NIGERIA: 800 Companies Close In 2 Years

In April, the World Bank had ranked Nigeria 133rd out of 138 countries on ease of doing business. Following that report, the British Department of International Developement's Richard Montgomery had stated then that it was “an issue of concern”, but then added that with “a number of good practices” Nigeria will probably go up to about 72 out of 183.

However, Montgomery's forecast of a rise from 133 to 72 may have taken a serious blow today as Dr. Herbert Ajayi, president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) announced that around 800 companies in the country have closed down due to the harsh operating environment in which they find themselves. Dr. Ajayi gave the figure in a paper he presented today at a zonal workshop on economic diversification organised by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC).

Ajayi said that capacity utilisation in industries hovered around 30 per cent and 45 per cent on the average, with 100 per cent overhead costs.

He blamed the continued decline in the manufacturing sector on "political and economic factors", citing poor infrastructure and epileptic power supply as key impediments to the industry.

"The manufacturing industry as a whole operates on more than 70 per cent of energy it generates; using generators and operating these generators greatly increases the cost of manufacturing goods," he said.

Ajayi gave other reasons for the decline in the sector as incessant increase in the price of petroleum products used by industries, multiple taxation, unabated smuggling and inadequate access to finance, both local and abroad.

According to him, widespread insecurity and the inability of government agencies in the ports to meet its 24-hour target for cargo clearance have contributed to the dwindling fortunes in the manufacturing sector.

The NACCIMA president, whose speech was delivered by Mary Iyasere, the association's vice-president, described current government policies to revive the manufacturing industry as inadequate.

"Government policies have been directed towards revitalising the ailing manufacturing sector.

"For instance, in May 2010, the government announced a $1.3 billion fund to help banks extend credit to the manufacturing sector following the decline in available finance after the global economic crisis had set in.

"Notwithstanding this positive development arising from the reform process, the Nigerian economy, especially the manufacturing sector is still confronted by serious challenges, structural imbalance and lack of diversification.

"The current government policies targeted at the real sector (manufacturing) are also inadequate and preventing the manufacturing industry from flourishing."

Advocating a way forward, Ajayi said that it is important for the organised private sector to support public sector efforts aimed at revitalising industries through the Public Private Partnership.

He also called for more transparency in the ongoing government-led privatisation exercise of public enterprises.

Quoting statistics from the Bureau of Public Enterprises (BPE), the government's privatisation agency, he said between 1999 and 2011, a total of 121 firms were privatised or commercialised, with about N250 billion realised from their sale.

"It was also reported that 81 of the privatised firms were operating at about 66 per cent and 41 at 34 per cent performance level," he added.

The NACCIMA president, however, observed that the figures were in stark contrast to the position of the Senate ad-hoc Committee on Privatisation, which claimed that 80 per cent of the firms were not performing.

In addition, he said Nigeria could borrow from the lessons of the economic policies of the “Asian Tigers” -- Hong Kong, South Korea, Singapore and Taiwan -- to boost the manufacturing sector.

He, however, warned that Nigeria must exercise 'caution' in trying to imitate the Asian policies.


"This is because the casualty between growth and industrialisation could prove to be a costly mistake as seen in other countries, in pushing for rapid industrialisation," Ajayi finished.

.........DAILY TIMES NIGERIA