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Diversifying Nigerian Economy Through Leather Industry

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At a time the federal government is mooting diversification of the nation’s economy from oil to non-oil sectors, stakeholders are charging government to focus more on the leather industry, as it seems to be the next goldmine, capable of generating about $1 billion to the nation’s economy by 2025. OLAJIDE FABAMISE writes

W

ith Nigeria’s over-reliance on crude-oil as its main source of revenue, there have been series of plan by the previous administrations in the country to diversify the economy, but all ended in futility.

However, when the current government led by President Muhammadu Buhari, came on board, it made the diversification of the economy from crude oil to non-oil sectors, one of its cardinal points.

While some successes have been recorded in the agricultural sector in the last four years, there has been calls for the federal government to also explore other areas such as the leather industry projected to have the potential to generate about $1 billion by 2025.

With over 50 million skins of animals being processed annually by tanneries together with other related activities in the country, Nigeria, according to experts, can comfortably provide the needed raw materials for its leather industry and even export some.

Already, the leather industry is making some inroads, contributing about 24 per cent of the total agriculture Gross Domestic Product (GDP) in the country, as Nigeria is also a net exporter of raw hides and skins including semi-processed leather in Africa and the world.

Conversely, the country is equally a net importer of finished leather products worth $500 million annually, an area stakeholders in the leather industry are trying to correct.

If the industry can limit importation of finished leather products, experts said, this will allow local manufacturers of leather products succeed, while also increasing the contribution of the industry to the nation’s GDP.

According to experts, the lingering challenges in the leather industry such as, structural barriers, poor visibility and lack of government intervention which have led to huge loss of revenue annually, if tackled, could make the leather industry a top revenue-generating sector for the federal government in the long run.

NESG Projection For Leather Industry

The Nigeria Economic Summit Group (NESG), in its recent report projects that the Nigerian leather industry can generate over $1 billion by 2025.

The Head of Research, NESG, Mr. Olusegun Omisakin, who spoke with LEADERSHIP in Lagos, noted that the leather value chain market is huge with immense potential of unlocking potentials across the industry and reducing unemployment rate with projected foreign exchange earnings of over $1billion by the year 2025.

In addition, he said, the leather processing sector employs over 750,000 workers with about 500,000 workers in the finished leather goods sector.

With about 61 million units, he stated that, Nigeria has the largest resource of goatskin and kidskin in Africa representing 46 per cent and 18 per cent of the total in West Africa and Africa, respectively. Being a dominant producer in Africa, he noted that the country also contributes about 60 per cent to the West African production of goatskin and kidskin.

“Domestically, the industry represents the second major earner of foreign exchange after oil with total export of tanned skins amounting to about $240 million in 2015,” Omisakin said. “More so, the lingering challenges in the industry such as structural barriers, poor visibility and lack of government intervention have led to a revenue loss of about $300 million annually.”

With all these, he believes, there is the need for value addition in Nigeria’s leather value chain to upgrade its position in the regional and global trade of leather commodities. This, he said, will have huge implications on backward integration, employment generation, industrial deepening, increased productivity and competitiveness.

Exploring Potentials Of Leather Industry 

The Director General, Nigerian Institute of Leather and Science Technology, Dr. Eucharia Oparah, said Nigeria has a comparative advantage in livestock production but that the leather industry had witnessed a decline in its performance due to absence of a specific policy.

This, she said, had contributed to the underdevelopment of the industry, despite its huge potentials as a foreign exchange earner and contributor to domestic jobs and wealth.

“It is therefore timely to draft the current leather and leather products policy which we are all here to validate in order to take into account these challenges as well as to tap into the existing opportunities in the sector,” she stressed.

Mr. Mustapha Nabegu of Leather and Allied Products Manufacturers Association of Nigeria (LAPAN), said, Leather policy was supposed to be changing with time because of the emerging new technologies.

He expressed joy that for the first time since 1958, Nigeria was trying to change the leather policy in the country which he said would add significant value to the sector.

According to Nabegu, “Leather comes from livestock and livestock contributes to several agricultural commodities such as meat, and even earns much more than any other non-oil export. That is why we are happy to be partnering with the Ministry of Trade and Investment. What we are trying to do, as much as possible, is to provide them with the raw materials.”

The acting head, Department for International Development (DFID) Nigeria, Christiana Rogg, said, his department was committed to supporting LAPAN because of its potential to create more jobs in the industry.

She said the support was to guide LAPAN on how to improve the industry’s performance, adding that this would also enable LAPAN engage in dialogue with government and other stakeholders to implement the leather transformation plan.

“The reason why DFID Nigeria has decided to support LAPAN is that we see it as a credible partner in the sector,” Rogg said. “We also believe that the leather industry has tremendous potentials to generate foreign exchange and create employment. We know that there is high level of unemployment in Nigeria, particularly among the youths. And we know that this will be of benefit to micro and small businesses as well as to the youths and the poor in our communities.”

Rogg observed that there was a dearth of industry specific data required for effective planning and institutional control of the leather industry and that the quality of leather produced in the country was affected by factors, such as; the limited institutional control of abattoirs, poor technological input and the absence of a national standardisation process.

She also observed that the current policy context distorts the local market and makes it more beneficial for finished leather producers to export rather than sell to the local market.

To her, there is an urgent need for the sector to be engaged in policy formulation and implementation of a master plan, which will include a funding strategy.

She noted that concerted efforts must be made by the public sector to gather relevant data through primary research. According to her, “The leather transformation plan should address issues of eco-friendliness, quality and standardisation within the industry.”

On finance, Rogg said there must be engagements with financial institutions that will guarantee easy access to finance by those in the leather industry.

Going Forward

To revive the industry to its pristine state, Rogg recommended that government should initiate a participatory review of the laws and policies that govern activities in the leather industry in a bid to address emerging stakeholder concerns, trends and impediments to the development of the sector.

She advised the National Assembly to collaborate with other stakeholders to strengthen the law and policy regime for the procurement of hides and skins in order to ensure institutional patronage as well as effective quality assurance and control. Stating that leather producers must be trained continuously in order to enhance the quality of leather produced in the country, she urged the Central Bank of Nigeria (CBN), to continually popularise available intervention funds using appropriate media and also review eligibility guidelines to promote access.

The Minister of Science and Technology, Dr. Ogbonnaya Onu, said the leather industry has the capacity to generate 700,000 direct and indirect jobs in the country.

“Leather industry is, therefore, the nation next goldmine and holds the key to industrial growth, economic diversification, jobs and wealth creation,” he said.

The minister said that NILEST had established Research and Development Centres across the six geopolitical zones and would continue to conduct training and research in the field of leather products technology, among others.

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