Requiem For Production?

Anyone who still wonders why Nigeria and its citizens have become mendicants in spite of their rich natural endowments should take another look at the number of manufacturing companies that have gone under or relocated from the country in the last five decades.

In the 70s and 80s, Nigeria-made goods were the gold standard in the West African market — from automobiles to tyres, to batteries, to household toiletries. From Lagos to Abidjan, our companies had a captive market for their products. Companies competed for freshly minted graduates to fill their ever increasing vacancies as they expanded to meet up with market demands. Final year university and polytechnic students were spoilt for choices between competing companies scouting for fresh blood.

Those were the days! Gradually, we were afflicted by the importation bug. Our rulers, intoxicated by the newfound wealth occasioned by petrodollars, abandoned the ‘Buy Nigeria’ mantra, and started showing signs that, as far as they were concerned, charity began abroad. Afrobeat superstar, Fela Anikulapo-Kuti, criticised the burgeoning insanity at the time in his album titled “Buy Africa”:

Se tiwa ni o, mi o fe (Is that our product? I reject it)

Se tiwa ni o, mi o ra (Is that our product? I won’t buy)

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Ta lo ma ba wa je? (Who’s going to eat this with us?)

Ta lo ma ba wa je? (Who’s going to eat this with us?)

Afi ta ba ra tiwa o (If we don’t patronise our own)

Ki la se ma l’owo l’Africa? (How can Africa prosper)

Afi ta ba ra tiwa o (If we don’t patronise our own)

We didn’t listen to Fela. We watched as one iconic manufacturing concern died after another.

Just as the death of any human being diminishes the rest of humanity, the demise of any corporate entity is a source of distress for its surviving peers. In many parts of the world, when successful corporate players who have become household names succumb to the economic variant of the grim reaper, the funeral train stretches from the location of the company to the rest of the country.

In Nigeria, we have become so used to erstwhile manufacturing giants biting the dust that it is no longer news. In a sense, one can say that the general attitude is to ask, who next?

Many manufacturing companies have died over the years. Last week, it was the turn of GlaxoSmithKline, GSK, to announce its own obituary after 51 years in Nigeria. The company is well known for its pharmaceutical products, especially household brands like Panadol and Sensodyne. (“If it is not Panadol…”)

In a corporate filing, the pharmaceutical giant said it would now adopt a distributor-led model to supply the country with its products.

“In our published Q2 results we disclosed that the GSK UK Group has informed GlaxoSmithKline Consumer Nigeria PLC of its strategic intent to cease commercialisation of its prescription medicines and vaccines in Nigeria through the GSK local operating companies and transition to a third-party direct distribution model for its pharmaceutical products,” the company said.

“For the above reasons, and having, together with GSK UK, evaluated various other options, the board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations.”

GSK Nigeria’s sales in the first half (H1) of 2023 dropped to N7.75 billion from N14.8 billion in the same period a year ago. In its 2023 H1 report, the company lamented that the business environment continued to be very challenging with foreign exchange (FX) availability affecting its ability to settle foreign currency-denominated trade payables with product suppliers. The company made more money from the sale of its consumer healthcare brands than its pharmaceutical brands (N2.49 billion).

It made more sense to simply import and sell finished products than to manufacture goods in an environment where every manufacturing firm has to generate about 70 percent of its power requirements, depend on black market operators for foreign exchange to import raw materials, contend with multiple taxation and inadequate municipal infrastructure, tiptoe around corporate landmines planted by corrupt government officials, and compete with smugglers and importers of competing Asian brands dumped in the market.

In an interview with The Cable, Ade Popoola, managing director of Reals Pharmaceuticals, described the situation thus: “It’s like being in the middle of an expressway. When you have too much traffic, the rate at which you will progress will be difficult no matter how good your car is,” Popoola explained.

“The look-alike from India crowded them (GSK) out. You find out that if you have been selling 250,000 units per year, when cheaper alternatives come in, it will first of all reduce to 200,000, and subsequently to 150,000, and 100,000.

“Later you will find yourself struggling to sell 50,000 because the hospital buying from you prefers alternatives because the other companies too may be quality. Once they crowd you out, you find it difficult to maintain your volume, and when you can’t maintain your volume, you cannot pay your cost. The Indian will sell at 20 percent of your price. It has happened to me, so I know what I am saying.”

Eleven years ago, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA)  raised an alarm that at least 800 companies had closed shop in Nigeria between 2009 and 2011 due to the harsh business environment. It warned that half of those remaining were ailing  and that capacity utilisation in industries hovered around 30 per cent and 45 per cent on the average. Successive governments did not solve the problems; they introduced complexities of their own.

Nigerian manufacturers self-generate 13,22 million 3.67 mega MW of electricity, according to a survey carried out by the Nigerian Energy Support Programme and Deutsche Zusammenarbeit (GZ) in 2015.

In 2014, Procter & Gamble set up a $300 million diaper plant in Agbara Estate, Ogun State. It was celebrated by the government, being the United States’ biggest non-oil investment in the country.

However, four years later, the company announced its decision to quit production. An insider revealed that apart from problems associated with electricity generation and inadequate infrastructure, the company’s refusal to bribe customs officers and other revenue agencies led to perennial frustration, making the management decide to beat a retreat.

Apparently, the business climate of Ghana is considered more clement. That is the only reason that could account for the relocation of some of the businesses that left Nigeria for Ghana. Among such firms are Berec Batteries; Exide Batteries; Okin Biscuits; Osogbo Steel Rolling Mills; Nigeria Sugar Company; Bacita; Tate and Lyle Sugar Company; Matches Manufacturing Company, Ilorin; Nigeria Paper Mill Limited located in Jebba, Kwara State; Nigerian Newsprint Manufacturing Company Limited, Oku-Iboku, among many others.

Elsewhere, responsible governments move mountains to keep the wheels of manufacturing firms rolling as both Presidents Bush and Obama did across two administrations (Republican and Democrat) to save the automobile industry in the United States. The federal bailout of General Motors Co, Chrysler and parts suppliers in 2009 saved 1.5 million jobs and preserved $105.3 billion in personal and social insurance tax collections,

Critics of the bailout at the time had argued the companies should be allowed to fail and the industry that resulted from the aftermath would be stronger. Treasury officials had repeatedly said the bailout was not an investment meant to turn a profit, but a move to save US jobs.

Now, who is to save Nigerian jobs being shipped away to other climes while we stand akimbo and continue to wallow in our regression? At this rate, Nigerians may soon have to buy commonplace items such as toothpaste and methyl balms from neighbouring countries. I have seen how some of them bend over backwards to accommodate foreign manufacturing firms. The fact that the level of corruption in many of those countries is of kindergarten proportions compared to ours, makes their terrain even more attractive.

It is not just GlaxoSmithKline that is leaving Nigeria, it is Nigerian jobs that are growing wings! Do we love our country enough to staunch this economic haemorrhage?

If we continue to lose the capacity to produce and instead throw more people into the unemployment market, the requiem won’t just be for the manufacturers who have bitten the dust but for the whole country of economic bystanders who cannot produce what they consume.

Congratulations, Prof Okojie

Hearty congratulations to Emeritus Professor Julius Okojie, former Executive Secretary of the National Universities Commission, (NUC) on the Inaugural edition of his annual Speaker Series and the launch of his Taco Charity Foundation.  I’m convinced, more than ever before, that living for others is an investment in immortality. Happy 75th birthday, Prof.