Government Must Tailor Policies to Reposition Manufacturing

19 Feb 2013

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Chairman of DN Meyer Plc, Remi Omotosho

Chairman of DN Meyer Plc, Remi Omotosho tells Crusoe Osagie that unless consistent government policies that promote manufacturing are implemented, the nation will continually ship its scarce jobs to other countries. Excerpts:

Current Personal Status

I have served on few other boards; I have served in few boards as a trustee too. I have retired from active work but a friend of mine in America said I am semi-retired and I agree with him, because I am deeply involved in a lot of activities and I am very, very active. I am going to be 68 years old in August 2013

Overview of DN Meyer
DN Meyer is one of the most visible companies in the paint manufacturing and marketing industry. It has one of the most trusted and patronised brands in the decorating, industrial and marine paint sector. It has been here for a long time. It used to be the Hagemeyer Company before it was bought over by Dunlop and that is why you have the acronym DN Meyer and we still recall the position of Hagemeyer in the paint industry and can attest to it that it has a very solid heritage both in quality and serviceability and that culture of Hagemeyer, was a major factor in what you call DN Meyer today. Dunlop has sold off its shares, and ownership of majority shares has changed hands and that is why we are here today

Nigeria's Manufacturing Industry
It is a very sorry and sad story that a major sector like manufacturing is so badly neglected in Nigeria. In some countries of the world, manufacturing contributes a significant portion of its Gross Domestic Product (GDP). In some countries 10 per cent, 12 per cent, 15 per cent as the case may be.

In those industrial nations, manufacturing occupies a significant part of the economy in terms of wealth creation, technological development, innovation and in terms of employment and once upon a time, manufacturing occupied a respectable place in the economy of Nigeria. In those days, manufacturing was contributing as much as 12 to 15 per cent of our GDP but it has today dropped to less than 5 per cent, while some say it is about 2.5 per cent and the implication of this is that all the things manufacturing can contribute to the progress and developmental growth of the country are compromised.

The manufacturing industry in Nigeria has not been able to perform that much because it offers employment to very few and because of the weak position of manufacturing, Nigeria has swung back to import dependence. If you take the case of textile for instance, there is very little of textile that is manufactured in Nigeria today and even if we talk about food, we tend to depend on imported food items. You go to Shoprite, for example, you will see that all sorts of food that the middle class consume all come from outside the country.

The basic raw materials we have are usually sent to the market as they are and there is only very little or no value added. This is so sad and of course we should not forget that there are linkages that we call the value chain. The advantages of the value chain have been lost by us. Let me give you an example in the case of the textile industry. If we are to manufacture our textile in this country, we will need to produce a lot of cotton and if we are producing a lot of cotton, there will be so many farmers that would be engaged and that would have helped to reduce the unemployment rate in this country significantly.

All the points of semi-process before it gets to the final conversion to textile materials have all been lost. Look at the semi manufacturing companies in Kaduna, Zaria stretching as far as Katsina all those cotton growing areas of the north and the processing units producing raw materials for final conversion into textile at every point of production, people are gainfully employed.

Why are people running away from Nigeria, why are they not investing in manufacturing, the same story we have heard some ten years ago is the same story we are hearing today. Our environment is hostile to manufacturing, infrastructure remains a problem and when you look at it, those who are policy makers in this country do not seem to apply their minds to the plight of manufacturing.

They did not apply their minds to the need to bring manufacturing to its rightful place in the economy; if they did, the policy on power generation and supply will be viewed a little more pragmatically, rather than the way it is being handled now. The road that manufacturers use to transport their finished products are not there. In the good old days, the railway from Kaduna to Lagos saw some movement of raw materials that was needed in the North.

But where are the railway lines now, they are all gone and we keep making promises as if these issues are not serious enough. So, unless government takes the issue of manufacturing very seriously and see it for what it is worth, the fate of the manufacturing industry will remain in chaos and in fact, in decline. We are transferring our scarce jobs to nations from where the materials we consume are imported. The people rarely understand the situation of the manufacturing sector.

Our approach to manufacturing is not comprehensive, it is not reflective of what we intend to do. There is so much talk and very little action. Why should we at this time, as the largest producers of petroleum in Africa, not be able to produce petrochemicals and if we produce petrochemicals, some of the needs of the manufacturing industry in Nigeria would have been met at a lower cost and this will make us competitive and will also make us the economic hub in Africa.

Nigeria should be the major place to produce consumer goods in West Africa and ship to other places but for all the plastics we consume here, I am sure not less than 80 per cent of the granules, you know the various plastics or things that we need to melt and convert into sheets and buckets, are still being imported. So, manufacturing is in a very topsy-turvy situation in Nigeria, it is not enviable for anybody to go into manufacturing and those that are there are struggling to keep body and souls together.

And when you look at the annual reports of manufacturing companies, you will see the very slow rate at which they are growing, it is only in the last one year that we have began to see the performance of key manufacturing companies that are still on ground improving on the Nigeria Stock Exchange. It is very frightening and when you hear the policy thrust to keep our youth employed and you see what is happening in the manufacturing sector, you will see that there is no positive correlation between the two of them.

Government Policies and Manufacturing

The basic things that would make manufacturing tick are not there. The basics have to be done first, it is then your policy of tariff and fiscal measures can become effective because people do not have electricity to run their factories. Today, Nigeria's manufactured goods are at least 40 per cent more expensive than what you will find in Cote d’Ivoire, Ghana even in Sierra Leone and even in those less-endowed countries because their power supply works.

Rural small scale manufacturing can hardly take place in Nigeria because the people do not have power to key into. Charles Ugwuh, a onetime Minister of Industry, talked to us about an industrial cluster where power, water and other factors would be made available to encourage manufacturing activities where you as a manufacturer go into the cluster and just plug into the facilities there, but I will tell you that they have been talking but nothing has happened.

The government has not created any cluster; let the government show the cluster they have created. That policy was not backed by action. It was all talk and no action. One Minister will come and tell us stories and the one that is there today is giving us loads of statistics where you can get constipation from his statistics but in terms of real action on the ground, there is nothing tangible you can hold on to.

The Minister of Agriculture is doing what you can rarely hold but the Minister of Trade and Investment is everyday on air giving us statistics but when it comes to what is on ground, there is no synergy between the ministries of agriculture and Trade and Investment. So, policies that are not coordinated do not have a measurable result on the economy. I think what is happening is that Nigeria has not yet learnt how to sanction politicians.

Most politicians get away with murder. Our brother, Barrack Obama was on the brink of losing the election for second term almost simply because of the issue of jobs. His opponent kept on saying that he would create jobs for Americans and every last Friday of the month, there is a report issued by the trade and labour department that tells you the amount of jobs that have been created in the past month but the luck Obama had was that job creation rate was increasing just at the time of the election.

If they were decreasing, he would have lost the election and Americans would have sanctioned him. The young people are saying that they need jobs, their parents are also complaining and when you look at the hierarchy of needs of people you will see that the number one factor is job opportunities because the push and pull effect of the economy is dependent on the economy.

If people have jobs they can take mortgage. They can go to department stores and consume more and if they consume more, the manufacturing industries' output will increase so job is very central. Majority of students going to America go to learn and study on loans, they take loans from banks believing that once they finish their education, they will get jobs and service the loan they took through their job and without job, they cannot service these loans and if they do not service these loans, opportunity for more people to take loan will be compromised.

So, jobs are very important, manufacturing industries occupy a very central place in job creation. The Minister of Trade of Investment says so much about job creation but nobody measures job creation. All we hear is talks about GDP growth but who cares about your GDP? We care about job creation; something has to lead to the other.

If the fundamentals of our economy are not addressed, we cannot make any significant growth. In fact, Nigeria is marching backwards, manufacturing is very critical for our growth and development as a nation.

Value of Paint Industry

Well, I cannot tell you specifically in terms of numbers but all I can tell you is that it runs into several billions of naira. This is one part of manufacturing that should be able to contribute to job creation but because not much is happening in the housing sector of the economy. If there is a conscious effort to raise the standard of living of Nigerians by building low cost houses for the masses, the paint industry will benefit massively because their product will be required and if their products are required, there are some raw materials that can be produced in this country, which we call linkages, which will bring direct and indirect benefits for the industry.

There is a need for the states to partner the paint industry so that so many houses can be painted particularly the ones very close to the road and this would also create job opportunities for the youth. We can train the youth on how to apply the paint and we would produce the paint, this is a win-win situation. You will hear some states saying that they want to employ 20,000 youths, yes they employ them but what do they ask them to do, sweep the streets, clearing and planting flowers all over the place?

But those people are the kind of people you can employ to go paint houses. If we have a policy of that nature, the paint industry will grow; it is not for the sake of DN Meyer alone but other paint manufacturers. There is so much we can get the paint industry to do if we have consistent government policies. If we do not begin to be creative to get creative, the issue of unemployment will blow up in the face of the country and what we are seeing today in terms of security, the Boko Harams of this world will be child's play.

This is because it gets to a position where people become desperate. In a situation where more than 30 per cent of the young population, in other words, in every three young persons within the employment age range, are unemployed and I am being conservative it can be two out of three. This is not healthy for our development and growth.

So, any sector of the economy where the government can create jobs will be very helpful, you cannot find any paint company going to streets to paint houses for people for free. But if we have a situation where the government and the paint manufacturers come together to set up a kind of alliance, you can imagine what will come out of such a partnership.

Remi Omotosho

Born in Ayedun-Ekiti in 1945, Remi Omotosho attended Grade Three Teacher’s College at Ifaki Methodist College where he spent two years. He later proceeded to the University of Ibadan in Oyo State, where he obtained a first degree in Geography. He was the Director-General of the Lagos Chamber of Commerce and Industry (LCCI) and is the current chairman of DN Meyer Plc.

Tags: Business, Nigeria, Featured, Government, Policies, Manufacturing

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