How to Revive Nigeria’s Neglected Leather Industry


Obinna Chima

Given Nigeria’s endowment in the production of livestock, hides and skins in Africa, a report has stressed the need for the governments at all levels to promote sustainable diversification of the economy through public-private coordination in the leather industry.

This is expected to boost competitiveness in terms of prices, quality and entry into domestic, regional and international markets.

The Nigerian Economic Summit Group (NESG), stated this in a report on how to revive the leather industry.
Supporting the implementation of an agriculture-led industrialisation as specified in the Economic Recovery and Growth Plan (ERGP), the NESG stressed the need to explore the synergies between agricultural and industrial sectors in Nigeria.

“In addressing the challenges inherent in the leather industry in Nigeria, private sector investment is required to improve on the various factors of production across the leather value chain.

“This therefore calls for an urgent need to promote a holistic coordination between the government and the private sector in order to reduce cumbersome and bureaucratic procedures that constrain private investment and growth in the leather industry.

“This will relieve the government of any major cost associated with financing infrastructural development in the leather industry and provide incentives to willing investors in operationalising and deepening of the leather value chain,” it stated.

Also, it urged the government to institute investment-friendly policies and fiscal incentives such as tax holidays to drive competitiveness in the leather industry.

According to the report, these incentives could be categorised based on investment type and worth to ensure inclusiveness for both local and foreign investors in the industry.

“This will increase tax returns to the government as more industry operators will be attracted into the tax net.
“However, there is also a need for the establishment of a credit guarantee scheme to address working capital requirements and inadequate financing in the industry.

“Also, ensuring ease of profit repatriation for foreign investors and import duty waiver for capital goods used in production,” it advised.

The report noted that high cost of production occasioned by rigorous licencing procedures as well as high logistics costs were some of the major challenges facing the leather industry.

It also noted that high cost of alternative energy remains a major challenge as the industry players decry inadequate power supply to power production machines thereby increasing the price of leather products despite Nigeria’s comparative advantage in the industry.

Furthermore, the NESG pointed out that the tough investment climate, high cost of credit and low finished goods standards for exports have also hindered the leather industry in Nigeria.

It noted that the Nigerian leather industry lacks a strong and positive brand image among consumers and investors.
“Nigeria’s development narrative and economic growth pattern underscore an interesting case of structural misalignment and fundamental disequilibrium.

“The overall impact of running a mono-product economy became more evident in the Nigerian economy as the shock in the global oil market in 2015 led to the plunge into the worst economic recession in 29 years in 2016.
“This clearly necessitated the need to focus on strategies geared towards diversifying government revenue base to reduce the impact of global shocks on the Nigerian economy,” it added.

While crude oil constitutes only nine per cent of the country’s Gross Domestic Product, it accounts for over 75 per cent of government revenue and 96 per cent of its foreign exchange earnings. This implies that the rapidly dynamic and volatile nature of the oil market makes it important for the government to explore the inherent opportunities in other viable sectors of the economy towards reversing the effects of the economic crises arising from shocks in the global oil market and returning the economy to a sustainable growth path.

One of the leading sectors in Nigeria driving national output, employment and export is agriculture sector.
The agriculture sector of the economy, which currently accounts for about 24% of GDP, has been acclaimed to have the potential of contributing about 65 per cent of employment generation and 50 per cent export share if its vast and enormous value-adding opportunities in agroindustry are explored. The livestock agro-industrial segment, especially the leather industry, presents an even more compelling narrative of revenue generation and industrial deepening through value and supply chain integration.