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Without Manufacturing Plants, Foreign Firms Scramble for Nigeria’s Tyre Market

Without Manufacturing Plants, Foreign Firms Scramble for Nigeria’s Tyre Market

•MAN, LCCI, NECA blame policy inconsistencies

Chris Uba

Foreign tyre manufacturers are frantically scrambling to garner the huge chunks of the share of Nigeria’s tyre market without deeming it expedient to establish manufacturing plants in the country, THISDAY’s investigation has revealed.

However, the Manufacturers Association of Nigeria (MAN); Lagos Chamber of Commerce and Industry (LCCI) and Nigeria Employers’ Consultative Association (NECA), have blamed the absence of local manufacturing plants on federal government’s policy, which had slashed the duty paid on imported tyres at the detriment of local manufacturers.

At the just-concluded 33rd Lagos International Trade Fair (LITF), about five tyre manufacturing multinationals battled with DN Tyre and Rubber Plc (formerly known as Dunlop Nigeria Plc), for the control of the Nigerian market, with mouth-watering offers.

They included Michelin, Bridgestone, Maxxis, Pirelli, and Goodyear as well as imports from Asia and Eastern Europe, but interestingly, none of the companies has factory in Nigeria.

Bridgestone, for instance, has major manufacturing plants in many countries around the world.
As of April 1, 2011, it had 47 tyre plants, 29 tyre-related plants, 19 raw materials plants, 89 diversified product plants, four technical centers, and 11 proving grounds globally.

From 2020, a plant will be constructed in Cameroon and 2023 in Kenya.
Similarly, Maxxis also a global company, with operations in Taiwan, China, Thailand, Vietnam, USA, Canada, Great Britain, Germany, Holland, Japan, Dubai, India and Indonesia , has opened many new factories and distribution facilities and serves consumers in approximately 180 countries, excluding Nigeria.

Michelin, which has manufacturing plants around the world, operated a tyre manufacturing plant in Port Harcourt, which it shut down in 2007, saying that the move was not linked to the increasing wave of violence in the oil-rich Niger Delta but a strategic decision related to problems with cost competitiveness at the plant even as the closure put 1,300 staff out of work.

The same can be said of Pirelli & C. S.p.A. an Italian multinational company based in Milan, Italy, which has presence in Europe, the Asia-Pacific, Latin America, North America and ex-USSR, operating commercially in over 160 countries.
It has 19 manufacturing sites in 13 countries but none in Nigeria, and a network of around 14,600 distributors and retailers.

The Goodyear Tyre & Rubber Company, an American multinational tire manufacturing company based in Akron, Ohio, USA does not have a plant in Nigeria and it is not planning to do so anytime in the near future.

The same applies to Continental AG, a German automotive manufacturing company specialising in tyres and other parts for the automotive and transportation industries. The company, which does not have or plan to build a factory in Nigeria, is the world’s fourth-largest tyre manufacturer.

THISDAY gathered that these companies are more interested in marketing their products in Nigeria, rather than establishing plants in the country. Speaking on the issue, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, blamed the policy inconsistencies that have persisted in the country for years for the absence of any tyre manufacturing plant in the country.

He told THISDAY that the government has not really encouraged the manufacturing sector in the country, saying the issue prevented tyre manufacturing companies from setting up factories in the country.
“Dunlop was making efforts to expand its operations; they borrowed money ,acquired new machines, only for the government to reduce duties on tyre thereby killing the effort of the company,” he said adding that the company also has backward integration- rubber plantation in the South-South.

“They (Michelin) were doing well in the country before the government came up with a policy slashing the duty on tyre, thereby opening up the floodgate for influx of tyres into the country. Weak infrastructure, including poor power, bad roads is part of the problems. It is about policy inconsistency that’s the problem,” he said.

Chairman of the Automotive Sector of the Manufacturers Association of Nigeria (MAN), Dr. DVC Obi, also told THISDAY that the foreign tyre manufacturers are not to blame.

“It is wrong policy by the Nigerian government, which fostered harsh business environment for manufacturing businesses in the country.
“You have companies producing tyres and employing people in the country, and you lowered tariff for tyre encouraging influx from different parts of the world,” he said, noting that the two companies had to close shops.

According to Obi, with this situation, others are not likely to come because there has been no improvement on the business environment.

The Director-General of Nigeria Employers’ Consultative Association (NECA), Timothy Olawale, frowned upon the state of the economy that has made the country to become a “dumping ground for all types of finished and semi-finished products, at the detriment of our local manufacturing companies, which is militating against the growth of the real sector and development of the nation.”

He added that the collapse of the tyre industry was as a result of direct consequence of the policy somersault of the federal government in 2006 by significantly reducing import tariff that was meant to protect local tyre manufacturing industry from the huge infrastructure deficiency, especially electric power, reconsideration of local tyre manufacturing strategy.

On how to attract investors into the tyre manufacturing, LCCI Director General said government should first encourage Dunlop and Michelin to return because they already have structures on ground.

“Government should give them incentives – tax holiday for five years, duty free on the importation of machines and other equipment among others, raise duties on imported tyres to encourage local manufacturers. The Central Bank of Nigeria should extend funds to encourage local production of tyres.”

He said: “If Dunlop and Michelin come back, more will follow them. NECA wants government to create an enabling environment for businesses to thrive and contribute to nation’s building, which includes: job and wealth creation; reduction in unemployment rate in the country and thereby eliminating social vices and insecurity, etc.

“However, companies are confronted with several challenges: provision of water for their manufacturing process and other usage, which they are also slammed with payment demands by government; provision of power (electricity) at cost.

“The country should avoid a situation that would force companies to reduce staff strength, or close shop or relocate outside the country,” he added.

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