By Funmi Komolafe
It is no longer news that many factories in Nigeria have closed down and thousands of jobs lost. Government has maintained that industries must not only declare profits, but must create job opportunities. Employers on the other hand, is insisting that government is not doing enough to sustain business.
All these issues came to light during a meeting of employers and finance minister in Lagos recently. What were the issues?. This edition of Labour Vanguard tells it all. Finance minister, Mr. Olusegun Aganga, said government is concerned that about 19.7% of the nation’s population is unemployed “among which is about 49.9% of urban youth and 39.7% in rural areas aged 15 to 25 years”. He said to government, this is very challenging given the social and economic pressure on the nation.
To tackle unemployment, he spoke of new steps taken by the government.
One of such steps is wider consultation with the private sector including the real sector. The forum is known as “Growth and Employment Roundtable”
He explained, “The Growth and Employment Roundtable is a new National Economic Management Team ( NEMT) initiative designed for closer interaction between the government and sectoral economic operators to hold frank dialogues and work towards solutions to the nation’s economic challenges.”
This committee the minister disclosed, is chaired by Business mogul, Alhaji Aliko Dangote and it is to “come out with a programme for job creation including labour intensive projects.
Mr. Aganga said the roundtable of captains of industries is to provide answers to the following questions.
1. What are the three binding constraints to faster, stronger and more sustainable growth in your sector? 2. What policies or incentives would help boost the level of economic activity in your sector? 3. What changes can be made in your sector to encourage job creation?
Policies hinder industrial growth-Employers while still awaiting suggestions from the Growth and Employment Roundtable, Captains of the real sector had answers to the questions. They simply said certain policies of government have continued to hinder economic growth. Dr. K.A. Popoola, who represented Mr. Mohammed Yinusa, Chief Executive Officer, CEO, of DN Tyre and Rubber Plc, told the story of how government policy wiped out the tyre manufacturing business in Nigeria .
DN Tyre, a company which had capacity to produce 1.0 million units of tyres per annum lost its market and massive business projections to government policies.
How? Dr. Popoola told the story of DN Tyre & Rubber Plc this way “The Company was a significant player in the rubber plantation business in Nigeria . It was the only surviving tyre manufacturer in Nigeria ( after Michelin Nigeria Ltd. shut its factory in 2006) and indeed in West Africa before it suspended manufacturing in December 2008.
Barely a year we completed an 8.0 billion Naira truck radial tyre factory, we had to suspend manufacturing due to low tariff on imported truck tyres and high production costs caused by infrastructural deficiencies , especially power”. Dr. Popoola complained that “the effect of the low duty rates has encouraged dumping and outright smuggling , resulting in a glut in the truck tyre market for locally manufactured tyres”.
Consequently, he said, “We were simply unable to compete with imports at 10% duty rate in view of the attendant infrastructural disadvantages which increase our production cost by about 40%. Imported brands which accounted for only 20% share of the market before 2006 increased to 90% before we suspended manufacturing in 2008. This inevitably led to Michelin’s relocation of manufacturing to a more friendly environment , while now importing into this market”.
On power, he said his company spent about N150 million on diesel per month. “No factory can survive on that”.
In all, DN tyre which had about 1,200 employees and Michelin about 2,000 stopped production and about 2,500 direct jobs were lost. The issue of dumping has been raised by trade unions of workers for years but no one in government listened.
Low tariff, job losses
Dr. Popola said “low tariff on imported goods creates more job opportunities in other countries while unemployment remains high here.” He called on government to give to companies the type of financial bail out that the United State of America gave to manufacturers in that country. This he said, is quite different from the federal government’s intervention fund. He explained that such a bail out would be essentially to keep people in employment . “ These incentives should not be seen as government hand-out but to sustain and increase employment opportunities”.
Exempt VAT food products- OPS
Another issue raised by the organised private sector is Value Added Tax. There was a unanimous call on government to exempt VAT for food items if indeed, government is serious about tackling poverty and raising the standard of living. Mr. Shex Ladipo , MD of Lishabi Mills Nig. Ltd.
He told the minister, “We have had the commitment of your ministry in the past that non-luxury food products would be exempted from VAT in order to make them more affordable for the ordinary Nigerian. This window should be opened as soon as possible.”
We are not yet part of the global market- Jamodu
Chief Kola Jamodu, President of the Manufacturers Association of Nigeria, MAN, told the minister in very clear terms that “Manufacturing boosts job opportunities, boosts the economy “and must be supported. He spoke of inconsistencies in government policies and some international agreements which Nigeria assented to which have hindered the growth of our industries.
Chief Jamodu said, “Opening our doors without restriction is not good for our economy. We are not part of the global players. We cannot tackle poverty unless industries pick up”.
We are working in your interest -Aganga
The finance minister had immediate answers to some of these issues. He said “ We are working on sourcing low cost long term funds for the real sector. This is in realisation of the fact that the high interest regime in the domestic money market is quite a hurdle for the real sector. We are exploring our global contacts of multilateral and other institutions to source low cost long term funds which shall serve our real sector”.