Despite the growth of Nigeria’s manufacturing sector in recent times, Nigerian manufacturers have faced mounting bottlenecks as they navigate the policy landmines that have become a constant feature in the world’s poverty capital.
The manufacturing sector’s nominal GDP growth in the second quarter of 2021 was 38.33%, up 38.47% from the same period in 2020. Also, Nigeria’s manufacturing sector saw real GDP growth of 3.49% year on year, compared to a decrease of 8.78% in 2020.
Beyond the successes from the global economic recovery, microscale local manufacturers in Nigeria are groaning under the weight of the harsh business environment that continues to decimate their capacity to profitably stay in business.
Despite the government’s efforts, local manufacturers who spoke to Nairametrics suggested that the playing field is getting increasingly tougher to plough, citing age-long constraints such high cost of generating alternative power supply, access to finance, and government policy rollercoaster as major threats to the survival of their businesses.
To better understand this dilemma, we spoke to manufacturers across different sectors.
Our first respondent, Tolulope Ajose, is the CEO of Natural & Sazzy, manufacturers of natural spices (MSG-Free), dates powder, tigernut milk powder, and gluten-free flours. Tolulope also runs Sparkleen, a business that manufactures detergents, handwash liquid soaps and other sanitary/cleaning agents.
She stated that government support was still short of what the sector required as the government appears to be focusing more on generating revenue from small businesses than on aiding them to grow and thrive.
“Government policies are not directly helping our business and support is still quite insufficient for what our sector requires. There is still a gap between the enforcement and real business growth support. What small businesses need is education and support, to meet up to export standards, for example. This will make the local small-scale manufacturing sector a significant generator of forex and a boost to the economy.
“What most of us are currently encountering is a situation where the government is more focused on generating funds from small businesses. For instance, the cost of some of the certification standards, although much cheaper than it was in the past, is still beyond the financial reach of the small business, and there are still lots of administrative bottlenecks in the certification processes. These things need to be looked into as they are a source of discouragement to new joiners,” Tolulope disclosed.
When asked if she has benefited from government MSME loans/grants, she answered, “No, I have not benefited from any MSME loans as far as this administration is concerned. However, I and other small scale manufacturers have benefited from the NAFDAC palliative scheme for certification which is a relief to a lot of small businesses.”
She went further to elucidate on the impact the current foreign exchange crisis is having on her business.
“For my detergent manufacturing business, most of our raw materials are imported, and the forex crisis is shooting up our costs.
“For the food business, even though we use local raw materials, power and fuel costs have made production and transportation of raw materials costlier, invariably shooting up costs. Prices are higher, but all these costs cannot be transferred to the consumers, so our profit margins are being eroded.”
She cited that power is a significant challenge that her spice and beverage business is encountering.
“Power cost is a significant challenge. Market access is also a challenge. The government’s help is needed to make electricity and fuel accessible at a cheaper rate. As for access to the market, the importation of products that are being locally produced in Nigeria should be stopped. Small businesses should be encouraged to promote internal and intra-African trade with working capital and business advisory support,” she suggested.
Another Nigerian manufacturer, Isaac Jacob Omosimua, CEO of Crichweather International limited, a plastic recycling business said that although his business was benefiting from a few programs of the state government, a lot still remained to be done in supporting small-scale manufacturers to survive and scale.
“In Lagos state, the blue box initiative by the Sanwo Olu administration is a step taken by the Lagos state government to support recycling activities in the state. However, there is a need for more supportive policies in this regard to protect the environment.”
When asked if he has benefited from government MSME loans/grants, he said, “So far, we have not accessed any. We approached the BOI recently for machine purchase but their requirements, especially in the area of guarantors, made it impossible for us to get what we wanted.”
Jacob further stated that the forex crisis was an auspicious situation for his business, a classic case of one man’s poison being another’s meat.
“Fortunately, the forex crisis has increased the demand for our products. Some companies, for example, fibre, plastic, and companies that deal on aluminium composite panels, now subscribe to using shredded and pelletized plastics as their raw materials,” he said.
The major challenge for is Isaac, however, is “access to low-interest funds for expansionary and shock absorbing purposes.”
For Iyoha Donatus, CEO Donatus Ehis & Co., a shoe and leather goods company established in 2015, growth has been a result of personal doggedness and effort, not government support.
“I have never benefited from any MSME loans/grants. We have been growing from our little startup capital, and so far, we and doing well.
“The forex crises has affected business negatively on every side. It has greatly influenced the production cost and profitability of the company in general. It has brought about the scarcity of raw materials despite the price increase.
“For example, the cost of the shoe sole has doubled and even worse, the item is unavailable. The same goes for some other raw materials. Logistics costs are also on the rise.
“Forex and Logistics are our significant challenges. This is not the same for other businesses that have to struggle with epileptic power supply, insecurity, and access to funding, among others.
“While we struggle with forex, lousy road networks have hindered the easy movement of raw materials and finished goods to endpoints,” he disclosed.
As small businesses operating in the micro space, these businesses rely heavily on the reach and cost-effective mass marketing alternative that social media provides. Both Tolulope and Donatus reiterated the gripe of many Nigerians with the Twitter ban which has carried on for months.
“I have enjoyed tremendous growth in sales via the digital media space as it has greatly erased the scourge of going through mediators and supermarkets who take products from small businesses and offer sales on return terms. Digital media gives direct access to the customer, enhancing the business-to-consumer link.
“Although the Twitter ban has not affected our profitability directly, still, the ban is a threat to small businesses because this is an indication that other media platforms can be banned too. As a proactive measure, we keep developing our websites and evolving in our adaptability to the dynamics of the digital space,” Tolulope said.
For Donatus who cited that his company was “aggressively taking advantage of digital media” to push local and international patronage, the Twitter ban was a wrong move as it was wiping off huge revenues for many businesses.