As a business reporter for the now defunct Theweek magazine in the 1990s, I witnessed firsthand and wrote extensively on the collapse of many manufacturing and financial institutions in the country. From Oba Akran to Ogba in Ikeja; from Ilupeju to Isolo and Matori; from Ojota to Apapa, and Iganmu; and from Broad Street to Marina and adjoining streets on Lagos Island, it was a tale of woes for the manufacturing industry as well as the financial sector.
Dunlop, Bata, Lennard, Philips, Michelin, many textile companies, IPWA (International Paints West Africa), and more sprawled everywhere in Lagos and provided jobs for hundreds of thousands of workers. In the states where they were, the leather and textile factories were labour intensive, so, very many skilled, semiskilled and unskilled workers got jobs.
But they folded up one after the other. And as they left, they erased the jobs they provided. Among others, two principal reasons explained their exit: high cost of power (more appropriately near absence of power…this darkness didn’t start today!); and influx of cheaper imported goods. As it happened in Lagos, it was the same story in Kano, Kaduna, Jos in Plateau and Aba in Abia States.
In 1999 and 2000 timeframe, I was privileged to have been a part of the Union Bank management entourage (I had left journalism by the end of 1998!) to its strong manufacturing customers in those cities and saw how those companies were folding up despite the willingness of the bank to advance them credit. They just could not break even. Bompai, Challawa, and Sharada were large industrial towns in Kano especially in textile industry. By 2000, they were a ghost of their former selves. I remember the owner of one of the dying textile factories in Kano lamenting that the cost of heavy fuel oil to power their big machines was astronomical.
The manufacturing sector in Nigeria died before we welcomed the 21st century. Till date, the sector has yet to be resurrected. And a country with well over 200 million people cannot be economically viable without a strong manufacturing base. It just cannot take place.
As it happened with the manufacturing industry, so it was with the banking and financial sector. Not many people would remember that we had over a hundred banks in Nigeria at a time. Almost every state then could boast of a bank. It didn’t cost much to set up one. Many private citizens owned theirs and provided employments to thousands of graduates and non graduates alike. If the license for a commercial bank was too high, they would settle for a merchant bank. Abacus Merchant Bank, Liberty Bank, Lobi Bank, Universal Trust Bank, Progress Bank, Fortune Bank, Cooperative and Commercial Bank, Savannah Bank, All States Trust Bank, Centre Point Merchant Bank, IMB, Highland Bank, Pinnacle Bank, Societe Generale Bank, name it.
It was my reportage of the scandalous way with which the late Air Vice Marshal Ibrahim Alfa, who was Chairman of the Gongola (now Adamawa and Taraba) State owned Highland Bank, ran the financial institution as his personal estate that won me the prestigious DAME (Diamond Awards for Media Excellence) award as the financial reporter of the year 1995. The article, titled Voodoo Banking, showed in graphic detail how not to run a business. Full disclosure: Much of the investigation on the subject was not done by me! I only handled the Lagos end of it, and wrote the story.
Following the dearth of manufacturing and production jobs, China, and to a lesser extent India and the war torn Ukraine as well as the traditional Western world flooded our markets with all sorts of imported products including toothpicks and used mannequins. This led to the emergence of the service sector to fill the void: Sprawling shopping malls; food service centres, local and foreign consulting firms and other service industries came to the rescue.
Now, these companies are folding up or closing down some branches, and throwing out Nigerian workers. Jumia Foods and Uber Eats have exited the market. The Games, a big supermarket in Lagos is gone. So is ShopRite exiting Kano, Nigeria’s second biggest commercial hub. If ShopRite cannot survive in Kano with the second largest market in Nigeria, where then can it compete? Decades old foreign companies have also exited the room or are at the exit door.
While President Bola Tinubu has done at least five economic shuttles abroad to sell Nigeria as the investment destination within the first five months of his presidency, I will not recall him meeting with the country’s top business and industrial leaders to hear firsthand what aches their businesses. Since his assumption of office late May 2023, not less than ten notable foreign businesses have folded up and left our shores or are in the process of doing so. Aside from rhetorics, not one major foreign company has landed our shores yet.
What we get from Aso Rock are promissory notes and lots of hype. Just as it was during the last regime, it is propaganda upon propaganda we are hearing about how billions of dollars worth of investment agreements have been signed at each of those shuttles. Until the agreements materialize by way of establishing of companies in the country, no word should be taken to the bank. The other day, we heard that a $10billion contract had been signed with an Indian company to invest in steel in Nigeria. Where in Nigeria would the company be located, we were not told. The ink on some of these agreement papers had hardly dried up when three or so companies shipped out of the country.
It always amuses me when I read about those ‘high powered delegations’ (read: more of estacode) in so and so countries to attract foreign investors. The sub national governments are even more brazen. Theirs is one purpose: the governors are out to hide away our stolen dollars. Soon, local government chairmen and interim administrators will be going out of the country to encourage foreign investors into their domains.
One question I always ask myself is: do our governments know that these foreign countries have embassies and high commissions in Nigeria? Do they know that information is highly democratized and that many would-be foreign investors have more information about the true state of affairs in Nigeria than our government officials? Last November, The PUNCH newspaper had to do an editorial cautioning the President to have a rethink of his frequent foreign trips.
What might turn out to be a mass exodus of foreign investors in Nigeria since July 2023 is caused by one major factor, the massive devaluation of the Naira in June by this government. The thoughtless action has torpedoed just about everything in the country. Since it was done, the Naira has moved from 441/$1 to 1,058/$1 with zero positive outcome for the country, its citizens and the government.
Perhaps the most impacted industry in the exchange market crisis is the Fast Moving Consumer Goods (FMCG) sector. Cadbury, Guiness Nigeria, Nestle and a few others have lost over N472 billion to Naira depreciation by September 2023, according to a report by Meristem, a financial consulting company. That number should be even more staggering by 31st December. And it is accentuated by the high inflation rate that should hit 30 per cent when the December numbers are released. This sector relies heavily on imported raw materials; so, they feel the effect of a devalued currency immediately. Because they cannot pass all the costs to consumers whose disposable income has dwindled considerably, the N473 billion loss is understandable. But for how long can they continue to run their businesses at losses when they are not ministry for humanitarian affairs and poverty alleviation!
The other day, a federal law maker, Gboyega Isiaka, called on the monetary policy authorities to take decisive actions against the falling Naira. “As our fiscal ecosystem is getting settled and organized, we need a more stabilized foreign exchange rate, particularly because of the private sector”, he said on the floor of parliament while contributing to the debate on the 2024 federal budget.
While the President was still scouting for foreign investments to come to Nigeria, many of the country’s heavyweights were leaving. GlaxoSmithKline and Proctor & Gambles that had been operating in the country for decades simply packed their bags and headed for the airport because of the harsh economic climate; they discontinued on-ground operations in the country and adopted import and distributor-led business models. This has multiple implications for the economy: first, it puts a lie to the President’s external messaging to foreign investors that Nigeria is a safe haven for business. Secondly, thousands of jobs have been offshored. In a country where one gainfully employed worker caters for an average of ten people, you can do the math. Thirdly, government is going to lose the taxes that usually accrue from the companies; not mentioning the many interdependent companies that would have lost their businesses. Also, as the companies adopt product import model, it puts more pressure on the Naira that is already gasping for breath.
There are strong fears that more transnational (well, they’re better known as multinationals. But the accurate word is transnational because they are not owned in more than one or two countries but operate in several of them. That’s a story for another day!) companies will exit the country. According to Cardinal Stone, a financial solution firm, more companies in the FMCG subsector will exit Nigeria this year if the operating environment does not improve. In a report titled “Strategic Resilience: Sailing Through Business Disruptions”, the firm says high operating costs would persist for firms in the sector. Other sectors are not insulated though.
According to the report, the FMCGs subsector remains heavily exposed to changes in commodity prices, exchange rates, import and clearing duties and freight costs. It noted that FMCGs might not benefit from the moderation in global commodity prices because of the significant depreciation of the Naira, which weakened from N422/$1 in June 2023 to N951.94/$1 in December 2023 after the Central Bank of Nigeria (CBN) shockingly floated the country’s exchange rate.
The CBN floated the exchange rate supposedly to bridge the gap between the official rate and the alternative (parallel) market rates and to address the challenge of foreign exchange scarcity. Seven months later, none of these factors have been addressed, and it’s leaving in its wake a tale of woes for literally everyone.
Here is another proof of the woes that the devaluation has brought: foreign investments in Nigerian startups fell by 65.83 per cent year-on-year to $410 million in 2023 from $1.2 billion in 2022. Nigeria with about 230 million people lost the top spot in terms of total startup investments in Africa to Kenya with a population of 55 million. That East African country raised just under $800 million, nearly double investment inflows into the country. Nigeria, which led in 2022, came a distant fourth after Kenya, Egypt and South Africa last year.
Even the heavily noised syringe manufacturer in my home state of Akwa Ibom has packed up. This is despite the huge state government financial backing. It is safe to say that the company, Jubilee Syringe Manufacturing Limited is gone. And as is often with government commercial entities in our clime, the firm has been mismanaged. The spin that it is only restructuring and would soon bounce back is just a spin. The state flour mill, next door to the syringe factory, which shut down a year ago has yet to reopen.
As the news surfaced this morning that the President spent N3.4 billion on local and international travels within seven months of his reign in 2023 (36 per cent more than the N2.5 billion earmarked for the entire 2023), Tinubu and his economic team have their jobs well cut out for them. Though a formal economic team has yet to be constituted, this government bears the mark of being pro-business but doesn’t seem to know how to go about revving up a flapping economy.
Hubris and fear of being branded as a government of policy inconsistency by the Western world will not allow the government to rein in the laissez faire system of foreign exchange markets. No serious government allows its core economic policy to be based on the full assumption of free market economic systems. As the United States prepares for presidential election this November, it can and will stimulate economic growth in order to favour it swear the electorates. Both monetary and especially fiscal stimulus will be applied to its advantage.
Poverty is palpable in the land and no amount of promises and staged empathy will do the trick. The fallen Naira just wants to stand up like its foreign counterparts. That is the only language that will wake up a dying economy.
Esiere is a former journalist!
