The Agony Of An Industrialist

By

Les Leba

lesleba@gmail.com, lesleba@swiftng.com, www.geocities.com/lesleba

The failure of the Nigerian economy has often times been laid at the doorstep of the monocultural nature of our revenue source.  Everyone agrees that the prospect of growth and development in this country would be enhanced if only we had a bourgeoning industrial landscape, generously spiced with the output of a fledging class of Small and Medium Enterprises (SMEs).  Indeed, SMEs have often been appropriately described as the ‘goose that lays the golden eggs’ in thriving economies and are consequently carefully nurtured and supported so that the goose can be more prolific in its output. 

To this end, government authorities would labour assiduously to provide enabling environment inclusive of modest or single digit interest rates for the sustenance and further stimulation of the operational and expansion needs of industry.  The fallout of such government support will generally be reflected in reduced unemployment, increased productivity, buoyant consumer demand, and improved government revenue gleaned from the plethora of successful businesses.

On the contrary, where government fails to provide an enabling environment and instead positions itself as an adversary to SMEs who must invariably be taught a lesson on the might and the monopoly of patriotism of government policy makers, we would inevitably have a comatose industrial landscape with unbridled unemployment rates and little hope of sustaining a multicultural economy with strategic spread and diversity.  Indeed, you would have a scenario that is akin to slaughtering the goose so as to quickly recover all the golden eggs that may still remain hidden in its body cavity! It would not be trite hype to observe that these are not the best times for entrepreneurs in Nigeria as our policy makers work enthusiastically but maliciously to knock the engine of growth of our economy. 

Indeed, only last week, I had the depressing experience of listening to the lamentations of an industrialist who needed to unburden his sorrows on a sympathetic audience.  This noble Nigerian had answered government’s call for more Nigerians to set up industries and businesses and become employers of labour rather than constitute an addition to the pool of unemployed.  After several years, he had, overcome several institutional hiccups and infrastructural obstacles, and succeeded in establishing a factory for the production of a mass consumable item for which he required imported raw materials and production lines which were not available in Nigeria.  His astuteness and integrity which meant little to the domestic banks in Nigeria, however soon found favour with his overseas suppliers, so that instead of bearing an interest burden of over 20% to finance his stocks of imported raw materials, he enjoyed a 90 day payment facility from his exporters.  Indeed, the success of his growing enterprise had become hinged on the sustenance of his credit facility with his suppliers. 

Like every industrialist  still standing in Nigeria, he had managed to keep his business barely afloat in spite of the huge hole created in his revenue base every month by the huge cost of fuel and the high cost of maintaining his power generators (he needed additional standby to the standard requirement).  In his attempt to minimize startup cost for his business several years ago, he acquired land a good distance from already built up areas, which were generally too expensive and laboured over the years to build a passable road from the main road artery to his factory location; in spite of the epileptic public power supply, he acquired a transformer at great cost, after settling a myriad of unofficial and officially receipted costs and bought over 500 metres cables and several poles to get power into his facility.  In view of the remote distance of his location, he quickly accepted the wisdom of the need to procure a bus to facilitate his employees’ journey to and from work.  Soon after the establishment of his factory, he barely managed to resist the temptation to close shop and retire to his village when all manners of levies and rates were submitted by government agencies who saw him and his factory as a fortuitous cash cow! 

He was amazed when he was asked to pay a mineral resource levy for the use of the borehole he had installed without any assistance from the government!  Nonetheless, he soon developed a thick skin to all such harassments, including those temptations from the police and other local government thugs who welcomed his sales vehicles for the daily tolls they had to forcefully part with.  He had stoically survived all these bricks thrown at his vision to answer the noble call to ‘produce and employ’ for Nigeria to grow!

However, one can only take so much if these suffocating pressures do not abate and, instead, the government itself introduces new twists and turns to further frustrate genuine commitments.  It becomes more tragic when the same government policy makers who are expected to be supportive by creating an enabling environment actually tie more blocks around your neck before throwing you in the deep sea!  So it was when the Central Bank Governor announced with such panache that the recent naira devaluation of about 25% was actually deliberate and strategically conceived to help local industries, notwithstanding the reality on the ground that the collapse of industry in Nigeria has gone hand in hand with the depreciation of the naira over time.  The naira has fallen from stronger than one to one to N150/$1 and Nigerian industries have collapsed rather than rejuvenate and grow!

Anyway, back to our story about our beleaguered industrialist, who has become unraveled by the current spate of devaluation.  Indeed, late in November, the poor man had funded his bank account with about N120 million to cover exchange rate and other ancillary bank charges for the remittance of $1 million covering raw materials supplied on 90 day credit terms by his overseas suppliers!  Coincidentally, at that time, the CBN suspended sale of dollars to commercial banks, as unknown to most Nigerians it surreptitiously and deliberately plotted a significant devaluation of the naira.  When the CBN once again commenced dollar sales in December, our industrialist found that rates had depreciated to close to N140/$1, and the N120 million in his bank account needed topping up with over N20 million to purchase the  dollars with which to clear his indebtedness to his suppliers for materials he had converted and sold based on a cheaper exchange rate. 

In his desire to ensure that his credit lines remained open, since he does not have a tree that grows money in his backyard, he had no choice than to approach his bankers for a loan of over N23 million with over 25% interest charges, and related legal, administration and management fees to supplement the N120m.  The Xmas and New Year celebrations turned out to be very sour for our friend, as a result of these shocks!  Any hope that the New Year would be any better was soon dashed, when his forwarding agents confirmed that his container loads of fresh stocks of raw materials which were expected to have been cleared before 31^st December had not even been offloaded from the vessel as a result of port congestion!  As he spoke with me last week, (mid February) the containers were yet to be transferred to the bonded warehouses by the terminal operators so that the clearing process could begin.

Meanwhile, his lifeline 90-day-credit would expire next week with serious and destabilising repercussions if the funds are not remitted when due.  His business, which had been kept alive by the grace of God and favour from his suppliers could soon be grounded irreparably for no fault of his!  I asked the poor man “what would you now do?”  His sober response was that he had no other choice but to go back to those he called the sharks who were waiting to have him for dinner once again.  The sharks, by which I presume he meant the banks, were willing to lend him the sum of N150 million (N30m more than he paid for the same consignment last year because of CBN’s deliberate naira devaluation) to cover the value of $1m plus the usual outrageous charges with an interest rate of 25%, as long as he had appropriate collaterals to cover the loan!

With misty eyes, this man confided that his spouse had earlier predicted that his sacrifice to create industry and employ fellow Nigerians may backfire for lack of sincerity and discipline in government circles!  Now, he was confronted with the task of convincing his wife to allow him use the certificate of occupancy for the house in which they live to serve as collateral for the bank loan to pay for goods which were yet to be cleared from the ports almost three months after the cargo arrived!  Meanwhile, our CBN continues to fund Bureau de Change (BDCs) with billions of dollars every month and lately proffered the gentle advice to them to sell their dollars with minimal margins and in lots of not more than $4000 to each customer!   Of course, the CBN does not concern itself with the control mechanism of such soft advice, even as it has become clear that our very cheap naira/dollar rate has attracted the attention of smugglers, treasury looters, and of CFA and Cedi holders from across our borders, who come to charter the dollars from BDCs and cart them away to fund smuggling of cheap contraband that end up displacing or filling those consumer gaps that Nigerian industrialists can no longer meet.

In fact, the demand for the products made by this industrialist had suffered lately as a result of the influx of such smuggled substitutes, funded by the dollars liberally supplied by the CBN to BDCs.  Furthermore, our noble Nigerian had become worried that government’s inexplicable enthusiasm towards free trade as espoused by the World Trade Organisation and the adoption of a common external tariff within the ECOWAS may eventually legitimize the nefarious activities of smugglers and consequently officially kill his business, especially if the government also imposes excise duty as currently proposed on his range of products.

With such odds stacked against him, it would be a miracle if our friend’s business survives, but if it does, it can only be at the expense of the Nigerian consumer who must have to pay much higher prices!  However, with depleting purchasing power of income earners as a result of CBN’s ‘deliberate and strategic’ devaluation, it is highly unlikely that we can count on the patriotism of a desperate Nigerian to pay more with the availability of cheaper imported substitutes.  Thus, the prospect of a diversified economy will remain a mirage!

SAVE THE NAIRA, SAVE NIGERIANS!