Distress as harsh economy forces shutdown of over 50 firms

LAGOS — Over 50 firms in the chemical and non-metallic products sub-sector of the nation’s economy are in a dilemma as multinationals, medium and small-scale enterprises, SMEs, and member companies are either exiting, on the verge of shutting down or operating at low-capacity utilisation.

It will be recalled that the employers, under the umbrella of the Chemical and Non-Metallic Products Employers Federation, CANMPEF, had a membership strength of no fewer than 100 firms,, comprising multinationals, medium, and small businesses, which employ about 350,000 people across the country.

But presently, Vanguard checks revealed that while over 50 of such companies have closed down, four are on the verge of shutting down, while 80 per cent of the remaining companies are operating at low-capacity utilization.

Industry sources told Vanguard that over 100,000 workers have lost their jobs directly and indirectly in the last year.

The firms in this sector produce medicals, pharmaceuticals, perfumes, cosmetics, toiletries, soaps, detergents and vegetable oil, hydraulics, cement, asbestos cement and concrete.

Other products include glass, ceramic, earthenware, clay products, basic industrial organic and inorganic chemicals, fertilizers, explosives, fireworks, footwear, leather, and rubber.

According to Vanguard’s checks, among the companies that have shut down are Glaxo SmithKline Beecham, Procter & Gamble, Mega Plastic Nig limited, Twinstar Nig limited, and Femina Hygienical Products Nig. Limited and Linda Manufacturing Company.

Those on the verge of shutting down include Unilever, PZ Industries, Prime Pack, and Reckitt & Benckiser.

One of the companies about to shut operations in Nigeria is Kimberly-Clark because of high energy costs, expensive raw materials, and reduced customer demand.

The company, it was gathered, has reduced shifts and implemented other cost-cutting measures in a bid to remain afloat.

The company’s $100 million factory, located in Ikorodu, Lagos State, was commissioned two years ago by former Vice President Yemi Osinbajo to produce diapers and sanitary pads, among others.

Firms lament

Lamenting the plight of the sector, Executive Secretary of CANMPEF, Mr Olorunfemi Oke, said the exits were painful, saying more worrying is the fact that challenges faced in the sector were inflicted by government policies.

According to him, the challenges confronting the sector are floating of the naira, depreciating currency and volatile exchange rate, fuel subsidy removal, high exchange rate for computation of import duty, high interest rate, epileptic power supply with the recent increase in tariff that has tripled electricity bills and made it unsustainable for businesses; and inadequate gas supply for firms, and high cost of diesel.

He also named poor road conditions, multiple taxations, a high inflation rate of over 34 per cent, weak consumer purchasing power, and insecurity across the country.

The executive secretary said: “The effects of the socio-economic challenges on the manufacturing companies are enormous. Most of our member companies are just managing to survive. We cannot access forex for purchase of raw materials and machinery.

“High import duty cost is discouraging importation of raw materials and machinery. High energy costs have resulted in high production costs. Unreliable power and gas supply disrupts production schedules and increases operation costs.

“We are experiencing high reduction in capacity utilization and increased production slowdowns, huge foreign exchange losses suffered by many member companies, especially the multinationals, and reduction of profit. Majority are recording losses.

“There is also declining market share and growth potential and inability to compete with imported products. High interest rates discourages business expansion. There is growing weakness in consumer purchasing power. Companies are shutting down some of their operations. This has led to retrenchment of employees. The hyperinflation has led to an increase in the cost of living of employees and an adversarial industrial relations climate in the sector.

Shutdown

“While I don’t want to sound alarmist, tens of member companies from the multinationals, medium and small scale companies have shut down. Some of the companies that have closed down are Glaxo SmithKline Beecham, Procter & Gamble, Mega Plastic Nig Limited, Twinstar Nig Limited, Femina Hygienical Products Nig Limited, and Linda Manufacturing Company. Similarly, among those on the verge of shutting down include Unilever and PZ industries.
‘’We are very pained by these developments. Let us take for example the case of Linda Manufacturing Company and Kimberly-Clark.

Linda Manufacturing Company which was producing synthetic hair attachments and other accessories was employing and keeping our young girls off the streets and criminality. Only God knows what these young girls will turn to now that they are out of jobs. And for Kimberley Clark which produces Huggies diapers, and sanitary pads, with the imminent shutdown of its Ikorodu production facility two years after investing $100 million in Nigeria. Remember that the former Vice President, Yemi Osibanjo commissioned the factory two years ago.

The company has been producing below-installed capacity since late 2023 because of the harsh economic environment in the country. If this company is allowed to exit Nigeria, it will add to the sad story of the worsening crisis in our sector. The pathetic situation of this firm is that in 2022, the company commissioned a $100 million production factory in Ikorodu, Lagos State which was inaugurated by then vice president to resume operations after an earlier closure of operations in 2019 following a review of its business. Apart from these woes, 80 per cent of the remaining member companies are operating at low-capacity utilization.

Job losses

While Mr Oke was not forthcoming on the number of job losses, Vanguard, however, gathered that no fewer than 100,000 Nigerians have lost their jobs in the sector.

Speaking further, he said: “As a Nigerian, it is sad and frustrating for me to talk about my fellow countrymen and women losing their means of livelihood in this manner.

‘’A lot of people have been thrown into the job market. The figure is huge. We are talking about direct and indirect employment, comprising suppliers, distributors, drivers, contractors, and traders among others. I do not want to give a figure. But I can tell you without mincing words that it is huge.”

Way forward

The CANMPEF scribe called on government to address challenges facing the sector by “giving concessions on the allocation of forex to the manufacturing companies, reduction of import duties for raw materials for an essential sector like the pharmaceutical industry, reduction in import duty charges, improving supply of energy and gas to manufacturers, reduction of the rate of energy charges by power distribution companies, DISCOs, stopping multiple taxes by the local, states and federal government agencies, signing and implementing the new national minimum wage bill to improve consumers’ purchasing power, focusing on rehabilitating selected roads to reduce logistics costs and fixing the nation’s refineries to enable access to petroleum bi-products that serves as raw materials for the chemical industries.

“The industry is import- dependent because of the nature of its products and its raw materials are chemicals majorly from the petro- chemical industries. ‘’The Federal Government should take urgent action to stop manufacturing companies from shutting down.

Government should support the companies to thrive and increase employment and reduce insecurity challenges in the country.

“The only member companies that seem to be doing well today are the cement manufacturing firms because of road constructions and other related businesses.”

Voda Paint MD reacts

Also speaking, the Managing Director, Voda Paints Limited, Mr Rotimi Aluko, blamed unreliable power, unstable currency, difficulty doing business, steadily rising inflation, insecurity, multiple taxation, and poor infrastructure, among others.

Aluko, who is also the Vice President of CANMPEF, said: “Like most of the sectors making up the Nigerian industrial landscape, the chemical, leather, food sectors are all struggling to survive economic hardship that, looking back now, has actually been long coming.

‘’It is, indeed, very hard to find any one sector of the economy that is not impacted by the numerous issues which those doing business in Nigeria have really been enduring, starting with unreliable power, unstable currency, difficulty doing business, steadily rising inflation, insecurity, multiple taxation, poor infrastructure, etc.

“Currency tweaking and the associated policies in concert with the removal of petrol subsidy and the floating of the naira, have helped to compound the pressure on industrial operations generally.

“The consequence on the consumers is depletion of disposable income, such that most households are in tight adjustment as their income is hardly coping with necessities.

“Not even crude oil can come close. Why? It is manufacturing that can harness our immense reservoir of human talents to serve as an engine for the conversion of the bountiful contents atop and beneath our God-given land and those beyond our shores into products capable of becoming the biggest foreign exchange earners as experienced by China and several other Asian economies.

“Government just has to step forward to help get the necessary building blocks in place and put right the business environment, such that Nigeria will rank high among nations having very attractive level of ease of doing business.

“For this to be, the government has to make these investments and protect local manufacturing. This is non-negotiable. All advanced nations and those who have climbed up to join the top league did it at one point or another and are still doing it.

“The most powerful economic and military power in the world is currently engaged with China openly as an example.

“We have done it before with huge success when in 2007, Nigeria clamped down on the importation of cement by companies without local cement manufacturing investment. The result is huge.

“Before the implementation of the smart act of protection, Nigeria in 48 years of cement manufacturing preceding the protective action, only grew to about seven million metric tonnes of cement production per annum and in the 15 years succeeding the policy, has grown to over 60 million metric tonnes production/per annum.

“Do that across several sectors integrating farm produce conversion, petrochemicals, basic chemicals, natural resources, basic tools, electronics, etc, Nigeria will be an unstoppable giant. It has potentials.

“The government should declare a clear form of emergency in the manufacturing sector. It should subsidise consumption via manufacturing subsidy by way of tax relief, duty/tariff removal on agricultural and manufacturing inputs. The gains will come in many folds.

“First of all, our youths will be gainfully employed and stop idling away their lives or hawking things they should be producing in the first instance. Savings on social and security costs cannot be estimated.

“Government should put in place necessary administrative and legal firewalls against those who might truncate gains of the strive towards the achievement of good level ease of doing business across the country and sectors.”

Labour begs FG to intervene

On his part, the National Secretary, National Union of Chemical Footwear Rubber Leather and Non-Metallic Products Employees, NUCFRLANMPE, Joseph Dada, pleaded with the government to intervene immediately to save the sector from imminent collapse. He said: “Our industrial sector has been finding it extremely difficult to operate smoothly and effectively for the past two years.

‘’Bad government policies have negatively affected the running of our sector. Many of the industries have relocated to other African countries where they can do their business with ease and maximise profit.

“Our government, through the Central Bank, has increased the lending rate to over 30 per cent, which is not good for manufacturing and chemical industries to break even as most raw materials are imported. We cannot do backward integration.

Economic distortions

“The industries are groaning under the outrageous tariffs imposed by DISCOs and others responsible for the supply and distribution of electricity to the industries in Nigeria.

The tariffs are doing nothing other than kill the industries. This is compounded by the removal of the petrol subsidy that has turned the country upside down since last year. The consequences are part of the socio-economic distortions plaguing the nation.

“Some of the companies that have relocated to other African countries are multinationals, such as Procter & Gamble and GSK Pharma, Femina Hygiene, and Twinstar. Many others are on the verge of closing down any moment from now because of the unfavourable economic policies of our government.

“Hundreds of workers have lost their jobs as a result of management’s inability to provide raw materials in their various companies. Those that are managing to produce are producing below 20 to 25 per cent of installed capacities.

‘’We are still compiling the list of job losses. I can tell you it is mind-boggling in a country with very high unemployment figure.

Enabling environment

“We are pleading with the Federal Government to urgently halt this alarming trend and create enabling environment for industries to have access to foreign exchange from Central Bank of Nigeria for manufacturers to get forex to import raw material for industries to produce.

“The issue of unsustainable tariffs as well high cost of fuel regime must be addressed immediately to save our industries from total collapse. We are not equally unaware of the issues of excessive and multiple taxation from all levels of government, insecurity, poor state of our roads and very low purchasing power of most Nigerians. The government should come to our aid as renewed hope is gradually turning to sustained despair.”