Challenges Facing Local Manufacturers: Transportation Network, Energy & Power

RECENTLY the management of OK Group, owners of OK Foods, OK Plast, among others, organised a long service award to reward loyal and dedicated workers who have served the group diligently. Managing Director of the group, Mr. El-Riz Mohammed who had earlier addressed the workers about increasing harsh operating environment and government efforts at encouraging local production, spoke to Vanguard on the difficulties faced by manufacturers in the Nigeria.

Excerpts:

HOW would you describe the operating business environment in Nigeria?

The competition is very stiff in Nigeria. Well, it is good. That means Nigeria is developing because in developed countries there is big competition amongst companies. In a country where nobody wants to grow, if have you one or two companies, nobody will come to challenge them.

 
This was the case of Nigeria some years back. In fact, when we started, we were almost alone in the market, but today, we are not anymore. I would like to commend the government of Nigeria especially the immediate past and the present one for some decisions that they have taken to help local industries. I have been here for 14 years. I can see the difference between what was 14 years ago and what has been happening from the past eight years.

We have been protected by the government of Nigeria through the ban on products like the one we produce. Believe me, production in Nigeria is not cheap. A Togolese worker would get three times less salary than the Nigerian gets to do the same job. I am not saying Nigerians do not deserve their pay. They sincerely deserve it.

 The problem of electricity is a very costly one for the manufacturing sector in this country, even in your homes. By imposing a ban on certain products, some industries in Nigeria are beginning to pick up. Take for example, the Five Alive that Coca-Cola used to import from South Africa. It is now produced in Nigeria.

It has created more employment opportunities for some Nigerians. It has equally generated more revenue for government to take care of some of its responsibilities. Some of you might be disappointed because in your everyday life, the real effects of government policies are not easily noticeable. I am not trying to speak for the government, but to get to the roof of a house, you must start from the foundation. With a weak naira you cannot go anywhere. With a very bad and weak banking sector you cannot go anywhere.

 If you wanted to open a bank credit in Nigeria before, it was very difficult. Now, the banks in Nigeria are very strong and they are well respected all over the world. You have a steady currency and inflation is beginning to be controlled. All of these, have allowed us today to have almost 2000 workers. We were not more than 500, ten years ago.

It is because of the policies of the government of ex-president Obasanjo and now Alhaji Yar’Adua. I shall use this opportunity to plead with the government of Yar’Adua and the government of Nigeria to keep this effort, they should not lift the ban or open the door for Chinese, Colombia and other foreign products that can be produced here.

 

What are the major difficulties confronting your group?

The difficulties in the operating environment in Nigeria now are mainly those of infrastructure like the road networks. For example, our goods are distributed all over Nigeria, even in the smallest villages. Frankly speaking, the roads must be improved upon. In some part of Lagos, we can see that they are working on some of the roads, while some big ones had been reconstructed. If the road networks in Nigeria are improved upon, it would really speed up the economy.

For instance, if we send a lorry today to Kano, it would take up to five or six days to get there. But if the roads are good, it would take maybe two or three days and the flow of money would be faster. This would make a much more dynamic economy.

 The major and biggest problems we are facing especially in the manufacturing sector in Nigeria, is power or energy. Some times, we can have ten hours cut off from public power supply in a day. We would include the ten hours expenses for diesel in our own cost. But when it comes to twenty hours, that ten hours excess is eroding the margin that we are making. It is really a big problem that we are facing. I believe the improvement of electricity supply is the main challenge of the government.

Do you think that good rail network would be good in your distribution chain and that of other manufacturers?

Definitely, railway, you can see it everywhere. Russia today has voted a budget of one thousand billion dollars for the next ten years, half of that is going to the railway. Russia is maybe 10 times bigger than Nigeria. But in their budget, half of it would go for the railway while the other half for the infrastructure. That is, to improve the infrastuctural facilities in general. I think a good railway network is a must for a country like Nigeria.

Recently, you had cause to reduce your biscuit production because of shortage of gas supply. How have you been able to cope and are you back in full production?

Eighty per cent of our machinery in OK Foods uses diesel or  gas, meaning, we have a choice. We have to switch to gas because it is three times cheaper and we can then save money and be more competitive in the market. When it happened, we had no choice than to re-instal the burners used in diesel. We are able to produce the same quantity as before, but with a higher cost. At that time, we had to shut down 20 percent of our production for three weeks.

During that time, we could not produce because certain machinery use only gas and when you have no gas, you have no choice than to shut down. However, we are now back in full production for some time now and have no problem now. We hope, however that it would not happen again otherwise, it would be a big threat to us.

In spite of the challenges you have as business concern, you are still determined to remain in Nigeria, why?

Of course, challenges, there are big challenges because Nigeria is a developing country. We should not be hypocritical about it, Nigeria has a great potential. Otherwise, we would not be here. We are not a Red Cross society. We are businessmen. If we do not  find business interest here, why should we come to Nigeria?

We are in Nigeria because we are in business, because our business is expanding, getting bigger despite all the challenges. If we are mentioning the challenges it is because we want the government to improve on them. We have to be demanding for improvement especially in infrastructure. When this is done, the whole country would benefit from it not just the business concerns.

O.K Group has a good name and a reputation for quality products. Like other quality products in the country, have you been having problems with people who fake and adulterate products?

No. I am happy that we have not been experiencing that because our prices are very low. Although, we are suffering from the low price of our products anyway. I am sure because the price is low that is why maybe, those who are involved in adulterating, counterfeiting  and faking of products do not find interest in it. Take for example, our biscuits for instance, which is sold atN3.5 or N4 factory price for a pack of 20 kilogramme.

However, in O.K Pen, we have such problem. Even the newcomers in the pen business are having that problem as well because pen is a high value product. In a container you can have maybe up to N5m product, while in a container of biscuit, you can have maybe, N800,00 product highest.

Are you concerned that there is importation of pen into Nigeria?

Yes. Pen is really a big problem because in biscuits, sweets, we still have problems about imported products, but they are not much. But in the pen, I see no difference between when the importation of pen was not banned and now that it has been banned. We still see the same foreign products, not even fake products, even real products from China coming into the Nigerian market. It is really affecting the growth of that sector, not only my factory, but the sector entirely in Nigeria.

We are aware that you have factories in some other countries especially in West African sub-region, how would you compare the workforce in Nigeria with others?

The quality of workforce is much or less similar to what we have in West African region like you know, we have factories in Cote d'Ivoire, in Senegal, in Togo, and in Cameroon as well. The quality of the workforce in Nigeria and these places is similar. I can say it is quite good.

March, 2008

Funmi Komolafe & Victor Ahiuma Young