Stories by Charles Nwaoguji
Nigeria is known for its huge raw and solid minerals deposits. Unfortunately, today, only 46.71 per cent of raw materials used by manufacturing industries are sourced within the country as most local manufacturers now source raw materials from other countries.
With Nigeria’s current unemployment rate at 24 per cent and over 50 per cent of the youth falling into that category, stakeholders fear that should the trend of non-sourcing of the raw materials locally continue, the percentage of unemployed in Nigeria could go higher.
For a country with large deposits of minerals and raw materials like cocoa, rubber, iron ore, coal and animal skins, among others, there is no reason why local manufacturing industries should not generate much of their raw materials locally. Experts however believe that the ability of any nation to engage in the transformation of raw materials to finished goods significantly develops its economy. If values ar added to local raw materials, these industries can help the Nigerian economy to stop importing finished goods from countries like Italy, China, Spain and India. These countries top the lists of countries with high amount of manufactured outputs, even though they buy raw materials from Nigeria.
Manufacturing industries can provide the economy more employment by providing opportunities in areas such as research and development, processing, engineering, entrepreneurship and a lot more.
The Nigerian Bureau of Statistics (NBS) reported 186,334 job losses in the second quarter of 2015. Employment in the areas of sourcing and processing raw materials locally can provide answers to Nigeria’s current struggles with unemployment.
According to the Chief Executive Officer of FAE Limited, Princess Layo Bakare-Okeowo, local industries even have the potential to meet Nigeria’s drug needs.
“Over-reliance on oil in Nigeria is listed to be another contributing factor for the growing rate of unemployment, particularly because other viable job-generating sectors like manufacturing, agriculture and entertainment have been neglected,” she said.
Classification of raw materials
Raw materials needed for industrial use could be classified into four major classes, namely:
•Unprocessed agricultural products, which are usually in their natural state, like cassava, yam, grains, fruits, vegetables, etc.
•Semi-processed agricultural products in form of dry cocoa beans, dry sugar, pasteurised milk, grain flour, cocoa mass, malted grains.
•Finished products of a particular industry can serve as raw material or ingredient for another industry, e.g. refined granulated sugar, starch, ascorbic acid, flavour, etc.
•Bye-product or effluent of an industry can serve as input for another industry, as molasses can be used for the production of alcohol and yeast, while biscuit dust can be used for the production of animal feed.
Food and beverage industries can supply raw materials to various sub-sectors such as brewery, soft drink, flour mill, cereal and bakery products, dairy products, animal feeds (livestock and fishery), meat and meat products, tea and coffee, sugar and sugar confectioneries, margarine, edible oils, roots and tubers, fruits and vegetables, spices and flavours.
However, to facilitate a streamline presentation, the Nigerian food industry can be divided into two major categories:
•Milling industries: Flour mills, rice mills, edible oil mills, etc.
•Processing industries: Beverages, cereal products, dairy products, confectionery, fruit and vegetable products, meat and poultry products. Each of these can derive all their raw materials locally.
The milling industries require mainly agricultural products and the outputs are generally finished products offered for sale as domestic food items after suitable food packaging.
The food processing industries require derivative secondary produce, and in some cases, require tertiary forms of agricultural and synthetic raw materials.
There are three broad categories of raw materials, namely, primary agricultural produce, secondary and tertiary raw materials.
Methods of sourcing for raw materials
In sourcing, there is a general principle that most industries use. The aim of sourcing is to obtain the best quality raw material at a most economical rate. In Nigeria, the approaches used include direct, indirect or combination of the two.
This requires the establishment of raw material purchasing department in the industry, which is charged with the responsibility of getting the required raw material for the industry.
Where direct sourcing is used, the problem of monitoring specification of raw material can be reduced. This is because such quality specifications are inbuilt into the production system. When such materials have to be purchased, the raw material specifications must be given to the supplier.
Limitations and constraints of local equipment for food industries
Many of the raw materials, especially seasonal ones such as maize, yam and fruits are inadequate for industries due to the fact that they are used as staples, and also due to low production from non-implementation of agricultural mechanisation. This unavailability leads to instability of price.
The finishing of most of the locally manufactured equipment is/are of low quality, as a high percentage of fabrications depend on the untrained/uneducated fabricators.
The range of equipment revolves round already known technologies. The prevalent unit cost of equipment, although cheaper than imported ones, is still too high with a resultant effect that only few can afford them. The ‘me too’ copy technological development characteristics of Japan and Asian countries is bound to be greatly hampered in Nigeria with the non-availability or limited number of founding facilities and petrochemical products necessary for food processing and packaging equipment.
Stainless steel and aluminium, which are required for building food contacting component of machines are not produced locally but imported.
Absence of pilot plant stage where the developed equipment could be evaluated for technical economic and operational feasibility under real condition make many attempts aimed at equipment development a mere academic exercise.
MAN urges FG to create incentives for investors
The President of Manufacturers Association of Nigeria (MAN), Dr. Frank Udemba Jacobs, has called on the Federal Government to create attractive incentives for investors who would engage in the processing of agricultural and mineral resources from primary produce to secondary or intermediate products.
Jacobs, who stated this at the annual general meeting of the Ogun State branch of MAN, held recently in Ogun State, said this would go a long way in attracting potential and current manufacturers into the use of local raw material inputs, which would be readily available locally.
“We are all aware that one of the greatest challenges manufacturers are facing currently is scarcity of raw materials for production as a result of the prevailing forex scarcity,” he said. He said the current over dependence on imported raw materials was borne out of past policies of previous administrations. The resource-based industrialisation policy involves the utilisation of the abundant natural resources in producing the products the country needs.
According to him, this is a more sustainable and enduring form of industrialisation when compared with the import dependent industrialisation, which has been practiced in Nigeria for long. In order to ameliorate the burden of the challenges on manufacturers, the MAN boss stated that the association has been engaging the government and its and agencies at the highest levels .
“We are also diligently pursuing the legal battle we have embarked on with the Nigerian Electricity Regulatory Commission (NERC) and Discos so as to redress the arbitrary increase in the electricity tariff in violation of the MYTO 2.0. “In the case of the latter, the recent court judgment that annulled the obnoxious increase in electricity tariff has rekindled our hope in the justice of our case and strengthened our position in the ongoing out-of-court settlement discussion between NERC/Discos and MAN,” he explained.
Also speaking at the event, the Chairman of MAN, Ogun State branch, Mr. Wale Adegbite, said unless urgent steps were taken by the Federal Government to tackle the growing power challenges in the country, some manufacturing firms might go under due to high cost of production.
Adegbite urged the government to quickly address the plight of manufacturers in the country to stem the tide of seeming industrial collapse. He disclosed that most industries are currently producing below their normal capacity, adding that with high foreign exchange, harsh economic policy as well as stifling industrial environment, there is high possibility of some industrial concerns going under, warning of the dangers of such a scenario.
“Businesses in the country are presently going through trying times with a sizeable number of them producing far below installed capacity. We are faced with the exchange rate crash, poor power supply and inadequate infrastructure. These challenges are no doubt bedevilling the smooth and profitable operations of the manufacturing companies in the country,” he stated.