Industrialist opposes incentives for raw material exporters

Posted by Adaora Anozie

On April 24, 2015

The Chief Executive Officer of Multi-Trex Integrated Foods Plc, Mr. Dimeji Owofemi, has suggested that to grow the local manufacturing sector, government should put an end to all forms of incentives currently being enjoyed by exporters of raw agricultural produce.

Owofemi told our correspondent that government’s policies on export were hurting local businesses and making them unable to compete favourably with their counterparts in other markets.

The Federal Government had, as a way of boosting non-oil exports, announced several incentives to encourage exporters. One of the incentives, the Export Expansion Grant which allowed for a subsidy of 20 per cent on non-oil exports, had since been suspended by the government who claimed it could no longer sustain the scheme.

But the finished product manufacturer wonders why the non-oil export sector is dominated by raw agricultural produce. He argues that it is not right for the government to encourage exporters of such raw materials with incentives as this amounts to a disservice to the local finished product sector.

The industrialist observed that a local manufacturer would have no chance against people who took raw materials outside the country to manufacture under favourable conditions abroad and bring the finished products back to compete with the ones manufactured under harsh conditions in Nigeria.

Owofemi, whose company produces chocolate bars and beverage drinks from cocoa beans, told our correspondent that he had to shut his main line because he could no longer cope with the situation.

He added that 212 staff members of the company were currently on compulsory leave-without- pay owing to the deteriorating conditions in his N13bn mega factory.

He said, “By rewarding exporters who take raw materials to factories outside Nigeria, government has succeeded in reducing the input cost of the exporter while that of the local manufacturer has increased. Besides, the exporter, who already has 20 per cent on every item he produces, will influence the local raw material market, paying higher for the product to discourage the local manufacturer from buying.

“Also, the people who work in the factories in countries where the raw materials are taken to are not Nigerians. There is no sense in continuing to reward them when they are not adding value to our economy.

“These factory owners also enjoy foreign loans which make the cost of their funds lower than that of the local manufacturer. They can afford to buy raw materials three times a month, achieving a faster rate of turnaround and enjoying three times the incentives a local manufacturer enjoys on the same product.

‘As a local manufacturer, I turn my raw materials into finished products. I use 100,000 litres of diesel to power my generator every month and I pay staff salaries. The exporter does not need a retinue of staff or warehouse. Even though we enjoy 30 per cent subsidy on raw materials, that percentage has already been swallowed up by the cost of manufacturing in this environment,” he added.

Owofemi decried the neglect of local industries in a situation where foreign goods flooded the market. He blamed the situation on corruption.

He said, “It is corruption when one does not think of one’s country. We should grow Nigerian entrepreneurial capacity. The shoot-it-down attitude of government is killing this country.

“Government is not encouraging local manufacturers. What they term foreign investment is the cash that foreigners use to buy shares at the Nigerian Stock Exchange.   It is paper investment, the moment the economy is having a problem or there is political uncertainty, the foreigners will sell off their shares and leave us with the trouble.

The Chief Executive Officer, Nigerian Export Promotion Council, Mr. Segun Awolowo, in an interview with our correspondent, said the country was making plans to encourage finished goods manufacturers and move from raw materials to processed goods exports.

He added that the existing finished goods factories were being revived noting that the key challenge of the manufacturing sector remained power.

Awolowo said the finished goods manufacturers also faced challenges due to the suspension of the EEG. “It was becoming too big for government to sustain so they had to shut it down. But we are looking at ways of restructuring it so that the right people can be beneficiaries.”

Culled from Punch