Nigeria Job losses loom as Local Raw Material Sourcing Crashes to 47%

Nigeria may suffer yet incalculable job losses to other countries, as many local manufacturers are now constrained to source more of their raw materials from abroad.

Data show that manufacturers currently source only 46.71 percent of raw materials internally, as against 58.58 percent reported by end of 2013.

 

The implication of this is that the 11.87 percent shortfall in local raw material sourcing may have displaced some people who worked in intermediate segments of the local economy such as farms, solid minerals sector and animal skin firms in the last two years  .

Analysts see the development as clear evidence that the nation’s raw materials are either of poor quality or in short supply.

Others attribute the crash in local input preference to poor economic diversification as well as lack of petrochemical industries and steel complexes that produce these raw materials.

“The absence of a functional petrochemical industry was a constraint to improvement in the local sourcing of industrial input materials,” says Manufacturers Association of Nigeria (MAN), while explaining the fall in the local input preference.

“This signals the urgent need for inclusive diversification of the economy,” adds MAN.

Nigeria’s unemployment rate is estimated at 24 percent, with youth unemployment put at over 50 percent.

Over-reliance on oil has been key to perennial unemployment in Africa’s largest economy, as critical job-generating sectors such as agriculture, mining, manufacturing, entertainment and intermediate industries were neglected for long.

BusinessDay’s analysis of Nigeria’s exports between 2010 and 2014 shows that crude oil and distillation products recorded 89 percent share of the total, while rubber, the country’s best performing non-oil export product for the period, constituted only 3.8 percent of the total. Cocoa, which was next in value in the non-oil segment, accounted for only 1.7 percent share.

“Howmany people are even employed in the oil sector?” asked  Bintan Famutimi, president, Nigerian-American Chamber of Commerce, at a foreign policy dialogue organised by the  Lagos Chamber of Commerce and Industry in Lagos.

“We believed a lie for a long time, thinking that there was never a time the oil market would be as bad as it is now,” Famutimi said.

Apart from the harsh business climate which prevents the private sector from creating sufficient jobs, export of primary products, which should serve as raw materials for Nigerian manufacturers has also been fingered as a factor that worsens unemployment in the country.

In more than two decades, Nigeria has been in the business of exporting commodities such as sheep, goat skin and leather, sesame seeds, aluminium, rubber, tobacco products, cotton yarn, woven fabrics, copper, cashew nuts, edible nuts, prawns, shrimps, fish and crustaceans to the world market.

Findings show that most of these primary products needed by Nigerian manufacturers are exported to countries where they are used as raw materials, after which they are imported into the country as finished products.

The 2013 data from the Nigerian Export Promotion Council (NEPC) reveal that while the Netherlands bought sheep, goat skins and leather worth $622,407, Italy, known widely as a producer of quality shoes and leather products, spent $355.63 million buying these commodities from Nigeria.

Spain bought Nigeria’s leather and animal skins worth $51.67 million while China, the world’s fastest-growing country, bought Nigeria’s leather worth $93.8 million. These countries are well-known producers of shoes and belts used by many Nigerians today.

But Nnabugwu Osondu, secretary, Abia State Shoe, Bag, Belt and Trunk Box Association, told BusinessDay that manufacturers in the state could no longer buy animal skins locally, as they now look to Cameroon, Mali, Benin and other neighbouring countries to source them.

According to Osondu, traders in animal skins now prefer to sell to Europeans and Asians where they make hard currency. 

Imo Itsueli, former chairman of the Nigerian National Petroleum Corporation (NNPC), believes that Nigeria has spent so much time supplying primary products such as cocoa and rubber to the world, wondering why the country cannot utilise available local resources to become a manufacturing giant.

ODINAKA ANUDU