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The state of Nigeria’s economy is worrisome and this is further accentuated by the free fall of the naira, nation’s currency, against the United States dollar.
Segun David, the national president of Chemical and Non-Metallic Products Senior Staff Association of Nigeria (CANMPSSAN), in this interview with the Daily Sun Workforce, notes that major manufacturers in the chemical sector are leaving the country due to the harsh operating environment.
He identifies high tax rates as one of the reasons manufacturers are finding it difficult to break even and why no new investors will come into the country.
He also speaks on other issues that the organised private sector is contending with to break even and the need for government to improve on policies militating against the productive sector of the economy.
The labour leader laments the effect of the harsh economy, coupled with the high inflation rate, on the Nigerian workers, and what should be the new minimum wage for workers.
Excerpt:
A year in retrospect
It has been very challenging. Arguably, the manufacturing sector is the worst hit. We see the situation in the country, in terms of the dwindling economy. Also, we know this issue of sourcing for forex has been so terrible. And it’s been affecting all companies.
And this has drastically affected our productivity and the workforce. We have a couple of companies in the manufacturing sector, and the majority of them are in our sector, the Chemical Non-Metallic, which shut down recently and they moved their operations out of Nigeria. We’re talking about companies like PZ, companies like Procter & Gamble, we’re talking about companies like GSK Pharmaceuticals, Sanofi and many others.
You know what that means to our sector. It means that a lot of people are out of jobs. And so we’ve been in one negotiation or the other. And we practically restrained a couple of companies from going into redundancy. However, a few insisted because we know that it might, eventually, you know, distort their going concern, if they don’t embark on it.
So, it’s been a very tough one for our sector, coupled with the fact that inflation is biting harder, the cost of raw materials has more than tripled, not even doubled. It’s tripled. And that has consequently caused many manufacturers to increase their product prices, not because they want to make extra gain, but because they just want to keep the margin so that they don’t start running at a loss. It is one thing to say, I’m increasing price because I want to make more profit, now they are actually increasing prices just to maintain the balance so that they don’t start selling at a loss. And most manufacturers bring in their raw materials from outside the country. The cost of transport also is something else.
Companies lost to economic challenges
Just within the industrial estate along Lagos-Ota, we used to have over 75 manufacturing companies in that area. But as we speak, there are only 30 surviving within the last five years. This means about 40 of them have closed. That tells you how dire the situation is. And this figure is for Ota axis alone, talk more of other locations across the country.
We cannot put a number on the total number of companies that have exited the country because many more are on the verge of leaving.
And, clearly, as these companies shut down, they are leaving a lot of workers unemployed. These workers are the ones bearing the brunt. Of course, the owners are moving out because, according to a lot of people we’ve talked to, the ease of doing business in Nigeria is completely eroded.
For the average Nigeria worker, they have at least 10 dependents. So, imagine one person losing his job, we’re talking about 10 people out there being stranded.
A typical example would be Procter & Gamble, who had over 2,000 employees and now they are out of the market. GSK, over 2,000, they are out and so on and so forth; so, you know what that means to the economy, coupled with the fact that the jobs are not just there. The economy is biting harder and everybody’s trying to see what they can do.
A lot of the youths or a lot of people have no choice but to want to run out of the country. Imagine a situation where you see a grown adult of over 60 years trying to leave the country; then you know there is a problem.
Effects on membership strength
If the companies are shutting down, no doubt, the membership strength will reduce. That has also affected our revenue drive and the number of people coming in, which is really a big problem.
Government’s response
Every government, every leader, wants to etch his name in gold. They want to perform, they want people to see them turn things around. So, I would say that the government is really sincere about turning things around, but how they will do it is another kettle of fish. Are they achieving the result? That’s another ball game entirely. But the truth is that they want to do something.
Advice to stem the trend
Number one would be to make forex available. I was talking to some management staff of a popular company, and they told me that they applied for a certain amount of forex from the CBN last year, they did not get the money up until January this year and the CBN wrote to them that they would have to pay an additional N400 million on the amount requested due to the fluctuation in exchange rate within that short period of time.
If the company does not have the capacity to pay the additional N400 million, it can crash.
In addition to making forex available, the government should stabilize the naira. The freefall of our naira is killing the economy and everybody knows it. Even the layman on the street knows that naira instability is killing the economy, so it is the responsibility of the government to ensure that naira stabilizes. This was one of the key points of advice that the TUC gave the federal government in terms of what needs to be done.
Also, the government needs to make food available. We’re pleased to see them trying to work on some palliative measures.
Furthermore, they should ensure that the refineries are working. They should work on the minimum wage fast enough too and other areas that require immediate attention.
Inflation at 30 per cent
As a result of inflation, the cost of goods has gone over three times, in some cases even more. One is not even certain of the price you’ll meet a commodity that you bought just two days ago. No economy grows like this. Coupled with the fact that the federal government is allowing the IMF to dictate how our economy runs, that is completely unacceptable and not a way to go.
No economy thrives with very high tax rates or with complete removal of subsidy. Even America that we tried to model their economy after subsidizes all food items, as well as other developed countries where they don’t pay taxes on food.
There is subsidy everywhere. So, if IMF is telling us to remove subsidy completely, they are not being sincere. And the federal government should really look inward and see that this will not help the economy. And no manufacturing company will be able to do well with very high tax rate. Also, no new investors will come in if the tax rates are very high. The federal government needs to start looking inwards to remove the bottlenecks that are preventing investors from coming in.
Minimum wage
We are in an economy where it is the dollar that dictates everything. Look at the current exchange rate, Dollar is exchanging for over N1,600. Given this, the minimum ideal amount should be at least $100, which is around N160,000. Even that money would go nowhere at meeting basic needs of people. A bag of rice is over N70,000, take that away and you are left with only N90,000. Now you will have to consider other commodities and demands of the average Nigerian: transport, rent and all that.
That money is honestly not enough for an average family. And you must bear in mind that in Nigeria an average worker has about 10 dependents. Now, tell me, how are they going to survive?
Even when you raise the argument and say let’s give N300,000 as minimum wage, where do you think the average employer would get the money? It would be gotten from the masses, because they would increase the prices of their goods and services. It is going to be a vicious cycle.
It is the same on the part of the government, if they decide to pay a huge amount as minimum wage, where will they get the money from? It is you and I because there would be heavy taxes levied on the same people.
Also, many companies who are unable to pay would have to close. What about artisans, tailors, drivers, hairdressers who are not part of the organized labour? Who pays them their own minimum wage? And we have more of those people in the nation’s workforce.
My suggestion is that the federal government should not be ashamed to correct its mistake of floating the naira and removing subsidy to the level to which it has done. The way forward is a total reversal of these policies.
