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Why companies will continue to leave Nigeria for Ghana

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That many companies have divested in Nigerian economy is no longer news. The disturbing issues are will Nigeria ever absorb the shock of this companies exodus? Are there any deliberate efforts towards making the companies come back?



For the most part of the last 10 years of Nigeria’s democracy, there has been near collapse of infrastructure. The development has been so bad that most businesses groan under intense pain due to overhead cost incurred in providing alternative infrastructure like power. In fact, power has become an albatross to the nation’s manufacturing sector.



For instance, in 1999, manufacturing sector accounted for not less than five percent of the Gross Domestic Product (GDP).  This shrunk to 4.9 percent in 2000.



As a result of high cost of production that results from inadequate infrastructure, the manufacturing capacity utilization remains on the down side.



The manufacturing sector is further bogged down by massive decline in capacity utilisation resulting from high exchange rate of the Naira and congestion at the ports. Prior to the financial meltdown, the manufacturing sector had not fared better largely due to lack of infrastructure and high production cost.



President of the National Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), Simon Okolo said there has not been significant improvement in infrastructure.



According to him, industrial/commercial centres continued to witness heavy traffic, thereby constituting undesirable delays to motorists and other road users while the rail and mass transit schemes did not receive the desired boost necessary to transform the transport sector.



Owing to these, the domestic economy witnessed an unprecedented closure of factories and production plants last year.



Indeed, it was a confirmation that the nation’s domestic economy was sinking. With the weakening economy, more sectors were being affected by the recession and the unemployment profile kept rising.



The president of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo disclosed to Sunday Trust that absence of conducive manufacturing environment and basic infrastructure would continue to draw back the sector, except something urgent was done to reverse the situation.



According to him, the dream of Nigeria being an exporter of manufactured goods would remain a mirage since Nigeria had thrown away agriculture and blindly embraced oil export.



The recent decision of some companies that had bases in Nigeria to relocate to Ghana was another confirmation that the nation’s industrial sector was still held in hostage.



A survey conducted by the Bank of Ghana recently revealed that Nigeria was one of the 10 sources of Foreign Direct Investment in the former Gold Coast.



Nigeria placed 9th with a contribution of 2.1percent of the GHC1.5billion invested in Ghana in 2007. Nigeria’s pre-eminence in the business environment of Ghana was further re-enforced recently when Ghana’s President, John Atta Mills visited Nigeria’s president in Abuja.



The president who reportedly spearheaded the move of asking Nigerian manufacturing firms to relocate to the former Gold Coast assured that his government would provide a congenial environment for the investors as well as give them some incentives.



According to him, some of these incentives were 15-year tax holidays, free land and other policy initiatives which would drive their businesses.



Last year, Dunlop Nigeria Plc., the only surviving tyre manufacturing company in Nigeria then, shut down its plants and laid off hundreds of its workers and put some on half pay.



Dunlop Nigeria Plc and Michelin had relocated to Ghana. Patterson Zochonis (PZ) is also planning to relocate to Ghana, even as Cadbury Nigeria Plc, Unilever and the International Institute of Tropical Agriculture (IITA) this year, sacked sizeable number of their workers over reported high cost of production, decaying infrastructure as well as the ravaging global economic recession.



Unconfirmed sources also said Guinness Plc was already putting spanners into works to move its business to Ghana, while some companies were said to have expressed readiness to move.



However, External Relations Manager of Dunlop, Sola Adebanjo said his company did not relocate to Ghana. He said the rumoured relocation of the tyre company stemmed from its drive to establish sister branch in the Gold Coast.



He told SundayTrust that the Dunlop version of Nigeria was still intact and operational.But not many Nigerians would buy Adebanjo’s position.



Recently, members of the Lagos State House of Assembly expressed concern over the relocation of manufacturing companies.



This was brought to the attention of the House under Matters of Urgent Public Importance by Sanai Agunbiade, chairman, House Committee on Commerce and Industry.



Agunbiade said manufacturing companies in Nigeria were already folding up, to relocate to Ghana and take advantage of the liberal investment incentives there.



According to him, the implication for the state was high unemployment rate and increase in criminal activities.



While attributing the development to constant power outage, he added that “manufacturers in Nigeria were crying over the power situation in the country which is the real bane of the manufacturing sector.



“I think Lagos State Government should call on the federal government to allow us implement the Independent Power Project (IPP) and distribute power to industrial areas, because Lagos would be most affected by this movement of industries to Ghana.”



Contributing to the debate, Chairman, House Committee on Finance, Adeola Olamilekan said it was high time the federal government decentralised Power Holding Company of Nigeria (PHCN), because huge funds injected into the body had not yielded desired impact.



The president of the Trade Union Congress (TUC) Peter Esiele lamented that the relocation of companies to Ghana was a sad situation that would forever impinge on the nation’s development.



He said the relocation was a manifestation that government had no concrete plans to develop infrastructure with a view to bringing more investments into the country.



He said the business environ-ment in the country was in disarray in the sense that many businesses groaned under intense pain to survive.

 


According to him, it was only companies that had thrown ethics to the dogs that survived “the harsh business environment”. He said it was amazing that the government that had not deemed it fit to put infrastructure in order imposed heavy taxes on businesses.

 


The Director General of Nigeria Textile Manufacturers Association, Jaiyeola Peters said the Ghana government’s plan to give the relocating companies 15-year tax holidays was a manifestation that the government had created an enabling environment to receive them.

 


A manufacturer, Ligali Mohammed lamented that the Ministry of Commerce and Industry had done little or nothing to boost investment drive in the country. ‘’Obviously, infrastructure is zero-some here and hope of reviving same is just not there. The minister keeps promising that infrastructure would be fixed, bail-out funds would be provided to ailing industries like the textiles, but where are the infrastructure and the bail-out funds?

 


‘’So, if manufacturing companies decide to go to Ghana, no one should apportion blame on them, for they are in business to make profit. And they are entitled to do their business where they consider safe.”

 


According to Ligali, government had lost its grip on all sectors wondering how government would achieve the so-called vision 2020.

 


Painting the sordid picture of power in Lagos recently, the chairman of Ikeja Branch of the MAN, Mr Godwin Oteri said, “Private power generation accounted for 30percent of the cost of production and the inadequacy of supply is majorly responsible for 25.24 percent average capacity utilization.” Today, the power situation in the country has further plummeted.


The country’s quest to hit the 6000MW by the end of the year remains a super-miracle to those in the know.

 


The current situation should therefore, be a litmus test for the federal government. Government needs to evolve economic agenda that would boost the investment climate of the country.

 


The Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi had already offered a way out of the nation’s economic doldrums by advising government to concentrate only on revitalization of the power sector instead of the bogus seven-point agenda.

 


Whether government would listen to Sanusi’s sermon is a matter many are still waiting to see.

 

 

(Source:Sunday Trust)

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