Legacy detergent, Omo is shot down. The maker, Unilever says its inflow is down by 35% and writedowns have doubled from 1.49 to over 3.7 billion naira – a 60% hit. When I see big entities like Unilever stumble, my immediate reaction is normally, “high time”. Many of them are run in the most inefficient manners you’ll be surprised. I’ve seen the production facilities of some of them and it is Fourth World in the extreme. What they concentrate on is the externals – packaging and adverts. The underlying basics driving their production – equipment, waste management, personnel management, accounting is so blighted you’ll wonder how they cope. And how do they cope? They cope because they are usually monopolistic. They have close to zero competition. So many of them can be easily taken down if there is competition from small, efficient new entrants that can produce more efficiently and spend more prudently.
But we must take a look at Omo’s real competitor who has now crashed out too – Ariel. Ariel was from the stable of the Procter & Gamble multinational. P$G found itself overextended and then the exchange rate differentials struck it right on its sickbed. It had to die. So, it seems there is something common to both businesses at first observation.
To be honest with you, I am not really surprised at P&G as well and its crash is not abnormal within appropriate contexts. The sources of its equipment is out of sync with Nigerian realities and this is just the source of its misalignment. When I heard they were putting $300 million into an FMMG factory in Nigeria, I thought they were misaligned. The Nigerian economy does not allow sufficient expendable income to households to pay for goods coming out of factories of that set up costs. That factory should have been around $90m to be competitive. You will be surprised at the disparity in the cost of machines purchased in the West and the East and the closeness of the quality of the products. Manufacturers have to be honest with themselves about these things. Some times there are additional benefits to be had from western systems but those benefits are usually long term – upwards of 30, 40 years. If it’s a dynamic system, in 25 years you’ll have something better and the industry itself would have been overhauled. The P&G outfit may have been basically misaligned as an investment, to begin with, all said for the Nigerian economic instability.
Now to local issues. I believe Nigerians should brace up for more shocks with respect to manufacturing because of this wild, unrealistic forex rate. With a heavy reliance on imported raw materials, manufacturing epilepsy will be the rule in the coming months, depending on how the forex animal is tackled. Nobody can import at N1,300 to the dollar and remain in business except your market is specialized.
And do you know what demons you have to face in extracting your imported raw materials from the port in Apapa? The authorities also caverlierly increase import duty and port charges from the comfort of their offices. Every now and then, Customs will roll out how many trillions they project to collect as duty, not mindful these isn’t a real income but taxation on the citizens whenever those charges are not protectionist as per economic strategy. Then your trailer will start to navigate the forest of Apapa traffic, which is hard enough if you were on a bike. People say it costs about N1.5m to transport a container from Apapa to Ikeja these days. If a society cannot solve a simple transport problem from the port to 10km inland, how can it possibly make an economy work? I asked those who know why don’t you bypass Apapa roads altogether by using the railway to evacuate the ports into inland container terminals. They smiled and told me it will hurt certain interests who profit from the melee. That’s when I understood things better.
What you will realize is the blunt truth that the economy has hardly ever been the priority of government and of the Nigerian union for some decades. Our priority is politics – the politics of power sharing and resource looting. There are way too many people making oceans of money in government without adding any value. It is the hustling for these positions that consume 90% of the attention of the government and its bureaucracy. Thoughts on the economy are mostly ancillary and a mere afterthought to core power issues. The real feeling in leadership is that the Nigerians will always cope and they are satisfied with convenient answers and loose excuses. You can even tell them the economic affliction is the will of God for them for now and it will make sense to a wise section of the voters. The real will and devotion to the prosperity of the public is non existent in Nigerian leadership. As for the people, they are also fragmented by individualism. Their idea of doing well is to have while others suffer and beg from them. The sense of community is zero and the country is a soft bed for bad governance any day, given this narcissist culture.
Finally, the success of the economy will depend a lot on robust local manufacturing: local sourcing of raw materials and local construction of machinery. I wonder how many local manufacturers of caustic soda we have. Do we even have any plant manufacturing sulphuric acid, the belweather chemical for the estimation of industrialization capability? Caustic soda and calcium hydroxide are the basic chemicals for soap making, along with fats, which are fairly available locally.
Then have you seen how logistics is neglected? I praise all these people who put their goods on trailers and brave perilous roads across the country. They are also harassed by the police and council boys wherever they are safe from kidnappers! A video recent went around where a man showed 52 pages of paid clearance papers he had to collect in Southwest Nigeria alone – for driving a Toyota Tacoma. A friend driving a similar truck one day took me around in it in Abuja. He had to be evading uniforms and choose routes because of harassment from government and quasi-goverment extortioners. At a point I felt we were criminals running from the law just for driving a light truck around town! Light trucks are seen as business vehicles and business people are seen almost as criminals exploiting the land who have to be punished with rates and bills. I used to have a fleet so I know exactly what I am talking about. Our journey into economic stability is just setting out. The government is using normal, regular means apparently in hopes that if you do the same thing over and over again and repeat it for long enough, somehow it will work. Our problem is not a lack of knowledge of the problems, it is a lack of the will to solve them by applying the solutions we already know and as long as this is the case, many more manufacturing concerns are going to be thrown overboard on this storm.
