Forex squeeze not healthy for industries —Shongai
The Managing Director of Shongai Packaging Industry Limited, Ravinder Kanwal Shongai wants Federal Government to sort out the foreign exchange shortage to enable manufacturing industries stay afloat. He spoke with BABATUNDE OSO.
In what areas would you want government to assist your sector of the economy?
We need the government to ban the importation of finished goods to protect local industries. Situations such as payment of low custom duty on imported finished products are capable of discouraging local production like ours.
Government needs to grant manufacturers like ours duty concessions and rebates on some of the raw materials in order to enable competitiveness of finished products with those imported into the country.
Some of the duty categories and description of goods are capable of wiping out local investors like us and exposing the country to all manner of unfair competition from developed countries, including job losses. For instance, some policies of government place zero import tariffs on finished drugs and 5-20 percent import tariff on raw materials and packaging.
So, what is the way out of the foreign exchange crisis?
The encumbering effect, especially, the manufacturing sectors’ loss cannot be quantified in terms of specific amount.
Our industry requires government support in the area of provision of foreign exchange for the purchase of imported raw materials, which is not produced here.
We are very concerned about the consequences of the Central Bank of Nigeria (CBN) approach to the management of foreign exchange market over the last few months. I am aware the manufacturing sector through MAN and LCCI have previously engaged the CBN and other authorities through several fora (including dialogue sessions and memoranda) to draw attention to the implications of forex policies on businesses and the economy.
We have set up a world class production plant with state-of-the-art equipment only to have them producing below installed capacity due to lack of foreign exchange to get raw materials and the inability of our customers to order for supplies due to the high cost of products and a shrinking market due to low demand for their products. It’s a vicious cycle and the loss is huge.
Current lack of foreign exchange has also lowered our production capacity much below our installed capacity and if it continues like this, we have to reduce the man power size, which can create lot of unemployment and affect the masses. We are struggling to survive and have postponed our expansion plans till situation improves.
We are not getting also not getting raw materials to buy and if we get, it is at very high price and customers are reluctant to pay and it is affecting our sales and customer service.
There’s this view that locally made products are inferior, how globally competitive are your products?
In terms of quality, we can match the standard of packaging produced in the industrialised countries. We are quite competitive as our technology and machines are European standard and all are from Germany, but on the pricing side, the foreign products may be cheaper in those countries because of the high cost of production in Nigeria.
We have the latest state-of the-art European technology. Our investment is for the long term so we get that best machineries available and get expatriates to come in and train the local staff to not only run them but also maintain them thereby ensuring that there is knowledge transfer.
What would you say is the value of your industry’s contribution to the Nigerian economy?
The packaging industry is worth over N300b. We provide packaging solutions to most of the manufacturers that produce your daily essential needs like bath soaps, tooth paste, detergents, and food products like cereals, biscuits and beverages. We also produce labels for numerous products.
The industry is very important because if we cannot meet the demands of manufacturers, they may not be able to package enough products to meet the consumers’ need and this may eventually lead to scarcity of commodities.
How have you addressed the poor power situation?
Government needs to continue going the way it is going, that is continue improvement of the power infrastructure, notwithstanding the fact that it has been privatized. Power is one of the key factors for the successful operation of any industry. Fortunately for us, we belong to a conglomerate that has an Independent Power Production company as one of the subsidiaries, so, our sister company supplies power to all our units in Ota, Ogun State. Of course we would have preferred the regular power supply from the GENCOs and DISCOs, since generating your own power means increased costs, which ultimately increases production costs.
Owing to the prevailing economic situation, there is low purchasing power among consumers, is it affecting your earnings?
In reality, we don’t sell products to the consumers on the street, so this doesn’t directly impact our business but we produce for manufacturers who sell to retailers and of course, if business is slow for them, it automatically reduces the patronage we get from them because they cannot request for packaging if there isn’t demand for their products.
Is there any advantage of being a local manufacturer in Nigeria?
Manufacturing locally saves a lot of forex going out of country and reduces the cost of inventories for the industries. The best part for us is knowing that we are contributing positively to the availability of products that compare with the best international standard in terms of packaging. It feels good to know that we are generally contributing to economic advancement of Nigeria.
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