‘Logistics is so expensive it makes Nigeria’s export uncompetitive’

Obiora Madu is the Chief Executive Officer/Programme Director of Multimix Academy. The academy also known as Multimix Export House is Nigeria’s pioneer and leading export management company. Popularly known as Mr. Export, Madu is at the forefront of promoting export in Nigeria. In this interview with SHIPS & PORTS DAILY, Madu speaks on the limitations to viable export business in Nigeria. He mentions poor infrastructure and limited access to funds as some of these limitations.    

 

Excerpts

 

How is the export business in Nigeria?

 Well, export business… there is a lot of improvement because a lot of activities have happened in the agricultural sector. Of course if we are expanding production in the agricultural sector; it means more capacity to export because what we have in agric will obviously be able to feed us and we have a lot more to export. A lot of things have happened in the sector, the Economic Partnership Agreement (EPA) which we were unable to sign with the European Union (EU) is affecting agric export to the EU but other markets are opening up in other parts of the world. So generally it’s been good but we are still looking forward to a time when we will depend on processed export, rather than the raw export of agro produce which we are currently doing. But until then, it’s okay. The expansion in agric is helping a lot of people to get into export.

 

Where is Nigeria’s comparative advantage in the world of trade?

Well; you can say it’s in agric but you know comparative advantage is of the old. Today, it is competitive advantage. We lack the competitive advantage and that is occasioned by logistics infrastructure. The logistics cost is so expensive that it makes Nigeria’s export uncompetitive. Today, you can have all the comparative advantage on earth, if you lack competitive advantage you will be suffering in the mist of plenty which is exactly what is going on here. So our strength is in agric but if we could process…take our cashew for example, we sell them for peanuts to the Indians, they process it and sell it so much to the world as snack and I don’t think cashew processing is rocket science. The sheanut; we produce 60 percent of the world share and we are not listed in the export market. Again, government should answer that question. For example if we produce 60 percent of a product for the world market, which means you can do something in that direction. Of course we are the largest producer of cassava, plantain and Lagos state is the largest producer of coconut in Africa. So there is so much to do. The only thing is that there is too much politics around, less business. In fact, too much politics is killing business. So, people have ideas but to run it regarding finance etc, these are where the issues are. Nigerians are very entrepreneurial.

 

We keep hearing Nigerians are entrepreneurial but it doesn’t go beyond our shores…  

No, because the environment is very tight. It is tough to run a business around here. You provide your power, water, you provide practically everything. At times you may have to tar the road to allow people get to where you are.

 

And there is no access to financing, even if you get it the interest rate is killing; 25% per annum?

 

That is the worst and you cannot compete with people who get finance at three percent per annum. In America for example, if you attend the Small Business Development Unit, the government will guarantee 80 percent of the loan you are getting to start a business, the bank takes responsibility for 20 percent. If that business fails, you simply take off and try something else. And assuming that 30 percent works, they are not worried over the 70 percent that failed, they are rejoicing over the 30 percent that worked and the multiplier effect it will have on the economy. That is an incentive. We don’t have anything like that here, even to get loan from banks. Like they said, every bank must set up an agric desk as part of the increased activity in agric. I said where is the other leg, the export desk? In the 1980’s when I was in banking, the Central Bank of Nigeria (CBN) said every bank must have an export desk and we did and it paid off. Right now if you take your proposal to a bank for finance, you don’t even know the department to send it to. So that is a challenge and I think CBN needs to bring back that policy of banks having an agric and export desk because while we are struggling to produce more in agric, we need to export more. So both desks have to be there for it to be complete.

 

There was a documentary on CNN recently on cocoa in one of the West African countries and a cocoa pod that sells for less than a dollar produces chocolate that yield hundreds of dollars. What does this tell us in Africa?  

 

Professor Ogbeke who was one of the brains behind cocoa in Nigeria and actually personally assisted Cote D’Ivore. Of course as we speak, Cote D’Ivore produces 60 percent of the world cocoa which is much ahead of us. Ogbeke said if he had his way; he will use a bulldozer to bring down all cocoa trees. And knowing his contribution to cocoa, somebody asked him, Prof, why will you do that? He said look, cocoa has remained cocoa but everyday the price of cocoa keeps coming down. It is a cartel. It is the chocolate manufacturers that dictate the price of cocoa in the world market but if we could start producing, and then we can cut off. Either we belong to the cartel or we fight them, though globalization doesn’t encourage cartels any longer.

 

But what about the limitations you talked about, poor infrastructure and poor access to finance?

In 1990, there was a facility form African Development Bank called ADB export stimulation load. This loan was given to people at about Three naira to a dollar and in a short time it has hit One hundred and twenty naira. So loan that was taken at Three naira to a dollar is being paid back at One hundred and twenty naira. As I speak, twenty one companies that were setup, guaranteed by the federal government based on that loan; not a single one of them is alive as we speak. One of these companies (LAK Group) is in Sagamu. It is suppose to be a cocoa and shea butter processing factory. So that is it. The environment is not good and until something happens in that direction; companies will continue struggling to survive. But that shouldn’t be the case.

 

Is it the infrastructural gap that killed the factories? 

The infrastructural gap made it impossible for them to be able to compete because what you produce and propose to sell at N300 to make profit, it will come in from China or elsewhere in the world and they sell at N100, so you are out of business. The point is that we need to articulate our stand. I have been advocating for a situation where we will have an initiative that will target two or three products, get it out of bureaucracy because with bureaucracy; the winner takes all. If you become a chief executive, you do what you like until your tenure is over. Whether you achieve something; there are no measuring standards, anything happens. So this is where the challenges are. If it’s whether it is possible, it is more than possible. We have intelligent people in this country, people who can compete anywhere in the world. The problem is not with us, it is with the inconsistent policies.

 

Aside the infrastructural defects and all that, Nigerians couldn’t take advantage of the Africa Growth and Opportunity Act (AGOA) which is export of produce?                                      

AGOA, if you go to their website and check, you have 6500 items that can be exported under AGOA.

 

But Nigerians practically did not take advantage of AGOA?

I don’t know what is wrong with us but in Ghana I know of a company that exports four containers of stockings every month to America. So many economies in sub Saharan Africa today, the growth is attributed to AGOA, Mauritius, Ghana and Kenya etc. If you check on the internet you will find a huge figure against Nigeria’s name in AGOA but 98 percent of that is oil. AGOA was not setup for oil. AGOA or no AGOA, America will continue to buy oil from Nigeria. Next year the current regime of AGOA will come to an end and there is a huge expectation that it will be extended. But I don’t care about the extension. It has been extended twice, what did we do? We did nothing after two extensions. So what magic is going to happen whether it is extended or not?

 

So what is the problem with AGOA?

 The problem is again the environment because if you go to certain exhibitions, you will be shocked at- there was a lady who makes women under wares with some unique materials; you can’t find them anywhere but to get support to be able to do huge export to the America-She has gone to AGOA conferences across the world and everybody is wowed about the product and there are so many like that. You see the challenge is oil. If this oil can cease for a while, it will knock some senses into our head. Oil is like a man who has a tap in his house and he puts a bucket and turn on the tap and dollars will be falling into the bucket and you are telling the man to go to farm, so that is the problem. Look at the maritime industry, it can match or surpass oil if well managed.

 

So we have said for over a decade…      

That is the thing! We are all sounding like cracked record but that is very unfortunate really because that American AGOA opportunity…anyway you can’t try it with the Asians because what happen was that when AGOA started, the Asians actually wanted to use sub Saharan Africa as a route because for the Asian countries, every textile they export to America; there is duty and there is quota. Once your quota is full, you export no more. But for us in sub Saharan Africa, it was duty free, quota free. So they wanted to use us as landing, export those things as made in Nigeria but the AGOA law was too tight; it was impossible for anybody to do that, the regulation was very, very tight. What I am saying is; that was one huge opportunity that we have lost; I don’t know what we need to do about it. When former President Obasanjo appointed a special adviser on AGOA, she worked; got the visa and setup one garment centre in Ikoyi. It is still there but I don’t know what result it has produced. So it is all about seriousness. Government runs like business elsewhere in the world. Nigeria National Petroleum Cooperation (NNPC) compared to the Oil Cooperation of Malaysia is a different ball game because the former runs like a privately owned company. So too much government is a problem, they say they have no business in business and yet they are not leaving business to run.

 



Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.

..