By Louis Ibah
President/CEO of Erisco Foods Limited, Mr. Eric Umeofia is demanding that the Federal Government musters the courage to ban the importation of all processed foods that the country has the comparative advantage of producing locally if ongoing efforts to resuscitate the economy is to be realised.
Umeofia said the country was endowed with hundreds of agricultural crops and the right weather to cultivate them, but lamented that the snag over the years remains the lack of investment in processing and storage facilities.
Said Umeofia: “I see no reason why we are still exporting raw cocoa, yam, cashew nuts and other commodities in raw forms and turn around to import processed foods when we can process and then manufacture these items and export them to earn more foreign exchange (forex) and mitigate our dependency on crude oil.
“Importation will kill Nigeria’s economy unless we kill it. I therefore call on the government to ban the importation of all processed food and instead support genuine indigenous manufacturers with new credit lines at low interest rate and forex on the spot with a target to process and export. We can do it,” he added.
Umeofia also spoke on the challenges Erisco Foods was facing getting forex from the CBN to execute projects and the havoc the importation of substandard tomato paste was wreaking on the local industry.
It is indeed very sad for me that despite the efforts being made by President Muhamadu Buhari to ease the processes of doing business in the country, local manufacturers are still going through so much difficulties. In fact, it appears as if some of the regulatory agencies are working to sabotage the good intentions of President Buhari.
The pains local manufacturers go through these days to source for foreign exchange (forex) through the Central Bank of Nigeria (CBN) is so discouraging. Sometimes, I regret doing business in Nigeria because of the operating environment. The Federal Government may not know that most indigenous manufacturers are being frustrated continually by the CBN. For instance, the present forex allocation mechanism has been too expensive and costly to all genuine indigenous manufacturers. And greater priority is also given to foreign investors by the CBN in the allocation of forex. These foreign firms are even getting import permits to bring in banned goods into the country. And it will interest you to note that they are not investing in the manufacturing aspect of the business that they are being given forex for. In fact, when I heard the CBN alleging that manufacturers were engaging in round tripping, I had to challenge them to publish the names of the manufacturers that had benefited from their forex allocation. If they do this, the whole country will discover that it is the foreign firms who are the greatest beneficiaries, and they can only be the ones engaging in round tripping. It cannot be the local firms that are getting peanuts. While we have lots of genuine local manufacturers crying and begging for funds to invest and grow the economy and create jobs. What we are witnessing instead is a situation where huge amounts of forex are given continuously for the importation of goods like fish head, frozen fish, corn, tomato paste on retail packs etc. And these are some of the 41 items that have been banned by the government. And it is done in such a way to harm the local manufacturing sector. And here in Erisco Food like some local manufacturers, our operation is severely hampered by unavailability of forex.
Let me share with you an experience that we had with forex allocation. Erisco Foods applied for $400,000 and got a paltry $30,000 whereas that same week, a foreign import firm was allocated $400,000 to import-frozen fish and other banned foods.
And you have to understand how the bidding process is operated to appreciate the challenges we face. At the beginning of each forex bid process, the local banks based on CBN policies would debit the accounts of local firms with the entire naira equivalent and transfer same to the CBN in order to fund the forex retail window.
After about 7-14 days, the result of the bid is released. CBN allocates only a fraction of our forex bid requests on 60 days basis. This is excluding the two weeks period for the bid making it a total of about 74-90 days. Local manufacturers pay interest rate to their bankers for this period of about 74-90 days. Given the nature of the forex futures that CBN operates, no company can confirm a letter of credit whose forex allocation was given say on 60days tenor until the maturity date of 60 days. Thus, when a letter of credit is confirmed after 60days maturity, it will take another 90 days for the foreign supplier of raw material to manufacture and ship for exports. It therefore takes about five to six months to attain a full cycle for any transaction of this nature. If you include the interest for the 74-90days, the effective rate per dollar of any forex allocated to every local manufacturer will be higher than the parallel market rate for every dollar allocated. And this has serious negative effect on our manufacturing process.
So, there has never been any preferential treatment on forex allocation to indigenous manufacturers as the CBN would want people to believe except on very few occasions when they allocated forex bid on spot basis.
How then does the CBN want local firms to grow and diversify the economy? Is it by giving importers more support than indigenous manufacturers? The truth however, is that no foreigner will develop your economy for you. It is only Nigerians that can develop Nigeria.
The CBN intervention funds just as loans from most commercial banks are death traps the way they are structured. They do not provide funds at low interest rate and forex to back the importation of unavailable raw materials in Nigeria to local manufacturers. So how can we be expected to pay our high interest loans? If the CBN claims that what it is doing is the right thing, we would have seen more of the importers that we have in the country joining the manufacturing train, but that is not what is happening right now. Rather, what is going on is strangulating and even killing the efforts of genuine indigenous manufacturers.
Foreign credit lined stopped
One of the problems that we are currently facing in Erisco Foods is that our foreign credit line was stopped and this projected our company in bad light. Till date, some machinery worth millions of dollars we deposited money for could not be balanced because the CBN refused to allocate forex to us despite several applications to the apex bank and our bankers respectively. This has brought our reputation to question, as we cannot have access to credit lines even from local financial institutions. Some of our machines suppliers have confiscated our deposited money and have also threatened to sue us to recover the balance money as they claim the machine is only good for scrap if we don’t balance the money soonest.
Ban on imported foods
I have to commend the government for banning the importation of all brands of tomato paste in retail packs into Nigeria including the poisonous and substandard ones. It was really a very disheartening sight to me when you see foreigners flooding our markets with substandard tomato paste that they don’t consume in their country. These are products that are very dangerous to health and should be banned.
I am urging the government to ban all food items that can be produced locally so that more investors will come to invest in Nigeria to create more jobs and our economy will grow astronomically in line with the aspirations of the government to industrialise Nigeria. The problem that we have is that we import most of the things that we consume in this country and this creates a lot of problem for the economy. Even the recession we say we have exited, it is still linked to output from the petroleum sector, which is not good.
We can only be celebrating exiting the recession if the manufacturing sector is the one contributing greatly to that process. That is when we can be confident that we have made progress in the economy. And we can only achieve this by making the right investments, by supporting local firms. We can only achieve this if we stop exporting our foods and commodities raw only to turn around and import the processed items. It is because we import the bulk of the things that we use that suddenly we have become a dumping ground for all manner of items. So, we should start processing. We should start focusing on industrialisation. We have all what it takes to harness our agric resources and feed ourselves. Local manufacturers should be supported with money at the correct forex and interest rates. We should support our own. We should be proud of what we have. Nigerians must begin to patronize Nigerian foods by eating what is manufactured or processed locally.
I am appealing to the Federal Government to carry out an underground investigation into the activities of NAFDAC as it relates to how they perform their regulatory functions on imported food.
You will recall that the Federal Government had banned the importation of tomato paste into the country and part of the reason for this was to allow the growth of the local producers. Local manufacturers need the market to sell. But that market becomes so difficult to access once you allow all manner of imported goods into your country especially those that are cheap. In Nigeria, what we usually see in the market are not just products that are cheap, but those that are substandard and injurious to health.