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Lagos — Tower Aluminium will soon be
celebrating 60 years of serving Nigerian population with pots and pans,
long-span roofing and aluminium extruded profiles used for doors and
windows frames.
In the last few years, Tower has found it difficult to compete with
imported Chinese aluminium coils, which are used for production of
long-span roofing and aluminium profiles or extrusions normally used for
production of doors and windows frames.
In this interview, the Group Managing Director of Tower Aluminum,
Chief (Dr.) Jinesh Chandra Dugad, who had in February 2013 cried out to
the federal government over the challenges threatening continued
production at the nation's aluminum giant, iterates that the local
aluminium production sector might just go the sorry way of the local
textiles and tyre manufacturing production sectors if the federal
government doesn't quickly formulate and sincerely implement the vital
policies to save it.
Last year, you addressed a press conference lamenting the challenges
facing the aluminum sector, especially the Tower Aluminum Company that
is the only surviving aluminum coils manufacturing company in the
country. One year after, has there been any policy change to ameliorate
the problem?
While some serious work has been put in place by the Manufacturers
Association of Nigeria (MAN) and the Minister of Industry, Trade &
Investment, work which has recognised the need to protect the aluminium
sector, there has been no firm action so far to protect the producers of
aluminium coils and aluminium profiles against unfair competition
mainly from China. Since last February when we met, there has not been
any policy change. As we understood, the Common Economic Tariff (CET) of
the Economic Community of West Africa States (ECOWAS) which was to
expire in December 2013 was being reviewed and there could be revision
of duty. It is already 2014 and the ECOWAS-CET duty structure has now
been extended and will be revised in January 2015.
MAN has taken up the matter with the government that we will continue
to suffer if the tariff is deferred for another one year, that is till
2015, unless the government does something fast. MAN has given
recommendations to the government on various sectors, including
aluminum. I understand that government has looked into those
recommendations and we are expecting something to happen concerning the
tariff, which may come anytime.
Meantime, there is a lot more serious activity within the government
in Abuja to accelerate agriculture and industrial activities to absorb
thousands of Nigerians who need gainful and productive employment and
are considering implementing tariff on certain core sectors.
As there has been no action so far, there has been the closure of the
rolling mill at First Aluminium. I quote from the annual report of
First Aluminium Ltd which was also established over 60 years ago at Port
Harcourt:
"Notwithstanding the progress that had been made at improving asset
utilisation and quality of own manufactured aluminium coils in the last
two years, it became clear that the Mill could not compete with imported
products and the decision was made to stop manufacturing, which led to
the direct loss of 215 skilled jobs. For our supply chain, the position
is worse as each manufacturing job is generally considered to support
three others because we are major consumers of materials, spares,
consumables and service. Wherever possible, we have endeavoured to
source locally.
We have not given up hope that manufacturing is completely finished
in Port Harcourt. The Mill has effectively been mothballed, meaning that
if in the future the government creates an environment where local
manufacturing is no longer disadvantaged, we can restart operations. We
cannot foresee that happening in the near future which is why we have
impaired the fixed assets, and written down inventory to estimated
realisable value."
Similarly, another rolling mill owned by Qualitec, which was
established to produce aluminium coils, has ceased production some time
ago. Currently, a new rolling mill with substantial investment is under
construction by Alo Aluminium Ltd., in Enugu. They have, however, we
believe, slowed down the project implementation, awaiting action by the
government to protect the aluminium sector against unfair competition
from China.
The story is somewhat similar in the case of the aluminium extrusions
or profile sector. There are five or six producers in the whole of West
Africa and they are based in different parts of Nigeria like Dopemu,
Otta, Abeokuta, Owerri, Abuja and Kaduna. Each of them could operate at
higher outputs and even expand their production to serve the whole of
West Africa if they are given adequate support in form of import duty on
their products and zero per cent on the raw material used by them,
namely, aluminium billets and ingots.
Nigeria has already witnessed impact of good protection, in case of
cement, where the country is now not only self-sufficient, but the
country is emerging as an important exporter of cement arising from the
incentive offered by the government.
At Tower, we have continued to operate our rolling mill and aluminum
extrusion or profile manufacturing, hoping that government's policy will
protect the aluminium sector, as it has done in case of cement, steel
rods and recently for automotive sector. We hope the government will not
let us down and will act soon, or else as it happened in the cases of
the textile sector and the rubber tyres (Dunlop & Michelin), the
aluminium sector will not progress and, in fact, will continue to
regress.
Today, the situation is still the same. As Nigeria imports the
materials from China, it is exporting to China the jobs that should keep
Nigerians in gainful employment. By importing those aluminium
extrusions, colours and the rest, we are exporting jobs.
What should the government to do to ameliorate the problems in the sector?
Many things are expected of the government to help the industry to
grow. Policy that is protective of local production, power and then
infrastructure because, there is no level playing-ground between Nigeria
and China on infrastructure and banking interests. There is need to
effect a zero per cent import duty on unwrought aluminium and aluminium
scrap; increase import duty on flat aluminium coil, strips, plates and
sheets; increase import duty on aluminium circles and other shapes of
sheets; and increase import duty on coated and pre-painted aluminium
coils.
There should also be an increased import duty on aluminium bars,
rods, profiles, extrusions, tubes and pipes and profiles; increased
import duty on household articles of aluminium; single digit interest
for industries; incentive on export of aluminium scrap, ingots, billets
should be removed; export incentive system for aluminium coil, sheets,
extrusion, profiles, household articles should be streamlined and paid
within three months of receipt of the proceeds; road communication
within ECOWAS should be improved, and there should be ease of Custom
formalities in order to grow the exports within ECOWAS.
I believe the government has to review each production sector and
challenge the manufacturers, as they did in the cement sector and as
they want to do in the sugar sector, by allowing the serious producers
to have special concession on blending their current production with
imports for a specified period to achieve self-sufficiency. They should
work more on bringing the production cost per unit down to be able to
stand up to competition from imports in future.
The most important need of the day in Nigeria is to rapidly create
more employment opportunities for thousands of people who are living in
hope. This can be achieved by a systematic industrial and agricultural
revolution within Nigeria.
In asking for different interest rate regimes for different sectors
of the economy, what rate would you advocate for the manufacturing
sector where you belong?
If Nigeria has to progress and use its human and untapped natural
resource gainfully, the trading mentality whereby the country imports
all finished goods and add little value at home and create only limited
employment should be stopped. For this, the tariff regime and the fiscal
policy must be used to ensure that the interest rate of current 20 per
cent is brought down to a single digit. The current BoI's incentive has
been a good step towards achieving this, but the total resource is not
adequate. Better monitoring and ensuring that the commercial banks
allocate larger resources to industrial and agricultural sector may be a
way forward.
Where do we go from here?
At Tower, we believe that Nigeria has to protect not only the
aluminum production sub-sector, but other sectors such as agriculture
and industries, which can deploy the abundant manpower that are without
work. Again, in protecting the aluminium industry in Nigeria, the
government should ban exportation of scraps so that we will not be short
of raw materials used in our local production. Exporters of those
scraps do nothing significant. All they do is put the scraps on export,
yet they get incentives. The government will be doing local
manufacturers of aluminium a great favour if they can place an
unconditional ban on the export of scraps since we don't make the
products from iron ore presently.
If you are exporting a finished product, which has value added, then
it has a meaning if such an export has incentives. But to export scraps
which have no value added and then they get 20, 40 per cent incentives,
it makes no meaning.
So, the aluminium sector in Nigeria needs to be given urgent
attention by the government in the area of incentives and policy change
because aluminium is vital in building. The more you encourage its
manufacturing in a way that it is locally produced, the more the
products will be able to compete perfectly with imported ones and
housing will be cheap. Housing should be made cheap and affordable
because of its necessity in human lives.
Also, there ought to be considerable rates for agriculture and
industries, different from others. And funds should be made available.
In the past, there was the allocation of the budget to banks with
instruction to lend so much to the agricultural sector and so much to
the industry. But now, so much is lent to the trade while they forget
about the industry. That is what they do. So, industries must be given
funds not only for short term; funds should be provided also for
long-term.
Like China, one day, if the industrial revolution catches up with
Nigeria, it would be an engine supplying its industrial products to not
only the West African market but to all over the world. Nigeria has the
necessary mineral and human resource and all it needs is to encourage
the private sector by providing a better environment and support.
Remember, China grew by protecting and encouraging its industrial
entrepreneurs.
Part of the complaints in the manufacturing sector is that a huge
portion of production cost goes into power generation. Now that the
power sector has been privatised, what is the impact on your cost?
It is too early to see the impact of the recent privatisation as new
owners have a lot of work to revitalise the distribution lines and also
to start new power generation plants. These will take time to implement.
We believe it would take some years for industries to rely on power
from the grid and wherever possible, they would continue to use natural
gas and generate own power. Alternatively, there could be mini-power
generation facilities like the ones established by our group in the Ota
Industrial Estate and now in Abeokuta to supply our own group needs and
reliable power supply to other industrial and larger consumers in the
vicinity.
Could you estimate the percentage of your cost that goes into power generation?
Percentage of cost on power varies from one industry to another. But,
like in our case, after raw material, power and gas is an important
cost of conversion and is as high as 10 per cent to 15 per cent of the
raw material input, to produce the aluminium coils and the profiles.
At Ota, you said that despite the challenges, you were neither
willing to relocate to Ghana nor retrench your workforce. Do you
maintain your position?
Despite everything, our group is a firm believer in the potential of
the Nigerian economy with its 165 million strong, young and enterprising
population and the natural resources. We believe that sooner rather
than later, the government will introduce reasonable import duty on
coils and extrusions.
We have tried our best to keep the skills wherever possible. While we
are seeking better protection against unfair competition, we have to
continue our programme of reduce production cost by recycling aluminium
scarp available locally along with virgin metal purchased earlier on
from Alscon.
We are now working to sort out logistics to bring unwrought aluminium
or ingots produced in Cameroon. This way, the supply chain is shortened
and with it, the cost of finance reduced. We are fortunate to have had
the Bank of Industry's support at reasonable finance cost and some
capital infusion from our shareholders to keep us going. This has helped
us upgrade our production methods and expand capacity so that the cost
is spread over a larger volume to become more competitive.
What level of employment have you been able to generate in the last one year?
We have concentrated on avoiding retrenchment on one side, and on the
other hand, to increase efficiency. So we have created just under 100
new jobs at Tower. If, however, the necessary protection on imports of
products manufactured by us is implemented, we believe we will have
possibilities of creating at least another 1000 jobs within a spell of
18 months from the day protection is implemented. Like us, the other
companies in the aluminium sector will also create another 3000 to 4000
jobs, which otherwise today are held in China or India.
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