High cost of doing business forcing manufacturers to shut down operations – BOI

Barely days after the Organised Private Sector (OPS) raised the alarm over the inclement business environment in the country which it said is driving operators under, the Bank of Industry (BOI) in Nigeria has lent its voice to the situation, as it decried the high cost of doing business and other challenges in the country.

According to the bank, the situation is causing manufacturers a lack of access to financing options.

It would be recalled that while reacting to the unceremonious exit from Nigeria of foremost pharmaceutical group, GlaxoSmithKline, the Lagos Chamber of Commerce and Industry (LCCI) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) said the decision by the company to shut its operations in the country after over five decades ‘would have adverse effects on the economy.’

The bodies noted that despite offering international businesses access to the largest market on the continent, the country still faced economic slowdowns due to rising costs of doing business, an unreliable power supply, and weak infrastructure.

“With justification, the chamber is concerned that if the trend persists, the nation’s economic growth potential will not be realised. GlaxoSmithKline’s decision critically reflects on the nation’s poor ranking on ease of business measures, which the chamber has constantly spoken about. It is time the government took appropriate action to reverse the saddening trends in the business clime in Africa’s largest market.

“Factor cost, as an integral element of the profit equation, is viewed with utmost seriousness by business people. In the face of rising costs, business people will likely search for cost-friendlier locations.

“The chamber is inclined to suggest the government take a holistic view/review of the business environment and take steps to make the nation’s business clime more competitive for growth,” LCCI said.

On its part, also reacting via a statement signed by its President, NACCIMA expressed deep concern over the exodus of companies from Nigeria.

It said the recent announcement of GlaxoSmithKline’s exit from Nigeria had dealt a major blow to the country’s manufacturing sector, which was already experiencing significant collapse among its local businesses.

According to NACCIMA, the sudden rise in the price of petrol and the abolition of the official naira rate has caused a significant backlash.

It claimed that that had eroded the already earned income and trading capital of several multinational companies that had established their previous earnings based on the official naira rate at the time.

That, it said, had led to a steady exodus of multinational companies and the collapse of several local companies, resulting in significant job losses and economic damage.

According to NACCIMA, it is crucial for the government to take urgent action to reverse the trend of companies leaving Nigeria and restore confidence in all sectors of the economy.

“NACCIMA maintains that sustainable development can only be achieved through collaboration between the private and public sectors, and we are committed to working with the government to ensure Nigeria’s economic success,” it stressed.

Meanwhile, speaking during the Annual General Meeting (AGM) of the Apapa Branch of the Manufacturers Association of Nigeria (MAN), Friday, the Managing Director of the Bank of Industry, Olukayode Pitan, expressed concern that a significant fraction of the manufacturing industry does not have access to finance due to a wide range of factors.

Pitan, who was represented at the event by the bank’s Divisional Head, Large Enterprises, Isa Omagu, also mentioned other factors such as lack of credit history, non-availability of collateral, vulnerability to market fluctuations and the highly unstructured nature of many manufacturing entities also accounted for major reasons why many of them lacked access to finance.

“High cost of doing business, that issue can never be overflogged. That is one of the biggest problems of manufacturers. For manufacturers to improve their access to finance, they have to ensure that they keep proper records. They need to do proper bookkeeping to make themselves more bankable.”

In its Bi-Annual Economic Review, MAN had identified lack of access to funding as a major factor that had stunted the growth of the industry.