Challenges Facing Nigeria's Leather Industry

Challenges Facing Nigeria's Leather Industry

Wednesday, August 13, 2014 5:26 pm

Maduabuchi Nmeribeh

Even with its touted climb in the economy’s ladder as Nigeria’s second foreign exchange earner, the leather industry still faces enormous challenges. Chief among them is the need for the Federal Government to inject adequate resources to stabilise the sector as well as provide an enabling environment for manufacturers and investors in the industry to thrive. As the chairman, Nigerian Tanners Council, NTC, Alhaji Lawan Sule Garo, observed in a recent interview with TheNEWS magazine in Kano, there was a need for government to encourage both local and foreign investors to establish manufacturing companies that would be readily available to use processed leather for the production of high quality goods such as shoes, bags and belts, which are imported from Europe and North America. “We (Nigeria) have reached the peak in manufacturing top leather. We can compete with developed countries; what we need now is to go to the next level; and that is production of shoes, belt, bags and other products that could be manufactured using leather as a raw material. We need people to come in and invest and we need improved power supply and infrastructural facilities which are indispensable variables that can aid, not only the leather but also the entire manufacturing sector in the country,” Garo noted.

According to the NTC boss, tannery remains one of the oldest industries in Nigeria. The leather industry has continued to generate employment for the old and the young, particularly, in the North-West part of Nigeria. It is one of the enterprising ventures that have refused to go moribund, even in the face of incessant refusal of the Federal Government to actualise its touted policies on the provision of the needed infrastructural facilities and social amenities. It is also on record that Nigeria has top-gradet hides and skin in the world—especially, the skin-red made from goats.

When the magazine visited one of the biggest leather companies in Kano, Mario-Jose Enterprises Ltd., located in Challawa Industrial Estate, the firm’s group general manager, Fadul Attar, a Lebanese, said, “It has been good doing leather business in Nigeria. If the Nigerian government can sustain its policies and make adequate improvement in the needed infrastructure, particularly, power generation, we will climb even higher.” He explained that Mario-Jose Enterprises is a subsidiary of the Mamuda Group comprising of other sister leather companies, including Mamuda Industries and Mahaza. The Mamuda Group has over 3,000 workers, 95 per cent of them Nigerians.

During Sallah festive period, when the supply of skins shores up, the Mamuda Group, just like other leather conglomerates in Kano, employs thousands of ad-hoc workers to help the staff process hides and skins for exportation. It exports over six million square feet of leather materials on a monthly basis, while making over $100 million on exported goods per annum. Currently, Kano has about 20 functional tannery firms—one in Bompai Industrial Estate, five in Sharada Industrial Layout and 14 in Challawa Industrial Layout. Out of this number, the Mamuda Group; Fata Tanning Company; Unique Leather, Multi Tan and Kano Tan have continued to witness a boom in production with the acquisition of modern technology that has greatly aided the process of manufacturing.

Findings revealed that in Kano, tannery remains the largest, and in fact, the most efficient industry, even though it is faced with enormous challenges just like every other sector of manufacturing. The industry employ over 25,000 people directly; and thousands of Nigerian youths are engaged on a daily basis as ad-hoc workers. One major factor that makes the industry vibrant is the availability of the major raw materials—hides and skin, which are produced in large quantities, particularly, in the northern part of the country. Also, the large supply of hides and skin from neighbouring Niger Republic, Cameroon and Chad and constant importation of semi-processed leather known as wet blue from Senegal remain an added advantage to the industry in Nigeria. It is also on record that Nigeria produces and exports high quality leather to Europe and other parts of the world.

However, the cost incurred in the importation of chemicals such as chrome, sodium sulphade and dye stuff has continued to have negative impact on the leather sector. Sule Garo pointed out: “If government can take decisive action, we can have those chemicals produced in the country. We hope the Eleme Petrochemical and other refineries in the country can be resuscitated—they are all sources of raw materials, not only for the leather industry but a good number of manufacturing ventures in the country. Nigeria’s leather products are rated as the highest quality in the world. Only if the government could provide the needed infrastructure and good policy thrusts for industries to strive, the leather industry alone can give employment to 50 per cent of job-seekers in the country. But investors who have the urge to join the business are often discouraged because of hard economic situation in the country, including unfriendly interest rates introduced by financial institutions who are not even ready to grant loans to local industrialists.

“Imagine a situation where financial institutions, in their bid to scare us away and continue their romance with the importers, impose far-reaching interest charges of 22 to 25 per cent. We understand that the government is giving out about N100 billion grants to revive the textile and cotton sector, we want such gesture to be extended to the leather industry considering its strategic position to economic development in the country. The Federal Government should also encourage research institutes to produce chemicals. It is not healthy that we import over 80 per cent of the chemicals that we use. Things should be put in place to sustain the leather industry. Leather products are hot cake in the international market, if the government gives adequate attention to it, leather will come to surpass oil in foreign earnings.”

Indeed, the Export Expansion Grant, EEG, an incentive from the Nigerian government given to the non-oil exporters has encouraged the exportation of finished leather products to Europe and other continents. The grant, as extended to other manufacturing sectors, ranges from 10 to 30 per cent discount, depending on the kind of goods being exported. For instance, in the leather industry, the crust and finished leather attract about 20 to 25 per cent grant. Investigations, however, reveals that some corrupt officials in the Nigeria Customs Service, in many cases frustrate government’s efforts to sustain these policies as most exporters, particularly in the leather industry, complain that the Customs officials hardly honour the Negotiable Duty Credit Certificate, NDCC, a situation which gives exporters undue headache. To remedy this hiccup, exporters of leather products continue to appeal to the Federal Government to expand the usage of NDCC to include payment of tax and Value Added Tax, VAT or to remit the payment direct from exporters’ accounts. Also, to encourage leather manufacturers, Sule Garo advocated for the need for long-term financial budget and single-digit loans. “If we can get long-term loan packages, people can go into manufacturing of shoes and bags with available raw materials—when this happens, it will add value to the growth of our local economy by creating more job opportunities and to a great extent, reducing the problem of insecurity.”

Another major challenge facing the leather industry is the transportation of finished products. For instance, transportation of leather products from the northern hinterlands to the Lagos ports poses a big challenge owing to bad roads and poor rail system. In most cases, the products are transported by road on trucks and the poor roads make the movement slow and cumbersome. Though some manufacturers resort to using train, the alternative remains ineffective owing to the fact that the train transport system is yet to be modernised and thereby, delivery of goods takes longer than necessary. rail-way system remain The narrow-guage system in Nigeria is very slow compared to the wide-guage system obtainable in modern society. According to Sule Garo, another challenge facing the leather industry, apart from lack of adequate infrastructure and security, is environmental. He said most of the leather manufacturers have elected to put in place primary treatment plants within their premises to ensure the treatment of polluted water before disposing it. “We want the state and Federal governments to build secondary treatment plants which will be self-sustainable to factory owners.

“We are big employers of professionals from the Leather Research Institute located in Zaria, Kaduna State. The research institute produces 95 per cent of the senior staff in the leather industry. Apart from the professionals, the leather industry today has employed over 25,000 Nigerians directly; and more than half of that figure, indirectly.”

In Kano, the traditional tanners are having a flourishing business. A visit to Kofar Wambe unveiled a local setting where men and women applied intuitive craft and skills that produce fine tannings that have become attractive in the leather market. They use a plant called Bagaruwa to tan out milk-colour leather known as Vegetable tan. Malam Idris Garba, one of the traditional tannerssaid that he inherited the art from his great grandfathers. “This is my occupation; it is the means of my livelihood. The big men that have companies in the city come to buy from us. What I earn from this business sustains me and my family.” Other locations of traditional tanners are Dawakin Tofa, Dawkin Kudu and the hinterlands of southern Kano.

In recent times, not a few stakeholders from the government circles and non-governmental organisations have underscored the need to boost the leader industry. According to the Registrar, Nigerian Institute of Animal Science, NIAS, Oyedele Oyedeji, “It is a paradox that as the government is trying to get the tanneries back on their feet, the boots and belts being worn by Nigeria’s para-military bodies are imported. Incidentally, Nigeria has the best goatskins in the world. If we manage, nurture and maintain the leather industry, we can generate up to $50 billion annually; it cannot be less than that.”

Also speaking at a three-day trade-fair organised by Ascent Innovations Integrated Concepts Ltd., AIIC, in collaboration with Growth and Employment in States, GEMS, held in Abuja, AIIC’s managing partner, Aisha Yakubu Bako, lamented the level of under-utilisation of leather in products in Nigeria: “Do you realise that leather produced in Nigeria is the third best in the world? The amount of leather utilised in Nigeria is just a single digit number, compared with our population of over 150 million people. We need to explore the full potential in our internal market.”

Late last year in Abuja, while declaring open a two-day summit on Leather Industry Revival Initiative tagged Reviving Nigeria’s Leather Industry: A Catalyst for Socio-Economic Growth, the Minister of Trade and Investment, Mr. Olusegun Aganga, said the Federal Government is capable of doubling the $680 million revenue currently generated by the leather industry, if proper policies are put in place. The minister noted that despite various challenges, the Nigeria leather industry should be commended for what it had achieved. “They developed the industry with little or no government support in the past. The government is keen on transforming the industry.

You have endured all these challenges and the sector remains relevant till today, but now, we must take it to the next level. The sector is the highest foreign exchange earner after oil. We used to say cocoa was the highest but they have overtaken cocoa. The federal government is currently reviewing the Export Expansion Grant, EEG, to remove all the bottlenecks, and government drive to increasing foreign exchange earnings, it must be careful of exporting products without any value, and in reality it is only exporting jobs instead of creating it. Therefore, local producers must be encouraged to produce thereby creating jobs.” According to Aganga, the Federal Government has concluded plans to develop six clusters for leather industry which include Kano, Kaduna and Aba, pointing out that government was committed to making the Kano cluster one of the leading clusters in the world.

Also speaking in the Summit organised by Leather Products Association of Nigeria, LAPAN, in collaboration with Enhancing Nigerian Advocacy for a Better Business Environment, the Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina, noted that the leather industry would be captured in the Growth Enhancement Support (GES) scheme as part of government’s effort to promote the Agricultural Transformation Agenda. Adesina, who spoke through the Director, Livestock, Dr. Joseph Ayanger, expressed the desire of the ministry to partner with the Ministry of Trade and Investment to ensure quality production of leather products in the industry. “Leather comes from livestock and livestock contributes to several agricultural commodities such as meat, and even earns much more than any other non-oil export. That is why we are happy to be partnering with Trade and Investment. What we are trying to do as much as possible, is to provide them with the raw materials. Leather is part of the commodities we are handling as a value chain; for the past two decades, this is the first time leather has got a budget line in the Federal Ministry of Agriculture. We are rolling out some form of support in our Growth Enhancement Scheme. We are also doing the same for leather and especially to support small scale buyers who are skin collectors so that we make sure that the quality of what we get is good enough.”

In any case, Alhaji Mutari Ali Daura, chairman of Mamuda Group of Companies, insisted that with the latest boost in the economic status of leather industry, hundreds of thousands of jobs have been created for Nigerians, arguing that, “If the Federal Government can pump in enough resources to supporting the industry, the economy will generally improve. More investors from local and foreign markets will come into the industry and it may even surpass oil in terms of revenue generation and foreign exchange. We deserve support and encouragement from government and pray those in power will see things the way we are seeing them.”

However, only time will tell if government and its agencies are sincere in their mouth-watering promises to boost the leather industry in Nigeria.

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