Nigerian Industrial Clusters Are in Poor State

Industries, Trade and Investment

 

 “Nigeria has over 30 industrial clusters which include Aba Leather Cluster (Abia State) , Amuwo Odofin Cluster (Lagos), Apapa Cluster (Lagos), Ikeja Cluster (Lagos), and Sharada Cluster (Kano), Otigba Cluster (Lagos), Leather Cluster (Kano), and Spare Parts Cluster (Nnewi), among many others. Some free trade zones are also referred to as industrial clusters”

 

The 2019 rainy season was bad news for manufacturing companies based in Agbara, Ogun State. A once bustling industrial cluster, it became a shadow of its former self, with potholes and gullies saluting visitors on entrance. Every day, trucks ferrying raw materials and finished products to and from factories got stuck in broken and muddy roads.

The big companies in the cluster all had their fair shares during this period. Flour Mills of Nigeria, Nestlé Nigeria, Beloxxi, Pharma-Deko, and GreenTech, among others, all suffered that fate. Logistics costs piled up. Cost of maintenance skyrocketed.

There was no solution in sight. Ibikunle Amosun, former governor of the state, proposed that manufacturers contribute 40 percent of the total cost of the road reconstruction, with the state bearing the rest of the cost.

It looked more like state abdication of responsibility, but many manufacturers were willing to key into the plan.

Levies and taxes were coming to the cluster in torrents, but the government of Ogun State was reluctant to do the least of its responsibilities—road rehabilitation.

“Whereas we are willing to collaborate with the government on this project, it is important that the government takes the lead in ensuring a proper and timely completion of this project,” Paul Gbededo, chief executive of Flour Mills of Nigeria, one of the companies in the cluster, said while addressing Dapo Abiodun, the then governor-elect of Ogun in April, 2019.

As I moved across the cluster in April, I appreciated why many Nigerians felt governments at all levels had failed them.

“We are job creators; we are foreign exchange earners; we are the growers of the economy, yet government is always unwilling to support,” a chief executive of one of the manufacturing companies in the cluster told me in anonymity.

I came into the cluster in a commercial mud-spattered motorcycle. The rider and I found ourselves twice in muddy water. Ladies, gentlemen, villagers, and visitors had all suffered that fate many times. They also had to alight from motorcycles twice or three times to get to their destinations.

Today, all that is changing as work is ongoing on these roads. But the roads have done a lot of damage already, having been in a poor state for over two years.

Industry cluster defined

The United Nations Industrial Development Organisation (UNIDO) defines a cluster as an agglomeration of interconnected companies and associated institutions. UNIDO said in a report that firms in a cluster produce similar or related goods or services and are supported by a range of dedicated institutions located in spatial proximity, such as business associations or training and technical assistance providers. In simple terms, industrial clusters involve manufacturing or industry-based companies situating in the same location. In a working paper, the Bank of Industry (BOI) said industrial clusters provide a platform for enterprises to share infrastructure, equipment and knowledge, and have led   to   the  economic transformation of many Asian economies, including    China,    South    Korea    and Singapore.

Nigeria has over 30 industrial clusters which include Aba Leather Cluster (Abia State) , Amuwo Odofin Cluster (Lagos), Apapa Cluster (Lagos), Ikeja Cluster (Lagos), and Sharada Cluster (Kano), Otigba Cluster (Lagos), Leather Cluster (Kano), and Spare Parts Cluster (Nnewi), among many others. Some free trade zones are also referred to as industrial clusters.

Clusters before

Experts say Nigeria used to have a huge number of industrial clusters in 1960s. Then, the country had palm oil milling clusters at Umuagwo in Imo State, Ihiala in Anambra State and several others across the country. Nigerian controlled 45 percent of the global palm oil market, according to a  2016 research by BudgIT, which aggregated data from Indexmundi, the United States Department of Agriculture (USDA) and Vetiva Research. But it only scratches 900,000 metric tonnes of palm oil per annum today, which represents just 1.52 per cent of global production.

Economists say Umuahia, the capital of Abia State, was once a garment cluster. It supplied garments to various parts of Nigeria and West Africa, but a string of poor import policies has hurt this cluster, pushing it into non-existence. One of the features of early industrial clusters, including textile and  leather clusters in Kano and Kaduna, was capacity to share resources and cut production costs.

Today’s clusters

Industrial clusters in Nigeria today have more challenges than bright spots.

Apapa Cluster in Lagos hosts some of the biggest manufacturers such as Dangote Sugar, Flour Mills of Nigeria, Honeywell, and Kneipe, among many others. But it has been taken over by trucks hurrying to ferry fuel and imported products from Apapa and Tin Can ports.

Trucks stay on Apapa bridges for weeks, and manufacturers in the cluster struggle to move their goods to the market.

 

Culled from BusinessDay

Read more: https://businessday.ng/features/article/shadows-of-the-past/

 

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