Lost Days of Kano Hides and Skin
While there, the Ghanaian head of state was shown round some selected indigenous enterprises, among them, the Nabegu Tannery situated at the state’s Sharada Industrial Estate. The leather factory, owned by Alhaji Baba Nabegu, was one of the success stories of Nigerians’ attempt at embracing industrialization. “If Rawlings were to come back here, he would […]
While there, the Ghanaian head of state was shown round some selected indigenous enterprises, among them, the Nabegu Tannery situated at the state’s Sharada Industrial Estate. The leather factory, owned by Alhaji Baba Nabegu, was one of the success stories of Nigerians’ attempt at embracing industrialization.
“If Rawlings were to come back here, he would shed tears as he did when he visited Rwanda,” Alhaji Mustapha Nabegu, one of the children of Alhaji Nabegu, remarked wistfully.
“I can recall how impressed and enthusiastic he (Rawlings) was at what he saw in the factory. While the inspection lasted, every now and then, he would pick up a skin and make some encouraging remarks towards the state military administrator or the company’s managing director,” recounted Alhaji Mustafa Nabegu.” Those were the flourishing years of the tannery.
In the company’s administrative building, pictures from the memorable 23-year-old visit prominently festooned the corridor and dominated the photo albums, driving home the pride of the place once occupied by Nabegu Tannery in Nigeria’s industrial circle.
At the factory’s production lines, it is a melancholic sight of work jerked up to an unpleasant halt; of machines sitting and covered in decade-old dust; and of hundreds of workers thrown out, from managerial staff to labourers, into an already saturated labour market. Everything around this once vibrant, money spinning complex – except for the less than a dozen staff milling about – now looks as dead as it never existed.
“When the going was good, we produced about 22, 000 items of leather on a daily basis and had hundreds of people working across various sections of the factory. We also had room for expansion and increasing our output,” recalled Alhaji Mustapha.
After establishing the tannery in 1981, senior Nabegu subscribed to a call by the federal government for industrialists to add value to their products, when he set up a shoe- making factory at nearby Sharada Phase 3. “Therefore, instead of just selling only hides and skins, we expanded to making and selling shoes and other leather products as well.” Like the Rawlings memorable visit,samples from the Nabegu’s Superior Shoe factory – reflecting the ‘good’ old days – hang on a corner inside Alhaji Mustapha’s office.
“They (the tannery and the shoe factories) are now history,” he lamented, pointing at the dilapidating structure that has become relic of the once respected Nabegu Tannery.
Over the years, requiems have been pouring in over the fate that has become of the hides and skin industry in Kano, a sector that has been one of the major pivots of the ancient city’s economy for time immemorial or for “as old as civilization”, as an economist, Dr. Ahmad Muhammad Tsauni, of Bayero University Kano would put it.
Alhaji Mustapha, who also doubles as chairman of association of Leather and Allied Products Manufacturers of Nigeria (LAPAN), fears that if the problems bedeviling indigenous entrepreneurs in the leather industry are not arrested, Nigerians will be eliminated from the sector.
The complaints coming out from local shoe manufacturers, traditional tanners and dyers in Kofar Wambai, Adakawa, Arzai and other places appeared to be lending undeniable credence to the concern raised by the union leader. In Kofar Wambai for instance, which is a major informal shoemaking market for ages in Kano, Sunday Trust gathered that shops are closing,and people losing their source of livelihood daily due to unavailability or insufficiency of leather raw materials.
“Some years back, about 20, 000 pieces of skin are supplied daily to this (Kofar Wambai) market, but now we hardly get 5000 pieces in a month,” lamented Alhaji Danjuma Musa, an official of the Kano State Skin Dyers Association. “You can now see some of the consequences; the labourers you see idling under shades have come looking for jobs, which are not forthcoming.”
Not long ago, products of Kofar Wambai were highly sought after by customers from all over the country and beyond. Things however have taken a sudden u-turn nowadays, such that even with their attempts to imitate foreign products that are being preferred by customers, the shoemakers have not been able to woo back their patrons. “Part of our problem is capital, the other part is power. But the biggest challenge crippling us all is the influx of Chinese made shoes and foreign investors, especially in the ownership of tanneries,” says Alhaji Sharu Ilu, who spent three decades in shoes business.
He recalled some days, when customers come all the way from Ghana and Cameroon to buy his hand made shoes. “Now they don’t come, they go for cheaper Chinese shoes instead,” he said. His shop, which used to be a beehive of activities for customers coming for the luxury shoes stuffed therein, is now almost empty and part of it has since been converted into workshop in order to “cut undue expenses.”
“Five years back, I used to get enough to meet my basic needs and those of my family from this business as well as save at least N50, 000 every month. But sadly, the situation is not the same again, because all I toil for now is what to eat and then pay my rent,” explained Alhaji Ilu.
He adds: “generally, the fortune of shoemaking business is crumbling steadily, resulting in over half of the shoemakers and sellers abandoning the business, and this is not because they have found something better to do, but because they cannot cope with the growing challenges.”
“It is left to our government to tackle the influx of foreigners into the business, otherwise we will be left with nothing to do in no distant future,” Alhaji Ilu observes. Also echoing his plight, albeit more forcefully, is the chairman Wambai Shoe- Makers’Association, Alhaji Yusuf Atiku a.k.a JB, who argues that “the Lebanese and Chinese are wresting the trade from us; the financially weak local producers.”
Study has shown that Nigeria imports 120 million pares of shoes annually, running into billions of naira, according to Alhaji Mustapha. “If we can manufacture 20% of this locally, at least we can provide thousands of jobs and that can improve our economy in no small measure,” he pointed. However, he thinks the shoe industry is long dead to turn things around.“in the past we had Bata, Anita Superior Shoes and many other shoe industries, but now they are extinct, even though the closure of Bata has more to do with politics than the general challenges facing the sector. Similarly, the outputs from shoemakers in the informal sector is fast diminishing. That puts us at a position to expect rise in the quantity of shoes imported than to reduce or shut it altogether.
In the past, Bata Shoes were a household name in Kano and some parts of the country. The Canadian company had had its products well accepted in the state that children would insist they would not go to school without Bata’s cortina or sandals and the same went for Christmas and Sallah festivities, Bata shop used to be one of the busiest places. Now years after the eventual demise of the company, its name has refused to die in Kano.Any shoes resembling Bata products are still called Bata by the locals.
During its heydays Bata a Canadian company got its supply of leather from indigenous tanneries.Mustafa’s father’s Great Northern Tannery (GNT) supplied Bata with the leather raw materials, and when he set up his own industry thereafter, he also joined in the lucrative supply business to other local shoe factories, in addition to Bata.
Meanwhile, local tanners have directly linked the inability, , to continue supplying shoe industries with leather to be the main cause of the collapse of the trade.
Alhaji Baballe Ila was another indigenous entrepreneur, who acquired his first tannery from the Italians after the promulgation of Nationalization Decree under General Murtala Mohammed’s regime. Bolstered by the performance of the company, its managing director, Alhaji Kamilu Ila, established a second tannery in Challawa industrial area and employed about 1000 people there.
Now the company has only 150 people working for it and is just struggling survive as in the case of many of its contemporaries. And its MD, Alhaji Ila is not under any illusion about the possibility of a collapse. “In the 1990s, we (indigenes) were having more than 30 tanneries, now we are inching to three. In the next few years, we may end up having none,“ he predicted.
Why the decline?
Business in hides and skins has been a major economic activity of the people of northern Nigeria since pre-colonial days, when skins were exported alongside cotton, palm oil, salt etc to other parts of the world. However, trading in skin and leatherworks were in the past, a preserve of an informal sector, though effectively thriving and producing bags, footwear, clothing, upholstery, horse saddle etc.
With the coming of colonialists, machines and new technology for processing leather were introduced, thus expanding and improving the business, at the same time increasing the demand for the expanded market. Similarly, the system witnessed some growth.
When Nigeria became independent, the country formulated the industrial and trade policies that Dr.Tsauni labeled as leaning favourably towards ‘socialism’ in the manner they aimed at “ensuring [the emergence of an] egalitarian society, by providing infrastructural and institutional incentives, with a view to encouraging manufacturing sector and promoting private sector participation.”
The declaration of Indigenization/Nationalization Decree was said to have significantly reduced the participation of foreigners in private sector ownerships, even though experts said the expartriates were able to circumvent the law using fronts and graft to retain some degree of influence in the sector.
Others however, are of the opinion that with the discovery of oil in the 50s and the Oil Boom of the 1970s, Nigeria was carried away by the allure of massive oil revenue to neglect the non-oil sectors of the economy, thereby making it to lose competiveness in the international market. , The abandonment of the trade too was said to have created bottlenecks for indigenous enterprises, especially against the backdrop of “high cost of production, lack of export incentives and effects of incessant changes of the national currency.”
Meanwhile, the closure of Nigeria’s indigenous hides and skin industrial subsector is directly linked with the general infrastructural decay – epileptic power supply, water shortage, poor or dilapidated roads etc – militating against the growth of local, small and medium scale industries in the country. Absence of infrastructure, according to Dr. Tsauni, helped kill the industries by creating a situation where the total capital required for production, cost of production and the prices at sales increased exponentially, thus reducing the quality and sophistication of our local products and rendering them unable to compete with foreighn goods. goods.
Furthermore, economists and experts in the sector submitted that the “down turn” of the hides and skin enterprise in Nigeria came with the introduction of the Structural Adjustment Program (SAP) in the 1980s, which brought about a total departure from the industrial and trade policy of the nation. SAP, they said, prevented Nigeria from pursuing economic goals of empowering the social sector towards embracing liberalization, whereby market forces were allowed to determine who produced what, what to be produced and how to produce.
“That policy created an unequal playing fields between the indigenous manufacturers and foreign investors,” posited Alhaji Mustapha. “These men came with huge capitals from loans they have accessed at low interest rates back in their home countries and exchanged it against our devalued naira. That gave them the upper hand, because in our own case, the indigenous investors, the loans available to us came with high interest rates. That is how the expatriates surpassed us in capital and gradually overtook us in the trade.”
Dr. Tsauni also observed that SAP also triggered a drastic reduction in the production of the commodity by local manufacturers and a drop in capacity to below 50%. Highlighting the consequences of the decrease in the sector, he states that “the number of producers reduced significantly, a number of factories closed down; others continue to close down, while some are just opening windows and others operating on shift basis.” “And when you look at the high price of skin, you will understand that the supply has reduced,” he adds.
In his view, although Nigeria could be sanctioned by international trade organizations to which it is a signatory, if it is found to be restricting investors from coming into the country,(protectionism) it is “realistic” for it to have policies that can insulate its local industries in the way “globalization” will not prove a stumbling block to their progress and that of the country. “Foreigners should not be given free hand to push industries into our nation; to benefit from cheap labour, low taxes (if any), get cheap raw materials and [in the end] go away with the money. Not even that, they enjoy the policy of our country for export expansion. These benefits should have been enjoyed by our people, who are going to sustain the production,” Dr. Tsauni stated.
“The devil is in the EEG”
In order to resuscitate the non-oil industry and boost export from the sector, the federal government established the Export Expansion Grant (EEG), as an incentive aimed principally at increasing volume of exports, diversification of export products and market coverage, among others.
The grant, was established under Export Incentive and Miscellaneous Provision Act Cap 18 of 1986 to provide grant for non-oil exporters who have exported a minimum of N5 million worth of products and have repatriated the proceed to Nigeria.
But indigenous manufacturers contend that the EEG has done little since its inception, in addition to opening an avenue for corruption by foreign investors, killing competition in the sector, creating scarcity of raw materials for use by local tanners and small scale enterprises, by jerking up price of skin to the detriment of small players in the sector.
As opposed to a dozen of functioning industries 15 years ago, the hides and skin sector is now said to be dominated by only about 3 big tanneries, all owned by foreigners – mostly Lebanese – and who are “fighting by all means to get (the) incentives.” “All others (indigenous tanneries) have been forced into paralysis,” charged Alhaji Ila. “There were over 20 shoe factories across the country in the 80s and many more small scale operators around Kano and Onitsha which have now ceased to exist because all the skins have been exported out of the country in search of export grants,” he adds.
The foreigners, especially the three powerful industries popularly tagged the ‘big three’ are further accused of cartelizing the business using the “massively inflated export grants” they receive from government to mop up the available skin quantity at unjustifiably high rates.
“When for instance, the normal time price for skin is N600, these people (the foreigners) can buy it at N1400, which is not the price even in Europe. But they are buying it exorbitantly because they don’t care and can as well dump it into the Atlantic Ocean, because all they are after is the EEG,” said Alhaji Ila.
To further drive home the effect of cartelizing the skin industry Alhaji Mustapha retorts, “in most cases, they buy even the rejects that are used mostly by our local shoemakers and then they will send it out.”
And the corollary is, nobody wants to sell their skin to the local manufacturers at price half what they can get from the foreigners, it was learnt. With the alleged practice, the market becomes effectively controlled by the ‘big three.’
“Even during Sallah periods – that is when the skins are usually of high quality because the animals have been well fed – the prices are between N750–N800, but immediately after the festivity they will push the price to N1800. Why?,” asked Alhaji Mustapha.
The local entrepreneurs claimed that while the foreigners use all available means to multiply the quantity of the skin for export, which in effect translates to more EEG, the available skin in the Nigerian market is made inadequate to meet domestic need. Therefore, in order to achieve their objectives of maximizing the quantum of export, the big foreig-owned industries would send agents to scout for and collect the skins in other African countries. Initially, the collection was done within West Africa, but now they go as far as Cameroon, Chad, Mali, Sudan, Burkina Faso and a couple of other African countries to get the commodity and transport it back to Nigeria for shipment abroad with the sole objective of scooping the EEG, it was gathered.
Although the indigenous manufacturers also import the leather, they claim that it is the only way they can meet the demand by small scale leatherworkers still operating, as the commodity is hard to source in Nigeria. The local industrialists also claim that as the foreigners beat them in competing for the available leather, they also hijack the EEG.
In Dr. Tsauri’s view, a situation where the foreigners dominate the home market and takeover the incentives for boosting indigenous industries, in addition to applying it to buying raw materials from other countries, clearly spells that the scheme has been defeated. “Because it has not benefitted those it was targeted at. More so, I think the grant is not successful, as a number of our tanneries are collapsing. These people I believe cannot get the incentives they get so easily here from their own countries,” he explained.
Similarly, local shoe manufacturers who said the skin from the tanneries owned by the Lebanese and Germans are too expensive for them to buy, accuse the big firms of only being interested in export business, even as they disclosed that the reason advanced in defence of the high cost of the products by the foreigners are usually associated with high cost of diesel and that of production. Alternatively, the shoemakers buy most of their raw materials from importers in Lagos at lower prices, they say.
Analysts contend that the crave for EEG is only succeeding in turning Nigeria into a massive warehouse for stocking skins awaiting export to other worlds, to the detriment and disadvantage of the revival, growth and expansion of Nigeria’s comatose shoe and leather industries.
The EEG for instance, is criticized as being open to corruption and abuse in the form of over invoicing, false declaration of exported quantities and false repatriation. The alleged abuses are said to be prevalent because of inefficiency or inability of the control mechanisms operated by the Nigerian Export Promotion Council (NEPC,) to check them, owing to alleged collaboration on its part and other monitoring agencies. Some of the local entrepreneurs accused the NEP of lacking the wherewithal or the know- how to check the quantity, quality and prices of the exported skin.
What the foreigners do to beat checks, according to some industry experts, is to package a container of skins – of high or bad quality s – which may only cost a $100, 000 and over invoice it to $1 million. As the container is cleared for exportation, the money equals the declared amount to their agents abroad for subsequent repatriation back to into the country as proceeds of sale as required by EEG terms.
The foreigners employ as a strategy to “increase the quantum” of the billions of naira they receive as grants “by pretending they are exporting leather goods at the prices that are not obtainable even by leading fashion houses around the world,” argued some experts.
“They do it continuously until much later, when they will go and sell the exported skin at a discounted price,” adds Alhaji Mustapha. Observers said the hides and skin export is susceptible to such sharp practices because prices of skin, unlike gold, are not quoted at the international stock exchanges. Similarly, they argued that it was for the corrupt practices prevalent in the sector that the grant was stopped in 2007; merely a year after an earlier suspension was lifted on it.
They further attribute the incentive of throwing out people into the labour market as a result the collapse of local industries, to a situation they say is in sharp contrast with its set objectives that explicitly targeted the expansion of the of the sector and creation of jobs.
Others criticize its desirability for inducing increment in an industry, like that of leather, whose available quantity is the direct result of an almost static determinant, which is consumption. Such analysts argue that giving incentives, skin producers cannot stimulate an increase in its quantity, as only the number of animals slaughtered can guarantee that, which is equally a subject of demand. The skin industry, they maintain, is not like growing of crops, whose yields and outputs can be increased by increasing the acreage, application of fertilizers and use of improved varieties and new farming techniques.
For that they said, the grants should have been pumped into providing infrastructure for the hides and skin subsector. They pointed out that recently, one of the foreign-owned companies received N7 billion as EEG, an amount they claim surpass the monthly grants of many state governments and which they say is capable of suffocating other players in the sector, especially judging by the ongoing “unjustifiable war” for more incentives.
Reacting to the allegations on behalf of the foreign investors, especially the ‘big three,’ chairman Tanners Council, Alhaji Lawan Sule Garo, attributed the problems bedeviling the indigenous manufacturing sector to pure lack of managerial skills and unwillingness by the their owners to hire experts.
Apart from employing experts, agents to work for them, he opined, the expatriates have access to capital which they accessed through loans and they succeed by dint of hard work. “They don’t sit down like us, who when given N10 million or N10 billion from the bank, you don’t come out until 11 o’clock,” he said. “If I cannot manage my own factory and you are succeeding and doing well, why should I accuse you of doing wrong?”
Alhaji Sule also disputed the argument that the EEG is susceptible to abuse and is being hijacked by the foreigners, saying the incentive was probed repeatedly and given clean bill of health. “It was investigated during Obasanjo time, when it was 20% and when he came and investigated it, he made it up to 40% to help the sector and it did, [because] now we are the biggest apart from oil. Non-oil export is earning millions of dollars for the country,” he stated addeing that EEG “is not a handout, it has to be earned.”
The chairman also faulted claims by local shoe manufacturers of inability to purchase leather processed by foreign-owned companies due to high cost, explaining that the tanneries do not discriminate when it comes to selling their products. On the contrary, he said “it is the leather goods manufacturers (who) have their own problem, which is managerial.”
Some of the companies that are being accused of triggering the downturn in the industry, employed up to 5000 people, while theysalso denied allegations of over invoicing and false declaration labeled against the companies, saying it is impossible for such abuses to pass under the system of well established checks without being detected.
Alhaji Sule then revealed that other export goods like cashew nuts, cocoa,and shrimps, fetch more EEG than the hides and skin industry, but said people mistakenly eye leather the largest earner of the inducement.
Also dismissing the charges, against NEPC over the administration of the EEG, its director in Kano, who is also the council’s area controller for the North, Alhaji Abdullahi Sidi Ali, said the disbursement of the incentive is extremely watertight, thus immune to abuse.
He explained that before an application for the EEG is considered by an inter-ministerial committee, the Central Bank of Nigeria has to confirm repatriation of proceeds from export, while the customs service and pre-shipment agents also have to confirm that export has been executed.
He further explains that, “all the companies operating the EEG have been visited by the inter-ministerial agency and confirmed that what is claimed in their forms is what is being operated by the manufacturers. If you go and look at the kind of investment that these companies have on ground, you will really know that these people are really operating.”
Responding to allegations on the incentive being hijacked by foreigners, the director stated that one has to bear in mind the indigenous manufacturers that have been pushed aside, found themselves in the situation “because they did not do what they were supposed to do right from inception.”
Export business, according to him, requires an operator to have a wider horizon, to think and to plan so that the activity can be sustained. “The export market being a competitive one, your chances and your ability to survive lies on your input into the business,” quipped the director.
He then opposed any call for the cancellation of the scheme, saying “because without the EEG, even the remaining companies that we can boast of will all collapse. Because as far as the export area is concerned, our producers, our manufacturers, our exporters need that support to remain competitive in the international market. [In fact] there is even an agitation for its expansion.”