BANKS NOT HELPING MANUFACTURING INDUSTRIES –OMANUKWUE CHIEF BEN OMANUKWUE

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Banks not helping manufacturing industries –Omanukwue

Banks not helping manufacturing industries –Omanukwue

Chief Ben Omanukwue is the pioneer managing director of KRABO Nigeria Plc, a company quoted on the Nigerian Stock Exchange (NSE), is not happy that a lot of things that ought to be in place to aid the growth of the capital market are not in place.

He believes that the problems bedeviling the capital market should be tackled from the angle of government providing the conducive atmosphere that will suite manufacturing sector which is the pivot on which the wheel of the economy rotates. He also shares the opinion that investors and operators should adhere to the tenets of the profession where they found themselves. In this interview, he bared his mind on major issues crippling the capital market. Excerpts:

I am into manufacturing and marketing of products. We manufacture correction fluid and printing chemicals and soap. But this time, we no longer manufacture because of the problems in the country concerning erratic power to generate heavy duty manufacturing machines, procurement of raw materials, technical partners and capital.

Products manufactured
We used to manufacture correction fluids which go by the name, Krabex. That was the product we were seriously into. In fact it is from Tipex we got our Franchise (Krabex Correction Fluid). Although that is not the only product we are into we are also into office equipment especially filing cabinet, security equipment and saves. We manufacture that one and we import saves. These are the few products we are into.

Factory office and source of raw materials
Our factory is located in Anambra state, precisely in Ifitedunu. Ifitedunu is about 14 kilometers from Onitsha and 10 kilometers to Awka, the state capital. We source our raw material from imported resin and another chemical we use from those who import them from abroad. We also use a solvent which is the main ingredient, locally procured. However, that we are no longer producing does not mean that the company is dead. The company is still alive.

We have not folded up. Difficulty in getting energy supply for the company stopped us from manufacturing and that is what makes us seem like out of business. We are partially alive because we have not folded up. I said partially because of the predicament in the energy supply and cost of raw materials and some other components in manufacturing that are very hard to come by. At a time importation of the finished products became cheaper compared to the goods manufactured locally. This therefore made it a waste of energy and not profitable to still strive to produce locally. Government is not helping matters.

This is because the cost of production outweighs the importation, thereby giving reasons why one should go into importation of the products. So there is no point wasting energy, raw materials and resources since after production no one buys and those that buy fail to pay. At this time if you manufacture, you manufacture at a loss and will not be able to pay your staff and other charges involved. We were unable to meet a lot of costs, so that is why we temporarily stopped production. But the company is into marketing and supply.

Deviation from core competence
Well, the most important thing is capital. If we have capital we can diversify into other portfolios. We can even diversify into production of pure water and bottle or table water which is even more lucrative now. We only need lean capital to start production because the factory is there, we only need borehole machine and another line of business is started. We then can get machinery for the pure water and other allied products. We can still diversify if there is capital, although the banks are not helping matters as far as capital is concerned.

Local or foreign partnership
We are open, if any foreign partner is interested in our company, we can discuss with him. We still have floating shares which we can sell. There is the enabling environment created by government. They have got a lot of gains to make from it because governmental policies are there to encourage such partnership. The partner can after business, repatriate his profits if he likes. There is cheap labour and market for any product here in Nigeria, so what he needs is the capital and every other thing is available.

Factors forcing manufacturers out of business
The greatest problem of manufacturing sector is power supply. If there is regular power supply, then 50 per cent of the manufacturing problems are solved. If there is no power, the cost of running generator with diesel will eventually take off the profits and eat into the main capital. If you factor the cost of procuring all these into the production cost of the product, the price will be very exorbitant. Then you will bear with me that the manufacturing sector in Nigeria is suffering. So that is the problem we are facing. Apart from the problem of raw materials, the basic thing is NEPA or PHCN that is not helping matters with epileptic and erratic power supply.

Effect of taxation
Yes, this is the policy of government, to pay this and pay that. Once you are an existing company, government will like you to pay this tax or that not minding whether you record profits, pay salaries or not. Taxation is one of the major problems manufacturing companies are facing. But nonetheless, we are prepared to pay taxes as long as we make profits because the taxes are paid from the profits generated by companies. But on the other hand, if you don’t make profits, where do you get the money with which to pay taxes.

Conducive atmosphere for business
Nigeria is quite conducive for business because there is the market. As long as there is stable power supply, reasonable taxation, reduced civil unrest and all that, there is nothing one manufactures that cannot be purchased, no matter the quantity. There is the manpower and labour is relatively cheap and not as high as people think. People are willing to work but no factory to work in. Due to lack of infrastructure, people are not encouraged to go into manufacturing because after considering all the costs of factors of production you will know it is on the wasteful side. But when you talk of business,

Nigeria is where to go. Some of these factors of production that will help whoever is in manufacturing are stable electricity, water supply, good roads because after you may have finished your production, there must be good roads for easy transportation otherwise you produce for personal consumption than for commercial purposes.

Relocating to other country
Well, Nigeria is the in-thing. Definitely I am a Nigeria and would like to patronize Nigeria. The only problem we have is government policies that are at times not business friendly. Otherwise, why should I leave Nigeria for other country to do business? Once there is the provision of infrastructure, energy and conducive environment, which we are crying for, there is no reason why one should relocate to other country. I don’t want to leave my country and go to help build other people/country’s economy. If I do that, it will reduce unemployment for the country while increasing that in Nigeria. Personally, I will not like to leave this country and that is why we pray government to provide the infrastructure, the enabling environment that would help business to grow.

Government should also enact friendly laws that will make the banks to give loan facility to business men because no business thrives without capital. What is happening now in the business world is better imagined than beheld because no bank is ready to give out loans. The ones that are ready to oblige you will charge such interest and demand such level collateral that you may not afford.

New development in the banking sector
The new development is not very healthy in terms of what the sacked chief executive officers did with depositors’ money. We never knew that when we deposit money in their banks, they use it for their private businesses. Investors are not happy over that. The Central Bank is trying to sanitise the banks but they should be careful the method they employ otherwise such method will backfire.

The sanitization is also affecting the manufacturers and individuals. They should bear in mind that the sanitization must be done with human face so that manufacturers could still get some sort of financial support from the banks for the purpose of lifting their businesses.

By MADUKA NWEKE

 SUNNEWS Thursday, February 04, 2010         




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