NIPC Intelligence Newsletter had an interactive session with Mr. Adil Farhat, Managing Director, West Africa, Procter & Gamble, a major investor in the Manufacturing Sector in Nigeria. Mr. Adil Farhat gave an in-depth analysis and insight into the dynamics and challenges of investing in Nigeria. The interview presents an opportunity to learn more about investing in Nigeria from an operator’s perspective.
Many Nigerians refer to P&G Nigeria Limited as the largest single manufacturing plant and a reference point of Nigeria’s industrialization drive, how true is this assertion?
For over 25 years, P&G Nigeria has continued to invest in local production and this has been a major boost to Nigeria’s industrialization drive.
P&G has invested significantly in the Nigerian economy to the tune of billions of Naira in the capital including our manufacturing plants in Ibadan, Oyo State, and our contract manufacturing operations in Lagos and our distribution center in Agbara, Ogun State. Our operations have generated thousands of jobs in the country, serving numerous SMEs with our suppliers. Nigeria remains a focus area for P&G and our investments continue to contribute to inclusive growth.
P&G products were mostly imported into Nigeria for a long time, what made you to place significant manufacturing investments in Nigeria?
Propelled by a desire to serve our increasing consumer base in Nigeria, P&G has invested significantly in manufacturing facilities and world-class distribution centers.
Our decision investments are driven by our belief in Nigeria’s potential and the immense passion of Nigerians to win in spite of all odds. In our over 25 years in Nigeria, we have seen the tremendous growth, leapfrogged technology, advanced consumer preferences, the emergence of a stronger middle class and increasing urbanization. Thus, Nigeria continues to be an active member of growing economic communities. All these factors inform our choice in investing in local manufacturing in Nigeria.
How have you strategically aligned P&G Nigeria Ltd to key into the Federal Government’s Industrial Revolution Plan in the medium and long-term?
P&G has aligned with the Federal Government’s Industrial Revolution Plan as well as other FG efforts to grow the local economy by focusing on backward integration and inclusive growth.
Since the inception of P&G Nigeria, the company succeeded in localizing packaging materials. We’ve worked to improve the standards of our local suppliers and have successfully localized 100% of our packaging materials. We have also made significant progress in localizing over 60% of our raw materials. We continue to work closely with the Federal Government and other institutions to localize whatever is available.
Investment Climate and Ease of Doing Business are critical issues for attracting investments in Nigeria. What areas would you like the Federal Government to address in the consumer goods manufacturing that will make Nigeria manufactured products competitive?
For products to be competitive, a level playing field must be created by the government which will enable companies to thrive and guarantees a fair return on investment.
There are several areas to address outside of hard infrastructure:
Multiple Taxation: The various levels of multiple taxations that occur at state and national levels. These should be streamlined to enable growth of industry supporting the intent of the industrial revolution plan.
Import Duties: We also encourage the Government to assess the impact of import duties on raw material that are not available in the country as some of these duties on raw materials are higher than duties of imported finished goods.
Duty on imported Machinery: Machinery for local production of any sort should be duty-free as seen in other countries in Africa. These factors will significantly enable industrialization in the country.
Lastly, the cost of finance should be addressed. Particularly as it affects SME development. This single factor significantly limits our competitiveness as local manufacturers and business people.
If these costs are revised, the impact of the ease-of-doing-business index would be very significant. It will also ensure that capital investment and local manufacturing remain attractive for companies in Nigeria.
Can you give us a picture of the future of the Consumer Goods and Products manufacturing sector in Nigeria and your local content policy?
It is our belief that the consumer goods sector will continue to progress given the level of economic growth we are witnessing in the country.
With regards to our local content policy, the ease of sourcing raw materials locally has always been the driver of our decision to manufacture in Nigeria.
We have continued to identify local manufacturers for primary input into manufacturing. This we have also achieved through the help of supplier Meetings which were done in conjunction with the Ministry of Industry, Trade and Investment and the Manufacturers Association of Nigeria with the overall objective of sourcing locally.
Localization is integrated into our business strategy. Our objective is to manufacture as close as possible to the consumer wherever it makes sense. In the same way, we work with our suppliers and partners to localize where we are located where it makes commercial sense. We have successfully localized 100% of our packaging materials and made significant progress on localizing our raw materials. We have a glide path to increasing our local sourcing every year.
As a key player in the sector, what are some of the policies and programmes you wish the government of Nigeria to specifically implement to attract investments in the local content in your sub-sector?
Some of the policies the FG can put in place to attract investments are policies that truly aid backward integration. A typical example will be a policy that mandates the purchase of goods produced in the country by FG offices/officials and so on.
The FG can also ensure that goods produced in the country are competitive by addressing the infrastructural deficit which makes goods produced in the country overall expensive.
Another suggestion is that the FG enacts policies to guaranty good return on investment for companies who invest in the country. These policies could take the form of workable and sensible tax holidays and incentives that reflect modern-day realities.
Considering how vital information is to investment decisions, what are the initiatives P&G is implementing to provide information for investment decisions in the sector so that government will key into the Industrial Revolution in Nigeria?
P&G is playing its role in promoting further investment into Nigeria and we advocate for Government to adopt the various ideas in this document. We are playing our part in positively promoting the opportunities in Nigeria to our partners at home and abroad. To this end, we have held several supplier summits in partnership with the Government to drive FDI into Nigeria. We have been successful in this venture to attract several of our major partners who have invested in Nigeria.
We also provide technical support to the Government to enable the ease of doing business in Nigeria which has seen Nigeria move up 24points on the world banks ease of doing business report in 2018.
We saw headlines in Nigerian Newspapers a few months ago about your decision to close shop in Nigeria, is this true?
We are aware of the media publications quoting incorrect information about the closure of the P&G Agbara Plant site and we have issued the correct facts of the plant restructuring project.
P&G is restructuring its Nigeria manufacturing operations to deliver a more effective business operation for now and sustainably for the future. This will entail an exit from production in its Agbara plant. We will strengthen our manufacturing operations in the Ibadan plant for laundry, scale up our contract manufacturing operations in Lagos, build capabilities in our world-class distribution center in Agbara as well as continue to invest in our local talents.
P&G is a foremost global consumer goods company providing world-class products sold in over 180 countries worldwide. This is purely a business decision for a sustainable and innovative business operation in Nigeria.
P&G is a model investor in Nigeria investing economically, socially and investing in technology transfer in partnership with local suppliers, agencies, contract manufacturers and the Government to deliver key development objectives of inclusive growth. We have been operating with world class standards in Nigeria for over 25years.
We believe in Nigeria’s potential and are here to stay for the long haul as a key player and part of Nigeria’s growth story.
Are there specific and defined challenges your company is facing in Nigeria?
The challenges we face are not specific to P&G. They are challenges peculiar to companies in the sector. These revolve around infrastructural challenges, port congestion, poor power supply, and transactional challenges.
What do you want the Nigerian Investment Promotion Commission (NIPC) assist you in the production processes that will aid you in doing more for the Nigerian economy in the manufacturing sector?
Below are the ways the NIPC can assist to grow the manufacturing sector:
A) Support for advocacy with the fiscal authorities, on the reduction of duties on raw materials not available locally.
B) Support the movement to forestall the introduction of excise tax (ad valorem) on soaps and detergents.
It is also proposed that the government should exempt the applicability of Value Added Tax (VAT) on hygiene products as a social imperative. As part of this objective, women and school girls and will be able to have uninterrupted education during their monthly periods. This is because manufacturers are then able to provide these products at affordable rates to indigent people who ordinarily cannot afford to use them during their monthly period cycle.
The NIPC can help champion the advocacy efforts of this proposal as it will benefit Nigerian women and girls in the country. The zero VAT rating for hygiene products could either be done by the legislature or by an order of the President and overall its benefits will outweigh any temporary revenue hurt the government will be incurring by this removal.
Sir, it has been an insightful experience interacting with you on these germane economic issues that affect the development of the industrial sector in Nigeria.
Source: NIPC Intelligence Newsletter