Doing Business in Nnewi

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Nnewi is not a tier-one city in Africa, and not in Nigeria. Even within Anambra, it is masked by the commercial lure of Onitsha and the officialdom of Awka, the political seat of the state. Yet, the town holds the hope for Africa’s fabrication industry and it is running with it. 

It is not only in fabrication and engineering Nnewi has made an indelible mark. Today, it is almost synonymous with full-scale industrial activities. From food, body care, building material to the automobile market, Nnewi brands stand tall. Cutix Plc, Chicason Group, Innoson Vehicle Manufacturing Company, Tummy Tummy Foods Industries Limited, Intercontinental Feed Mills, Ngobros Industries and Ibeto Group are some of the big brands behind the rising Nnewi industrial zone. 

Though they have emerged as household names, these companies are not the real heroes of the decades of the triumph of the ancient town. Its (Nnewi’s) essence is defined by hundreds of battered, yet uncompromising fabricators that have defied all odds to earn a living from their trades. 

EMCO Foundry Works is one of the unsung heroes. Located in what appears like an abandoned building on a plot of land along Afam Oledome Street, EMCO has held tenaciously to nurturing its dream of growing into an automobile parts manufacturing company someday. The company owned and operated by a middle-aged Ukamaka Okoye brings together over half a dozen young people who etch daily pay by working with crude tools and implements to produce car battery terminals, motorcycle hand clutch levers and similar components. Like the products, the fabrication machines are a product of the local ingenuity, innovation, and determinism Nnewi represents. 

Ukamaka Okoye, fabricating metals at Nnewi
Ukamaka Okoye, fabricating metals at Nnewi

Okoye, who burns her fingers daily as she joins her employees to pull her trademark out of burning coals, said her N500, 000-monthly turnover could triple if the burden of power is taken off her. She identifies the absence of funds as another major constraint she and her peers face. Like every other cottage industry, Okoye relies on self-generated energy for her manufacturing.

Every evening, a few indigent students who seek financial relief in the fabrication centre join the regular employees. Okoye said she desires to expand her operations and provide opportunities for more individuals to help transform the financial fortune of the country. But she needs affordable loans and infrastructural support to make her dream come through.   

Despite the odds, EMCO has survived five years, which hundreds of such other fabrications could not.

Silas Ibekwe, a retired civil servant, narrated how a similar fabrication he set up in the twilight of his active service was killed by his inability to access cheap funds. 

He said: “The commercial banks were not interested in my proposal. I applied to the Bank of Industry (BoI) for a loan but never got any response from them. The interest rates of the microfinance banks were too high. I put my entire savings into the business but it was gulped by high production costs. I closed shop in 2017 when I could not sustain the operation anymore with personal resources.”  

Ideally, start-ups like EMCO operate from incubation centres such as the ones operated by the National Board for Incubation, an agency of the Federal Government. The closest functional innovation centre to Nnewi, the country’s entrepreneurial powerhouse, is located hundreds of miles away in the Southwest. Perhaps, this is one of the reasons services that are better provided at subsidised rates elsewhere are a luxury to start-ups in Nnewi.

Not even the established industries are speared of the excessive burden of self-help. Many of the roads and social utilities are products of self-help. The industrial setup is built on personal sacrifice, which the operator says has made the cost of production unbearable. The companies are not asset-heavy by choice. The majority of them wish to shed weight, concentrate on production and build on their competitive edge. Unfortunately, facility sharing is not feasible, as the companies are not sited in a cluster or industrial estate. 

Cutix Plc, a cable manufacturer, said it has been in talks with a gas power company that insists that its current energy consumption (about 0.8 megawatt) is below the minimum requirement for an independent plant. Cutix operates two factories producing regular and almond cables. Its almond cable manufacturing process requires an uninterrupted power supply. Hence, it relies fully on diesel, with the entire operations of the company gulping about 32,000 litres of diesel (approximately N7 million) every month.

“The production of the almond cable cannot be interrupted. If the machines stop as a result of power outage at any stage of the production, whatever you have done is wasted. So, the plant is permanently on a generator. It is very expensive, but we do not have a choice. We run two plants. Each of the plants is powered by a generator because one cannot serve the two of them,” Ijeoma Oduonye, the chief executive officer of Cutix told The Guardian during a factory tour organised as part of the activities of the recent Nnewi Investment Summit. 

Oduonye said access to reliable and affordable power could reduce the company’s production cost by over 20 percent and increase its competitiveness in the global cable market. Cutix product is rated as one of the best cables in the market. But like other local manufacturers, its production is not as competitive as the imported cables it is competing with.             
The story of Cutix is the story of Innoson, Tummy Tummy, and many other Nnewi manufacturing giants. They rely on generators to power their plants; access their factories through self-constructed/or maintained roads. Tummy Tummy speaks eloquently of the Nnewi’s decade of growth. In 2009, the noodle maker won the First Bank SME award. As disclosed by Ogo Emenike, the managing director of the company, Tummy Tummy currently has 970 employees on its payroll. “With infrastructural support, we would do much better,” boasted Emenike as he explained his daily operational hitches to the organisers of the Nnewi Investment Summit at the company’s boardroom.     

With its operation (which sits on a swathe of land in the heart of Nnewi) spread across the entire spectrum of manufacturing (refining, construction, fabrication, recycling, processing and several others), Chicason Group is not a struggling company by any standard. Its economy of scale advantage gives it a competitive edge in the elite club of manufacturers. Yet, its executive, Linus Ilozue, said the cost of energy is a major burden the company has been struggling with. 

At a panel session during the Summit, Ilozue took on Dr. Chukwueloka Umeh of Century Power Generation Company, which he accused of giving unrealistic conditions to Nnewi manufacturers who approached it for energy solutions. Umeh, on his part, explained that his company is equally grappling with the systemic constraints that have increased production costs for the manufacturers. Century Power has seen commercial prospects in the Nnewi hub and is willing to provide a sustainable energy solution to help the businesses reduce their costs said to be 40 percent energy-related. 

Yet, Umeh said his company cannot bet its resources without a guarantee that the operators will take-up power when produced. The industrialists have given their words that they will buy the energy as long as it is cheaper than generators. But the devil is in getting the manufacturers to give the energy company a bankable guarantee as mere words cannot be taken to the banks. Umeh and his team have been in the business of power generation long enough to know how easy it is to lose investment made only based on mere statistics. 

The Century Power boss is among those who believe that Nnewi is a miracle waiting to happen. That miracle, however, is being delayed by high energy cost, which he put at N90 per kilowatt. In the face of the current erratic or non-existent public energy, the private sector operators are ready to step in. But their involvement is also being stalled by the inability of the service providers and the consumers to agree on a workable payment structure.

According to Ike Chioke, managing director of Afrinvest West Africa Limited, Nigeria currently has 39 trade zones with 20 of them active. That Anambra, the engine room of Nigeria’s entrepreneurial adventure, has none, he said, shows the level of neglect the area has suffered. Chioke, whose company has carried out a detailed survey on the business prospects of Nnewi, said the manufacturers could cut the cost of production by 20 percent if they operate in a properly serviced trade zone.  

Eleven of the trade zones are sited in Lagos, while three are in the Federal Capital Territory, a city whose most flourishing businesses are politics and bureaucracy. It was not surprising that Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria (CBN) and presidential candidate at the 2019 general elections, condemned the Federal Government over what he described as politicisation of industrial policies and decisions. He said Africa contributes only one percent to the total global manufacturing figures as against China’s 20 percent because sufficient attention has not been given to promising hubs like as Nnewi.         

Moghalu, a native of Nnewi himself, said: “We are not yet competing with the already most-industrialized countries, but rather we are seeking to build a sustainable and sophisticated industrial economy relative to our current stages of growth. In that context, we must have an industrial economy before we can have a post-industrial one. We, therefore, need an effective industrial policy to promote manufacturing in places such as Nnewi. A populous country like Nigeria, with millions of jobless youth, also cannot afford not to have a strong manufacturing component in its economy; with special attention to the efficient productivity of labour…

“Nnewi’s manufacturing has in the past been neglected by the Federal Government and even state governments. But economic decisions that affect the viability of manufacturing, in particular rail and ports infrastructure, and the possibility of creating economic zones, are in Abuja’s hands. The Federal Government has consistently focused almost exclusively on Lagos in this context e.g. the creation of the Lekki Free Trade Zone, ports policy, etc., and by-passed Nnewi, Africa’s Taiwan. 

“Some manufacturers appear to be more loved – and favored – by the Federal Government than others. This has resulted in a crony-capitalist approach to industrial policy in which waivers and access to foreign exchange in the past were given to specific business corporations rather than general policies for specific sectors, which would create a more level playing field. This is a politically induced policy failure. Nnewi manufacturers have been political orphans for far too long.”

From the Presidency to the Anambra State House, there is no debate about the possibilities of Nnewi. There is also no doubt that there are logs on its path to emerging as the ‘Taiwan of Africa’.

Dr. Jumoke Oduwole, Special Adviser to the President on the Ease of Doing Business, had at the Summit reeled out activities the Federal Government has embarked on to provide the needed institutional support, stressing that the government would visit Nnewi operators to “hear from them” their specific needs. 

The Anambra State Deputy Governor, Dr. Nkem Okeke, noted that access to reliable and affordable power is a key factor in unlocking the goldmine that Nnewi has become. His assurance that the government was doing so much to boost supply was to be deflated with his call on operators not to “necessarily wait for the government” as the private sector operators are available to provide the much-needed solution. “We need steady power but we cannot continue to wait for the government. We can partner the private sector operators,” he continued. 

Briefing the traditional ruler of the town, Igwe Kenneth Orizu, member of the House of Representatives representing Nnewi North/South/Ekwusigo Federal Constituency, Chris Azubogu, also itemised several ongoing negotiations and collaborations aimed at narrowing the gap between Abuja and Nnewi.

But the manufacturers who bear the brunt of the neglect seem to have witnessed so many failed promises that they do not believe any.

The Ndigbo are often described as the Jews of Nigeria. Nnewians (as the indigenes often address themselves) are the forbearers of the trait often attributed to the Igbo – a reason ‘Nnewi sense’ is synonymous with shrewdness and entrepreneurship among the Southeasterners. This tells the socio-political foundation of the creation of the Nnewi that has become the envy of all lands.

To buy or not to buy made-in-Nigeria has become a political issue. A few days ago, the House of Reps came under fire for preferring Toyota Camry in place of Nnewi-manufactured Innoson. An average Nnewi manufacturer lists poor patronage especially by the government as a major drawback to their commercial aspiration. Public figures and notable commentators often condemn the government for being so insensitive.

Now and then, people of different affiliations visit the manufacturing plant of Innoson to see the making of the first complete made-in-Nigeria vehicles. At Lagos Sheraton and Transcorp Hilton, the Nigerian elite mount the podia to sermonise the difference it would make if “we all use made-in-Nigeria brands’. In defence of stronger naira, officials of the Central Bank advocate the adoption of made-in-Nigeria. But most often, one wishes there is a regulation to compel these made-in-Nigeria advocates to take a compulsory ride in Innoson or other locally assembled vehicles. Even those who visit his plant to give Nnewi-born industrialist words of encouragement often park cars bearing imprimaturs of Toyota and Mercedes Benz to give him a pat on the back. Does this matter?        

It is about 50 years when the Nnewi traders, rising from the trauma of the Civil War began their journey back home. It is half a century into the building of the economic powerhouse, which started in the form of backward integration. The new generation industrialists look forward to the second half of the century with heightened excitement. But as the new economic order dictates, those who will compete locally must be necessarily ready to compete globally as the reality of globalization continues to crush the walls of protectionism into dust. Perhaps, the next leading Nigerian industrialists are those who will have the ‘courage’ to demand the world, and not Nigeria, patronise them. 

Plan for the provision of land for the industrial estate

The Nnewi Chamber had initiated steps for the provision of land for the industrial estate.

The estate will help existing small and medium industries and lead to planned industrial development.  It will also ensure that the indigenously driven industrial revolution in Nigeria for which Nnewi has come to be known is sustained.  The 76 hectares of land already earmarked by the Government should be developed.  Also, the N50 million pledged by General I.B.Babaginda (during the special trade exhibition in his honour, at Anaedo hall in 1992) for the development of the estate should be followed-up for release.   The assembly of motorcycles in Nnewi with local brand names is a good development that will positively impact on further industrialization of Nnewi.  The emergence of such motorcycle assembly industries as Innoson and Maryment amongst others is definitely in the right industrialization path.  Christomex Industries now produces motorcycle seats.

There are many informal manufacturing activities in this area.  This gradual approach of conversion from importation to manufacturing and assembly will augur well for the future of industrialization.   There are four distinct modes of investment financing in Nnewi.  This excludes the isolated case of partnering with foreign investors already mentioned.

  • The first is where the owner finances the investment 100% with own funds and then with some support from the Banks for Working capital.  This is the dominant mode with very few not receiving any support from Banks.  There is always the problem of post founder succession and success.  The second is where a few people collect money from others to set up factories that did not work.
  • This second mode is replete with a lot of credibility as well as succession problems.
  • The third mode is by going public by raising money from the Stock Exchange.  This is the model adopted by Cutix Plc and Adswitch Plc.  According to the founder of Cutix Plc and Adswitch Plc, Eng. G.O.Uzodike, he initially started with private placement but quickly went public as soon as possible.  He preferred to go public rather than use private placement for three main reasons.  He wanted the shares to be marketable.  He believes it would be easier to raise more funds in future.  He wanted the two companies to survive him.
  • The fourth mode is from 100% bank financing.  This could not be sustained as funds were diverted into other areas.  The indiscipline in the management of such funds created problems that caused the failure and closure of both trading and manufacturing businesses.
  • The United Nations Industrial Development Organization (UNIDO), the World Bank Group (WBG) and the African Project Development Fund (APDF) are jointly mounting a program aimed at developing the Nnewi Automotive Industrial Cluster to a self-sustaining standard.  This is a big boost to the industrialization of Nnewi.

Nnewi at present is the source of more than 80% of motor spare parts trade in Nigeria (both for automotive and motorcycle).  There are medium and large-scale industries.  There are also micro and small-scale entrepreneurs, and importers of new spare parts.  Four main associations coordinate activities in the Nkwo market.  These are old & new motor parts dealers associations and old & new motorcycle parts dealers associations.