Forex scarcity driving local demand for cables
BY THE PUNCH Jul 25, 2016 LINK
The Managing Director/ Chief Executive Officer, Coleman Wires and Cables, Mr. George Onafowokan, speaks on the need to encourage utilisation of cables produced in Nigeria and sundry issues in this interview with IFE ADEDAPO
How do you cope with imported adulterated wires and cables?
It is nemesis for the industry, not just for Coleman. We will continue to try and speak to the government agencies to limit what is happening. We are the only industry where everyone says made-in-Nigeria is better than imports. That is a fact. Considering this, we should have a problem if the industry does not perform well. But we find ourselves struggling because of import of substandard cables.
Fortunately, it is not the countries selling these substandard cables that are guilty but Nigerian importers who go there to specify lower specs on the cable so that they can make more money. The awareness is not being driven enough on what the standards and the specifications are. Most people can’t answer a simple question like what the standard coil is.
A coil is a round cable you buy because most house wiring cables are in coils. When you look at it, a lot of people don’t know what the length of a coil is in Nigeria. A standard coil in Nigeria is a 100 meters, but if you go to the market, majority of substandard cables are in 100 yards.
Nigeria doesn’t use yards anymore, we moved to metrics in the 1970s, but we see wires in yards but they do it for deceit. One hundred yards is 91.34 metres and a typical imported coil is like 60 metres. But this thing is done to actually deceive people and make more money because if they reduce 40 per cent of the coil and it is sold for 20 per cent less, they have made a lot of money.
To make matters worse, they have reduced the spec. For a 1.5mm2 cable, the diameter of the copper is 1.38mm2, but the importers go to China or India and tell them to make the cable but put the diameter of the copper at 1.1mm2 and swell it up to make it look as big as the standard one. The importers have cut 40 per cent of the material and 40 per cent off the length and their profit is abnormal. If it is matched with the real cable, they have cut about 40 per cent more than made in Nigeria cable. The government needs to do more awareness.
The Standards Organisation of Nigeria and Consumers Protection Council need to work on more awareness. The risk to life is one of the things we should safeguard because in reality, cable can be a disadvantage to a building if the wrong specification is used and there is fire outbreak. It is quite key if the standard of the cable is not below spec because the cable itself can heat up, bring out sparks, and the fire breaks out from the sparks.
Most conduits are connected with the roof constructed with wood when fire is caused by cable; it spreads to the roof like wild fire quickly. An essential role the government need to play, if they want people to live well in their houses without thinking that the cables will burn down their houses is that it must insist that people get standard cables. People should buy from reputable businesses, companies and distributors and get qualified people to install them.
Should government ban the importation of the substandard cables?
In every right, if have to be selfish I will say that is the right thing to do. The government should try to encourage local production of cables. For a country this big, I think we should not be import dependent in cable. We should be an added value country because we need the cable for almost all our processes. Yes, if we look at it, they should ban it, but if not, they should restrict importation as much as possible to force investment into the industry.
We are a country that has massive power shortage; without cable it will not improve. Cable is still an essential part of power generation, transmission and distribution. It is an essential part of housing in which there is 16 million housing shortage in this country.
Cable is an essential part of almost everybody’s life and if we don’t instil growth in the industry, we would make the products expensive and scarce. We want to drive down cost like we managed to do in other industries; we need to force growth into the cable industry for it to be sustainable, that it makes cost-effective sense to buy local products.
Do Nigeria wire and cable companies produce enough quantity to meet local demand?
We do because in recent times, many companies like Coleman have invested in expansion. Today, Coleman has over 4,500 tonnes a month copper capacity and over 3,000 tonnes a month aluminium capacity.
The combined capacity of every other company in West Africa is not even up to half of ours. We are not utilising it because unfortunately we don’t have a situation where the government is encouraging local buy as much as they should.
The local content law is in the oil and gas industry but it is not efficient as you expect it to be and there is no local content law in other sectors. Everyone is doing government jobs and importing. Based on the current situation, access to forex is so tight because we don’t have enough. The situation has given us an opportunity to have a peep into government infrastructural projects. We are shocked at the size of some of them which we have seen in the last six months.
Because the contractors could not get forex, they started looking for local solutions. So I am all in support of this low forex availability because we have learnt about projects we did not even know existed because the contractors were used to getting the money from the government and going to their countries to import every cable. Now because of lack of forex, they are forced to look for local solutions and they are finding them.
We have found these government projects that are so huge and you wonder why they will allow the huge funds to leave the country. We are not encouraging internal growth. Why will a Federal Government project be totally import-dependent? The money is supposed to be for all of us. If the government is giving money to contractors to import 90 per cent of what they need and only 10 per cent goes towards the labour, then we defeat the point of the growth.
Growth internally through government infrastructure projects is not determined when 10 per cent of the money stay in your country; it is achieved when 90 per cent stay within the country and 10 per cent go out.
We need to change the dynamics of how we give out projects because we need to insist on how much of that money is staying within. The more the money goes out, the less people it will trickle down to. That to me is where we need the government to change its focus.
I pray that when the oil challenge gets solved we won’t go back to our old ways and we become the biggest importers in the continent again, leaving what we have worked for during crisis.
What challenges have you been facing in getting forex to import your raw materials?
We are facing massive challenges. We have been struggling. The Forex situation has gone from bad to worse. We were encouraged by the fact that the government focused Forex allocation on machineries and raw materials but we don’t see that happen in practice. It is a lot of words that are not turning into action.
Truthfully, we saw increased capacity utilisation. For the first time we used our hours very effectively with 80 per cent capacity utilisation in a particular shift. But systematically, raw materials started running out and those percentages have started dropping.
As they dropped, rather than the cost of the goods reducing, the cost of goods increased. The word ‘Forex’ now is uncertainty. We are not sure when we will be able to get it. We can’t make plans because we don’t know when next we will get raw materials.
That uncertainty is why government today is overburdened because if I have a business and have run out of a lot of business deals; instead of ordering raw materials on a mont- by-month basis, because of uncertainties, the minute I find Forex, I will try to buy so much raw materials because I are not sure when next I will have access to Forex.
What is happening is that there is a flood of demand, which in my own view is not real demand because the uncertainties have created added requests. This is because there is no guarantee of what tomorrow will be on Forex. They are making astronomical request on the Forex that is not necessary. For us, we are struggling to get today and we are one of the few that are getting once every two to three months. That doesn’t help capacity utilisation.
Have you been able to find alternative to the raw materials locally?
We are working on it. Part of the next project that we are working on with one of our banks and Bank of Industry is to backward integrate part of our processes. Copper is not commercially available in Nigeria yet. Aluminium smelter in Akwa Ibom, is not working at the moment. This could have given material to every company involved in aluminium products because that itself is something that has to be reviewed.
Today, we are seriously looking at how we can get copper or different types of commodities and process them into concentrates. If all things go right, we will be in that business between now and the second quarter of next year.
You are a pioneer in many cable products. How were you able to achieve this?
Today, Coleman is the pioneer for quite a lot of products not only in Nigeria but also in West Africa. We are the first and only producer in West Africa of insulated high voltage cable up to 33KV. We are also the pioneer producer of CAT 5 and CAT 6 network cable that is used for local area network production and telecommunications in West Africa.
We are the first producer of TV/video cable which is used for TV antennae connections and cable satellite as well as other products. Those are the three major pioneer products which we have in West Africa. In terms of DC flexible cable, we are the biggest producer in West Africa and we do the biggest sizes.
Considering the high voltage cable, we are the sixth country in the continent to produce this. In East Africa, Central Africa and West Africa, we are the pioneers of the large majority in this area. Prior to that, you can only get the Insulated High voltage cable in North Africa or South Africa.
In 2014, the Sagamu factory became a pioneering factory for wire and cable not only for Nigeria but also for Africa and we became part of the league of high distribution cable producers in the continent.
What has inspired and brought us this far is the fact that when we go to so many countries, we are seen to be rated below specifications and standards. We are almost like underrated anywhere we go.
I believe that as Nigerians and Africans, we can aspire to be better than what people think we are or what they expect of us. I am always proud of my country and that has always helped me to achieve the unimaginable locally than continuing to be seen as a country that can achieve not more than what is expected.