There is a worrisome challenge in the Nigerian aluminium industry. It is a challenge that plant owners in the industry believe may lead to the same situation in the textile and tyre industries. Nigeria’s once thriving textile and tyre industries became moribund as a result of inconsistent government policies which encouraged huge importation of cheap textiles and tyres into the country.
CEOs of three major aluminium manufacturing companies – Tower Aluminium Nigeria plc, First Aluminium plc and Qualitec Aluminium Industries Limited – who have plants across the country fear the Nigerian aluminium industry may go the way of the textile and tyre industries if government does not intervene urgently. They allege that cheap imports from China, India, Turkey and South Africa have flooded the market.
According to these CEOs, importers of aluminium coils make wrong declarations, presenting coated aluminium coils as plain coils by turning the coated part inside-out, paying 5 percent duty meant for plain aluminium coils as against 20 percent duty for coated coils.
Two of the three operational rolling mills in the country – Qualitec Aluminium Industries and First Aluminium Nigeria plc – have suspended operations. A fourth rolling mill, Aloy Aluminium Ltd in Enugu, though completed, did not start production because of very hostile operating environment. Many extrusion plants are shutting down also. Tower Aluminium laid off 450 workers last December. First Aluminium has sacked 200 workers.
Moreover, Standard Organisation of Nigeria (SON) does not allow local manufacturers to manufacture coils below 0.40mm. This limits the capability of aluminium rolling mills to service the requirement of total aluminium industrial application. Yet coils of thickness less than 0.40mm have flooded the market, affecting capacity utilisation.
That is not all. Aluminium scrap, exported with no value added, enjoys undue benefit of Export Expansion Grant (EEG) of 20 percent. As a result, aluminium scraps have become scarce to local manufacturers. Import duty on aluminium raw materials is the same as semi-finished and finished aluminium products. This has thrown up traders, with no investments whatsoever in plants, who import aluminium coils.
Aluminium ingots purchased from Aluminium Smelting Company of Nigeria (ALSCON) attract import duty just like those purchased from outside the country. At present, ALSCON does not have the capacity to supply ingot requirement for the country in terms of quality and quantity. ALSCON is currently engulfed in ownership tussle. The ongoing negotiation on the sale of the plant between the Bureau for Public Enterprises (BPE) and BFIG is on the verge of collapsing.
Market-friendly policies and firmer regulation are necessary at this point to prevent the collapse of the industry. This is the only way to stem the de-industrialisation of Nigeria which the collapse of the nation’s textile and tyre industries set in motion.
Until ALSCON can supply the raw material needs of local rolling mills, there should be zero duty on aluminium ingots, and also on plant, machinery and spare parts. Companies with rolling mills and extrusion plants should be allowed to import any shortfall arising from inadequate capacity vis-a-vis national demand.
