Greed Drives Locally Made Goods More Expensive, by Farouk Martins Aresa
by Farouk Martins Aresa,
Dangote recently announced that he was going into rice production while promising to flood the market and bring prices down. Well, it is true that most promises made by businessmen in Nigeria in particular have not been fulfilled. Critics pointed to Dangote promises about cement whose price has not gone down just as his entry into tomato production. In the case of tomato, he was not the only Nigerian that made promises.
We have to accept that there are more market forces at play than the promises of one man. This writer is not a supporter of Dangote and has pointed out his disagreement with him in other cases. However, there is nothing wrong with making profit. Indeed, profit is essential as an incentive to increase production. Even in Cuba, the Government came to realize that if you allow farmers to sell their surplus after Government’s share, production increases.
When it comes to Nigeria, there is this endemic greed among our businesses to milk the masses as long as there are enough of them willing to pay outrageous prices. Those willing to make just a decent profit are frustrated out of the market to enforce their avarice. The case of the cement dealer in Akure makes a good point. Threatened and abused for low price, he had to call police. Many decent people like him all over the Country, are just afraid of their colleagues in business.
Before we come back to rice, tomato which is produced in surplus in Nigeria went begging at a low price when weather was favorable in Kaduna. Unfortunately, lack of adequate storage facilities as always, left most of them rotten and unsuitable for market in some Northern farms. Considerable efforts have been made since then to help Erisco Food, Dangote and others as priority by the Central Bank to provide forex out of dwindling reserve, to avoid workers lay off.
Tomato is a local product. The excuse for forex is that they need to import special seeds and machineries in order to float their manufacturing plants to avoid lay-off of employees. The same is true about the price of bread always going up. One would expect that since cassava is now an unsuspecting ingredient in bread, the amount of imported wheat would be reduced. Actually, after all these years, we should be growing enough wheat to meet our consumption.
O tio! Not in Nigeria. Erisco Foods has threatened to relocate to China and Dangote at one point almost blackmailed the Government into submission during the cement wars. These and other big businesses like Nestlé, Nigerian Breweries Plc and Coca-Cola dealing in sugar and water available locally should be sources of foreign cash for Government, not asking for allocations. Everyone is draining the Government either by looting or as foreign black market billionaires.
It boils down to the fact that our businesses are not willing to make reasonable profit when there are enough people in millions, no matter how few millions are they out of the 180 million or more population in Nigeria willing to pay any price! They raise their prices to those of imported goods and in many cases, importers are able to beat local prices. They complained that those imports are substandard and made from cheap materials.
While their reasons are not entirely unfounded, Nigerians are not the only ones making the best products in the world. Let Nigerians make great products as they are capable of and give consumers the choice between fine rice and ofada rice, fine shoes and Aba shoes, ripe tomato and green tomato as long as all of them are made in Nigeria. People in foreign country have this choice and they learn fast between durable and substandard goods made in the same country.
African mentality is that if it is foreign made, it must be better. Indeed, Nigerian businesses had to export/reimport lace and shoes from Cotonou to satisfy Nigerian taste for imports. Finally, Africans have now discovered that most of the goods from China are of low quality. Yet, we demonstrated that by killing our textile industry. The notion that it is cheaper to import cheap materials instead of manufacturing them at home will soon be busted as China’s wages rise!
The fact is that wages are still lower in most African countries including Nigeria, except South Africa, than in South American countries. So countries like Brazil and Mexico cannot compete with us in wages. Our businesses know this, yet they threaten manufacturing workers at home that unless the Government open the meagre foreign exchange to them, they will shut down.
Haba! Local prices must reflect workers’ low wage and owners of these businesses must cut their profit to beat foreign goods into our market. We beat Kentucky Fried Chicken in some locations! Nigerian businesses would rather close down than to entice more patrons with less expensive products. Take the cost of renting in major cities. Folks cannot afford the apartments and houses. Instead of lowering the rents, owners leave their properties empty.
One of the reasons is the way they came into business in the first place. Their seed money is either obtained illegally without bank loans and therefore without interest or monthly payments that were due. Normally if you have interest payment due, a good businessman would even find other source of income and add it to lower rent or product to make payment to the bank. Otherwise the bank would either take over the business or liquidate the property.
The cases of Innoson automobile without enough patrons is sad. This is a local manufacturer that should be patronized by both Federal and state Governments. Indeed, most Africans should find their cars and trucks so affordable that foreign cars would be driven out of business. But Nigerians want to sell their products at the same price as the imports. Regardless of the durability and style, there are more lower-middleclass than upper or rich people willing to buy.
However, in a country where there are enough looters mixed with hard working folks that made their money the old-fashion way, even if they are a few millions, goods are priced to meet their demand freezing out other genuine and serious poor buyers that can spur demand in the market. Therefore increasing output, production and employment of more workers. The question becomes: if Innoson Motors decrease prices, would they be able to meet demand?
Businesses would rather hoard goods to increase prices than cut prices to increase demand. But are willing to sell themselves cheap for export where they make pittance as long as it is foreign money to buy expensive toys. We never learn from foreign fluctuation in the price of cocoa.