Tanners and other stakeholders in the leather industry in the country had thought it was a blessing and succour to the industry when the federal government introduced Export Expansion Grant (EEG) as part of its support to the private sector. The EEG was meant to serve as an incentive to exporters of certain non-oil products so as to diversify the economy from the monolithic oil sector.
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The business in hides and skins was one of the mainstay of income earners in Kano and surrounding states, including Katsina, Sokoto and Zamfara.
Since the colonial era, Kano had been a hub of skins business with visiting merchants purchasing raw skins for hauling to mainly European countries such as England, Italy and France for processing into finished leather goods. Later on, the business grew in leaps and
bounds with the establishment of tanneries that process the skins into semi-finished products.
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Subsequently, with the attainment of independence, ownership of those businesses shifted to indigenous entrepreneurs. Local entrepreneurs like Alhaji Baballe Ila and Alhaji Baba Nabegu, among others, joined the business. The business flourished through the decades of 1960s, 1970s and 1980s.
However, with the oil boom of the 1970s, the leather industry, like other manufacturing sectors of the economy, began to experience drastic decline on account of government’s neglect and heavy concentration on the oil sector. In no time, the sector began to dawdle with production becoming erratic and the industries leaning towards failure.
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To avert the disastrous effect of this wanton decline in the non-oil sectors of the economy, the federal government, in 1978, established the Nigerian Export Promotion Council (NEPC) in order to support the
growth of exportation of non-oil made-in-Nigeria products.
In 1996, the military government of the late General Sani Abacha moved a step ahead to enact a law – the Export Incentive and Miscellaneous Provision Act CAP 18 of 1996.
The Act provides for provision of non-cash grant to exporters who have exported a minimum of N5 million worth of products.
The leather industry is one of the sectors pencilled down to benefit from the scheme. However, there are widespread allegations among some players of underhand deals due to the many loopholes with the process of accessing the grant. The exporter is the one to singlehandedly value his product and write out the quantity and the prices on his invoice. This is then sent to the NEPC which would now document it and send it to the Central Bank of Nigeria and the Nigeria Customs
Service.
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It was after some outcry regarding alleged over-invoicing that the federal government appointed a private firm tocross-check all invoices and the products before approval were granted. This system, too, according to some industry sources, was punctured right at the centre as some industrialists still connived with the staff of that company to perpetrate the messy act.
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To some players in the industry, like Alhaji Kamilu Ila, the EEG scheme spelt a death sentence for the industry, especially to those industrialists with feeble financial clout. According to him, the many negative effects of the grant threw himself and some 40 other industrialists out of business.
According to him, the incentive provided through the EEG window only meant perpetual price wars among the tanneries as players tried to outdo one another for the available quantity of skin, and those who had stronger financial muscle allegedly did all they could to scoop up all the available raw skins in the market, a situation that turned into a racket controlled by the strong ones.
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“No matter what money is given out as incentive to increase production of skins, it cannot be dramatically increased. This is because the number of animals cannot be suddenly upped like, say, foodstuff that can be grown. The number of skin you can get is fixed and inelastic,”
Alhaji Ila explained to our reporter at his moribund Globus Tannery, located at Challawa industrial estate, in the outskirts of Kano.
“This has dual implications for the leather industry and the country as a whole,” said Dr Mohammed Sagagi, a trained economist and expert on the leather industry. “The local industries, especially those owned by the indigenous entrepreneurs, are disadvantaged, largely because they cannot compete in the unhealthy competition for the raw materials. Again, those who scoop those skins do not really care about the local manufacturing industry; their sole aim is to access the EEG. Therefore once they produce, they haul it out for them to get a fat share of the EEG.”
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The story of Alhaji Bashir Danyaro is a pointer to this negative consequence of the EEG. Danyaro’s is a story of a dashed hope. He had studied leather work technology in premium institutions in the United Kingdom before he came back home. He worked with the famous defunct shoe company, Bata Shoes, for 20 years in Lagos.
In the year 2000, Danyaro decided to return home and start his own business. He established Whanu Limited and equipped it with first-class shoe-making equipment.
However, Danyaro, who said he used to have up to 2,000 workers on his pay-roll and had produced shoes for the Nigerian Army, among other agencies, painfully watched as his business crumbled. According to him, in addition to power failure, his major challenge was how to source the chief raw materials for his firm, the hides and skins. He noted that the competition was so high to the extent that the price of raw, unprocessed skins in the country outstripped that of finished leather in other countries like Australia.
Danyaro described the EEG scheme as a curse to the industry.
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“Northern Nigeria”, according to Dr Sagagi, “has been known for many years as the centre for local production of hides and skins. Now this traditional sector has been wiped out by the export grants because the local manufacturers are not able to buy the raw materials in competition with companies that receive massively inflated export grants leading to the exacerbation of the unemployment in the country.”
Alhaji Ila has a rather lasting solution to the problem. According to him, the EEG should be cancelled and the fund used for “more pressing social services, like pollution control of the toxic waste emission by the tanneries and other socially desirable projects.”