Growing Nigeria's Leather Industry
Leather products are present in almost every Nigerian home. The aesthetic appeal of shoes, bags, clothing, and other finished leather products (FLP) remains a desire for most of us and indeed, the rest of the world. Despite this obvious demand, FLPs and the broader textile, apparel and footwear industry is struggling to hit its full potential
In 2019, the textile, apparel and footwear industry-a subsector of Nigeria's manufacturing sector had a negative GDP performance. The industry declined by 0.09%, the second time the industry has experienced negative growth in the last four years.
Hindrance to growth
Let's examine the footwear industry which consumes about 54% of leather production globally.
One reason behind the industry's weak growth is disintegration in the local value chain. Shoemakers say sourcing for leather locally is a gruelling feat as a lot of the leather produced locally - at tanneries in Kano and Kaduna - is exported to foreign countries.
A flaw in the value chain suggests Nigeria has an underproduction problem. Vietnam, with a population of 96 million, has an annual production capacity of 760 million pairs. Nigeria, on the other hand, produces 48 million shoes from its local production epi-centre- Aba, which houses the largest shoe clusters in Nigeria.
Nigerian shoemakers and other leatherwork producers say they have been unable to produce the desired quantity of FLPs that would spur the sector into a self-sustainable or globally relevant one.
Other shoe and bag makers in the country have blamed their inability to grow as a result of unfavourable policies and lack of support from the government. Only a few shoe factories continue to operate and are barely surviving through government contracts to supply leather shoes to the Army, Police Force, and the Ministry of Defence.
Most of these shoemakers make use of old machinery and mundane methods to sustain their production capacity. This affects their ability to scale and increase their production capacity efficiently. Research shows that a maximum of 120 shoes can be produced daily from manual methods. Meanwhile, Ethiopia launched a plant last year with a daily capacity of 10,000.
Quality or foreign?
Apart from these constraints in production, there is also a quality and perception problem.
To purchase a leather product in Nigeria, the customer decides quality based on comparison with a "bad" product, or whatever convincing words the seller provides. There is no real assurance of the product's tensile strength, abrasion resistance, or colour fastness. This is because Nigerian leather products are not regulated by quality standards. There is no uniform policy of what materials producers should use or best practise processes to be adopted.
This is not a Nigerian specific problem. Even Chinese imports which have dominated with a 90% market share, lack these quality controls.
Perception, however, has a strong factor to play in determining whether Nigerians buy a foreign or locally made product. Statistics show that if you ask 100 Nigerians to choose between Nigerian or international brands, 92 will choose the foreign brand, while eight would be undecided. In a blind brand experiment conducted amongst Nigerians, 98% claimed that they could differentiate between foreign shoes and Nigerian shoes. When the shoes were provided to them, only 32% could make a distinction.
Expanding local trade
So how do we address the many issues in the sector?
One of the most pressing things to address is competition. Both on the import and export side. On imports, efforts must also be made by the government to reduce illegal importation of shoes into the country. This illegal dumping from foreign countries is part of what sparked last year's border closure.
On exports, some lessons can be learned from Kenya, where the government introduced a 20% export duty on hides and skins. The government then increased the duty to 80% to further encourage deeper integration of value chains in the local market. The logic here will be to divert some of the raw leather produced in Nigeria which gets exported to the likes of Ralph Lauren and Louis Vuitton instead of going to local FLPs.
However, arguments have been made against export restrictions because they could discourage investments and future production in the sector. However, this measure could be adopted on a short-term basis to encourage leather producers to sell to indigenous shoemakers. In the medium term, the export earnings for Nigeria will be vital.
Another measure is a credit guarantee scheme targeted towards shoe producers, where the government introduces guarantees for FLP wholesalers who are willing to purchase these large quantities from the producers.
A good example is the Agricultural Credit Guarantee Scheme Fund (ACGSF). Between January to December 2018, a total of 30,612 loans were guaranteed by ACGSF - totalling ₦4.4 billion. More these schemes are encouraged. They could come in the form of incentivised development finance loans, aimed at maximising the production techniques.
Infrastructure also remains critical to ensuring that the market grows. Transporting leather from Kano to Aba or Lagos remains a hurdle with the poor quality of roads in the country. With proper roads, the products are able to reach the markets faster.
There is certainly room for more growth. Last year, the Nigeria Economic Summit Group (NESG) estimated that Nigeria's leather industry could generate over $1 billion in export earnings by 2025 - a 70% increase from today's figures. However, this could end up being another of many projected figures for Nigeria that have not come into fruition.Until deliberate measures are taken to amplify local production, Nigerians would continue to wear "Made in China" over "Made in Nigeria."
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