Multiple regulations, global listing policy killing SMEs in Nigeria – Ikpong Umoh
.Says misleading HS code for raw materials a major challenge
.Bags excellent leadership award
By Udeme Clement
“Multiple regulations, Global listing policy, border closure, misleading HS Code for raw materials, harsh operating environment and lack of infrastructure are killing local cosmetics industries in Nigeria”, said, Mr Ikpong Umoh, a manufacturer.
Umoh, who is the out-going Chairman, Toiletries & Cosmetics Group of the Manufacturers Association of Nigeria, said this at their 2019 Annual General Meeting, AGM, held in Lagos.
He pointed out, “The Toiletries & Cosmetics industry all over the world is under the purview of designated government agencies such as Foods & Drugs Administration (FDA- in USA); National Market Products Administration (NMPA- in China); Ministry of Health, Labour and Welfare (MHLW- in Japan); National Agency for Food, Drug, Administration and Control (NAFDAC-In Nigeria).
“In Nigeria, NAFDAC controls and regulates all facets of the Toiletries & Cosmetics value chain, from chemical raw materials, packaging, laboratory, production personnel and distribution channels. Importations of chemical raw materials require Chemical Imports Permit issued by NAFDAC.
“The process of obtaining this single permit requires elaborate warehouse/factory inspection, comprehensive documentations and payment of fees (if there are no compliance directives). The duration of this exercise for new companies may take between 30-90 days. In some cases and finished products, it may take up to one year before being certified to be put into the Nigerian market. These imports permit must be attached to the banks and the Customs before any Form-M can be established.
“Just recently, other agencies of government like Standards Organisation of Nigeria, SON, and National Environmental Standards and Regulations Enforcement Agency, NESREA, have also come up with similar regulations on the same chemicals that NAFDAC is already regulating. This implies that for the chemical input raw materials, companies must undergo the same stringent factory/warehouse inspection, documentation and certification with SON, NESREA, the same for NAFDAC Chemical imports permit. This situation of multiple regulations is not only cumbersome and wasteful of precious man-hour but also puts most SMEs in a serious competitive disadvantage.”
He went on, “When you consider that the African Continental Free Trade Agreement, ACFTA, implementation is around the corner, Nigeria Cosmetics SMEs will be holding the short end of the stick, especially as these multiple regulations do not exist in South Africa, Egpyt, Ghana or in any other country in the continent”.
Speaking more on cosmetics standards, he revealed, “There is recent attempt by SON to establish cosmetics standards based on quality parameters of individual products. These standards being presented to our industry looks very much like the internal quality standards of one company’s products and this cannot represent a true industry standard.
“Such attempts portent great danger for our sector, as there is no cosmetics standard based on individual product parameters anywhere in the world.
“These standards as canvassed by SON are flawed and do not conform with international safety regulation and standards, because the standards only addressed quality parameters and ascribed values that tend to restrict every cosmetic product to the same thing.
“By so doing, certain pertinent questions have been thrown up, begging for answers. For example, why should all BABY POWDER have “white” as a standard colour? Or why must all Body creams and lotions be “Scented”? Does another company not have the right to differentiate its Baby powder from others by developing one with an attractive pink or herbal colour with proven safety profile, or utilize the concept of fragrance, free products to satisfy a niche market?
He emphasized, “We in T & C sector think that SON is hurrying to ratify the draft standards, in order to use them and forcefully administer Mandatory Conformity Assessment Program (MANCAP) on cosmetics products. It should be known that MANCAP is based on Good Manufacturing Practice (GMP), which is already covered in NAFDAC regulation, another GMP exercise is an aberration and double regulation. SON should concentrate on other areas that are not covered by NAFDAC or any other government agency”.
“We in T & C group suggest that government should call SON and NESREA to order, encourage data and information sharing between NAFDAC , that already has sufficient data on the companies and their chemical raw material requirements, and the other agencies, which may need such data for their work, in order to save SMEs the pain and agony of regulatory overkill.”
Misleading HS Code for T & C raw materials:
The out-going Chairman disclosed, “For the past 15 year, T & C subsector has been forced to import its raw materials under HS Code 3402 at 20 percent, plus VAT, as if they were finished products. Unfortunately, these raw materials have no local substitute.
“In the CET document, the tariff band 3402, which our basic and bulk raw materials domicile (except 3402;2000), has been blanketed and charged between 20 percent.
At first, it was soap and detergent group of the Manufacturers Association of Nigeria that claimed to making these surfactants locally, but it turned out that they lied and refused that the duties on the raw materials be reviewed downwards.
“Just last year, 2018, some Indian companies, SIL & Reliance Chemical Products (RCP), also claimed to be making these raw materials. But a visit to their factory site proved that they only could do Sulfonation and not Ethoxylation, which most of our raw materials are made”. Umoh warned, “It is tragic to tie the fortune of the entire Toiletries and Cosmetics industry to the business venture of an individual company. We suggest that this deception and anti-trust activities be thoroughly investigated and redressed with reversal of HS Codes that are not appropriate.”
He stressed, “The danger is that if allowed to continue, with the coming of African continental free trade agreement, our market will be flooded with products made with raw materials under 3402, while our local cosmetics companies will watch helplessly, as their market vanish before their eyes, with attendant job losses and industry closure.”
CBN FOREX Prohibition List:
Umoh, who is also the Chief Executive Officer, Stellarchem Nigeria limited frowned, “T & C Group registers serious objection to the contents on the list of goods that forex financing are excluded from the official forex market. Those items are critical inputs to our manufacturing operations, and are not locally available. The high rise in forex in the parallel market has hindered the production operations of our member companies.
“We request that these items be removed from the exclusion lists and the Federal Government should create room for investors interested in investing in these packaging materials. Also, official forex funds should be made available to alleviate the current suffering of manufacturers in sourcing for these locally.”
Global listing policy of government:
He explained, “Global listing policy of government as incentives for Foreign Direct Investment allows operators of super and hyper markets to import any item from any part of the world for sales in Nigeria, notwithstanding the fact that the local cosmetics companies have the capacity to mass-produce finished cosmetics to meet their needs.
“This policy has wider negative implications for our country. Beside the drain on our foreign reserves and exportation of employment opportunities, there are also health implications, as Nigerians are wittingly exposed to using cosmetics products that have neither been developed for their climatic conditions, nor tested on their skin types.
“For us in T & C subsector, this policy is very unpatriotic and presents a “New Iron Curtain”, which ensures that indigenous cosmetics manufacturers are screened out of the unfolding market distribution channels, as the operators of these supermarkets do everything to frustrate local products in their outlets”
He stressed, “We strongly suggest that government should limit foreign products in the shops to about 20 percent and locally manufactured products be 80 percent in all supermarket outlets. This policy will preserve our jobs, save forex and increase capacity utilization for local companies.”
The Stellarchem CEO pointed out, “Overall, the free trade agreement will cover a market of 1.2billion people and a combined GDP of $2.5 trillion, making it the world’s largest free trade area since the formation of the World Trade Organisation. Nigerian SMEs have the potentials to dominate this market but this feat can only be achievable if the internal unnecessary encumbrances and aberrations are removed”.
The climax of the programme was award honour given to Mr Umoh by T & C Group, as appreciation for his outstanding performance as the Chairman of the Group. The Stellarchem CEO received double honours, as Daily Business Update of Nigeria also bestowed the prestigious ‘Excellent Leadership Award’ on him, following his remarkable achievements as the Chairman of T & C Group.