High Tariff On Raw Materials Limits Steel Sector

The disparity in tariff between raw materials and finished steel products has brought the local steel manufacturing sector to its knees.

Currently, business is very challenging for local manufacturers in the steel value chain as they are unable to cope with a 35 per cent tariff imposed on cold rolled sheet used as raw materials for making roofing sheets and other products, while the finished roofing sheets attract only five per cent tariff.

Our correspondent learned that under such conditions, nobody was willing to manufacture locally, rather everybody found it more profitable to import the finished items.

“It is so bad that contractors are now importing roofing sheets directly because it attracts only five per cent duty,” the Chairman, Steel and Allied Products sub-sector, Manufacturers Association of Nigeria, Chief Oluyinka Kufile, told our correspondent in an exclusive interview on Monday.

He said the situation had thrown many operators into debt as many of them had been unable to service bank loans.

According to him, the government needs to sit down with stakeholders in the steel sector and review the Harmonised Systems Codes for each category of steel products.

He said the industry was currently facing crisis of not just high tariff on raw materials but the foreign exchange ban on import of steel and allied products, which had thrown operators out of business.

He said almost all the major aluminium firms that responded to the call of the government and suspended importation to commence backward integration had shut down while the few remaining ones were struggling.

Some of the major aluminium firms in Nigeria include First Aluminium, Tower Aluminium, Allo and Qualitek.

Our correspondent learnt that all four firms were struggling to stay afloat.

In February, First Aluminium reportedly hit a five-year low on the Nigerian Stock Exchange. The stock plunged 25 per cent, underperforming the NSE All Share Index, which was up by 3.11 per cent.

Our correspondent gathered that Tower, Allo and Qualitek were equally struggling to remain in business.

The same situation applies to firms that used aluminium coils for colour coating; 15 of them are said to have gone underground.

Of the foundries in Nigeria that smelt iron, only a few are still in existence out of a reported 2,000 that operated in the country, our correspondent gathered. The scenario is the same for metal fabricators.

Kufile recalled that when the tariff on annealed sheet was increased and the manufacturers of enamelware, shovels, wheelbarrows and others found it hard to cope, the association met with the government and persuaded it to assign a different HS code for the annealed cold roll so that the tariff would be reduced and the small scale producers could retain their jobs.

But the entire arrangement was cancelled a few weeks after the government had approved it and annealed steel was thrown into the list of 41 banned items, resulting in over 10,000 job losses in that sector alone.