Indian steel maker, Aarti, is exiting the Nigerian manufacturing sector, joining a long list of companies leaving the country on account of economic woes, BusinessDay confirm.
The Ota, Ogun State-based steel maker, has already been put
up for sale and big players have submitted unconfirmed bids ranging between $50
million and $100 million.
The steel maker’s exit is attributed to a combination of
factors, notably high rate of indebtedness, challenging economy, fluffing
currency, surging inflation and high energy cost, a source who spoke on
condition of anonymity told BusinessDay.
“We are aware that Aarti Steel Nigeria has been put up for
sale but we are yet to make our bid,” a reliable source from one of the bidding
companies, who is not authorised to speak on the issue, said.
According to the source, African Industries and Bharti are
bidding to buy the Indian-owned steel manufacturer for $50 million to $100
million. The process is expected to be completed in a few months.
The company is asking investors to submit their profiles,
another source noted, saying that the management of the company wants to hand
over Aarti to a credible investor.
This will make it the sixth company to exit Nigeria in the
first half of 2024 after Microsoft Nigeria, Total Energies Nigeria, PZ Cussons
Nigeria PLC, Kimberly-Clark Nigeria and Diageo PLC left the shores of Africa’s
most populous nation.
The exit of Aarti will further dent the country’s perception
as an investment destination and its $1 trillion gross domestic product (GDP)
target, experts said.
“The continuous exiting of multinationals from the economy
is a serious cause for concern and this is because of the implication that it
has,” said Muda Yusuf, chief executive officer of the Centre for the Promotion
of Private Enterprise.
“It has a negative implication for employment and the
country’s perception as an investment destination,” Yusuf added.
In 2017, Aaarti spent $20 million to $30 million to
establish a 120,000-capacity cold-rolled mill in Ota, Ogun State, to serve
Nigeria’s downstream players using the steel to produce home appliances,
roofing sheets, metal furniture and filing cabinets, tables and chairs, among
others.
But the investment does not seem to matter much now.
G C Tripathi, a director at Aarti Steel Nigeria, told
BusinessDay that he is not aware that the company has been put up for sale,
noting that key operating decisions come from Indian – the business
headquarters.
Tripathi however said the business is trying to get more
finance and bank commitments to increase production.
But a senior management of the company had confirmed to
BusinessDay in March 2024 that the company was seeking investors.
The official said the company’s indebtedness was high and
suppliers were worried that timelines for delivery had been missed several
times.
“We are seeking a lifeline,” the official told one of our
reporters.
On a quarter-on-quarter basis, growth in the basic metal,
iron and steel subsector of the manufacturing industry slowed to 0.57 in the
first quarter of 2024 from 1.1 percent in the fourth quarter of 2023. On a
year-on-year basis, it grew by 0.11 percent from 0.46 to 0.57 percent.
Manufacturers have attributed the continuous exit of
multinationals to the country’s worsening business environment and insecurity
that are crimping profits and wiping off shareholders’ funds.
Segun Ajayi-Kadir, director general of the Manufacturers
Association of Nigeria (MAN), said that rising energy costs, foreign exchange
(FX) volatility, accelerating inflation and worsening insecurity are hurting
manufacturers in the country and hampering their growth.
He said that the issue for manufacturers is further
compounded by the uncleared forwards by the Central Bank of Nigeria (CBN),
which have made several operators lose billions of naira.
He noted that the steel industry is highly vulnerable to the
negative impact of these challenges, noting that most of the operators in the
industry are struggling to survive.
“The escalating costs of power, low consumer spending and
low access to competitive credit and high rate of unplanned inventory and
depreciation of the naira is hurting the country’s steel industry,” Ajayi-Kadir
said.
Earlier, Oluyinka Kufile, former chairman of MAN Steel Group
and chief executive officer of Qualitec Industries, had told one of
BusinessDay’s reporters that “poor policies and lack of seriousness by the
government are killing steel companies in Nigeria.”
He had noted that only few players participate in meetings
held by steel producers who were members of MAN.