December 8, 2023

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Backward Integration, Tax Holiday Way Forward for Tobacco and Beverage Sector – Stakeholders

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CEM REPORT, MANUFACTURING | Backward Integration has been highlighted as a viable means to strengthen and prosper the food, beverage and tobacco sector.

Sector stakeholders have also decried the difficulty in accessing raw materials which they say have pushed most companies in the sector to embark on backward integration.

Speaking during an interaction with journalists National President of the Food, Beverage and Tobacco Senior Staff Association (FOBTOB), Jimoh Oyibo, said the Russian /Ukraine war was affecting the importation of raw materials.

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He noted backward integration will enable the development of raw materials, freeing the sector from the strenuous exercise of sourcing and importation.

He added that the process will also bring about efficient cost saving, increased revenue and improve the sector’s competitive advantage.

Furthermore, Oyibo stated that the high rate of redundancy in the sector has been minimised due to the impact of backward integration engaged by some companies in the sector.

“Backward integration is the direction this country should be looking at, by dwelling less on importation. If we don’t do this, what happened to the textile industry will also spread to our sector.”

The National President further lamented other factors plaguing the sector to include high diesel costs and multiple taxations.

He called on the government to grant tax holidays to the sector players to enable them stabilise the industry, noting that taxes companies pay were more than enough to turn their fortunes.

“We are not saying we should be exempted from tax, but tax holidays should be given for some time so that some of those losses they have incurred should be recouped. But the government is only interested in bleeding us to death.”

He also appealed to the government to create an enabling environment for the industry to thrive. He said the issue of kidnapping, banditry, herdsmen/farmers clash and Boko Haram should urgently be arrested stating that due to insecurity, attack on farmers is reducing production.

He added that “the inability to access foreign exchange is a big problem. The incoming government should ensure we have a single foreign exchange window for an equal exchange rate without favouritism to make sure the industry thrives,” he said.

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He also noted that industrial action was prevalent in the industry despite the challenges encountered as a result of constant communication with workers.

“There is constant communication with their employers that has made workers remain in their jobs. Most employers have come to terms with us on reasons they cannot keep their workers due to the challenges. Sometimes we agree and sometimes we don’t as we look for better ways to negotiate.

“We have told them often a time that redundancy can never be a bailout option. As partners, we tell them that since we are embarking on backward integration, we should take some of the workforce and direct them on the cultivation of raw materials instead of outright sacking and some of them are looking in that direction.

“With us coming to terms with our employers, the number of redundancy now has reduced drastically.”

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