Nigeria’s $5bn furniture industry outlook positive amid bottlenecks

Local furniture makers are battling with a myriad of challenges ranging from skills shortage, high exchange rate to immigration (japa), however, the future outlook remains positive, Justice Okamgba writes

Aside from the high exchange rate, skills shortage and the ‘japa’ syndrome, Nigeria’s furniture industry is also battling with high operational costs caused by fuel subsidy removal in May 2023.

Other problems militating against the optimal development of this sub-sector include deficiencies in technologies and finance, lack of qualified manpower and rapid turnover, according to the Raw Materials Research and Development Council.

The Industries and Market Furniture Report 2023 obtained by The PUNCH noted this industry is valued at $5bn in 2023 and expected to grow annually by 12.10 per cent between 2023 and 2028.

The furniture industry revolves around crafting functional and visually pleasing pieces for homes, businesses, and institutions.

Industry watchers said entrepreneurs in this field often commenced with extensive research on market trends, customer tastes, and design advancements, allowing them to create furniture designs that meet market demands.

However, local furniture makers recorded significant growth in 2021, driven in part by the COVID-19 pandemic, as people spent more time at home and invested in making their living spaces more comfortable.

The market faced significant challenges in 2022 due to easing COVID-19 restrictions and rising inflation. Despite these challenges, analysts remain optimistic that the market will expand in 2023 as consumer spending has proven resilient in the first quarter of this year.

“The continued demand for comfortable and functional living spaces, coupled with the potential growth in the millennial demographic, presents a promising opportunity for furniture retailers who can adapt to changing consumer preferences and offer high-quality products at competitive prices,” they noted in the report.

Souring of raw materials

The production process starts with sourcing raw materials, often including wood, metal, fabric, and upholstery materials.

“I’m not certain if upholstery materials are currently manufactured or produced in Nigeria, and I’ll need to verify that,” the Chief Executive Officer of DO.II Designs Ltd, Ifeyinwa Ighodalo said in an interview.

The CEO who owns a 1400-square-meter showroom in Lagos with different furniture on display affirmed the company’s dedication to global standards, stating, “Our approach is not merely about assembling and putting furniture out there; it’s about ensuring quality, meeting international benchmarks, and maintaining a commitment to excellence.”

When delving into the specifics of material resourcing, Ighodalo emphasized, “Examining our input materials, take the sofa for example, the frame and foam are sourced locally, while the fabric is imported.”

She further disclosed the company’s ethos, revealing that approximately “80 per cent of our materials are sourced locally, with only about 20 per cent being imported, and in some cases, the local percentage may even be higher.”

Highlighting the commitment to supporting domestic industries, the CEO stated, “Primarily, our fabrics are sourced locally.” However, she acknowledged that in broader aspects of manufacturing, particularly accessories, lamps, and decorations, “a significant portion, around 95 per cent, is imported.”

Ighodalo underscored the strategic decision to import office furniture, noting, “While our home furniture meets global standards, we had to delve into importing office furniture to maintain market competitiveness due to certain components and machines not yet available locally.”

Reflecting on past successes, Ighodalo shared an impressive anecdote, stating, “In the past, we’ve had instances where expatriates were impressed with our products. I vividly recall furnishing the home of an oil company MD’s wife, who, upon leaving Nigeria, took some of our furniture back to America to showcase its quality.”

Despite such accolades, the CEO reiterated the company’s unwavering focus on improvement, stating, “Our focus remains on continuous improvement.”

Addressing recent challenges, she revealed.

“Discussions about expanding our capabilities began earlier this year, but due to the challenges of the past months, we strategically paused to ensure a successful execution.” Ighodalo detailed the process, noting, “The process of placing orders, getting the lights on, and initiating operations took nearly three months to complete.”

‘No dollar’ challenge

Nigeria grapples with dollar liquidity issues in its foreign exchange market, adding strain to the country’s economic landscape.

The challenging economic conditions are further intensified by a notable increase in the inflation rate, reaching 27.33 per cent, the highest in two decades, as reported by the National Statistics Bureau in October.

This surge in inflation poses significant hurdles for millions of businesses including furniture manufacturers.

Analysts attribute the difficulties to a combination of factors, including government reform policies that contribute to the complex economic situation faced by the nation.

The CEO said, “The current situation affects us across the board—our component input, raw materials, and the exchange rate are all impacted. Initially, I resisted changing prices, asserting that we wouldn’t increase them.

“However, we reached a point where I received frequent emails notifying me of rising costs for various materials like foam and spray materials for wooden products. These increases, sometimes by 100 per cent or 200 per cent, have been consistent for every single material.

She explained the situation worsened and it became imperative to start adjusting prices in line with market realities. “But there’s hesitation, with reluctance to raise prices beyond 10 per cent or 15 per cent.

 “The reality is that we’re often selling at a loss, even with the advantage of a rush of customers who can no longer afford imported finished goods.

Despite this, the purchasing power in Nigeria, especially in Lagos, is nearly non-existent. Basic needs like water, food, and rent take precedence over non-essential items like furniture,” she added.

However, the current Central Bank of Nigeria Governor, Yemi Cardoso told stakeholders at the weekend that the apex bank has made tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations.

We have already witnessed improvements in FX market liquidity in recent weeks, as the market responded positively to tranche payments which have been made to 31 banks to clear the backlog of FX forward obligations.

“We have been subjecting these payments to detailed verification to ensure only valid transactions are honoured. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0bn.

Available reports indicate that Nigeria spends over $8bn annually on the importation of furniture. Chairman of the Kugbo International Market Traders Association, Abuja, Prince Egwuekwe, highlighted that this expenditure could have been avoided with proper attention from the country.

Egwuekwe emphasized that the furniture-making industry has outgrown local production and urged the government to collaborate with the association, particularly in the aspects of machinery and infrastructure.

He further expressed that government support in the furniture sector would not only generate revenue but also create employment opportunities for Nigerians. Egwuekwe stated, “If the government provides machinery and power, we have the skills to produce whatever the country is importing yearly.”

Japa syndrome and skills gap

The World Bank in a report reveals that a significant 50 per cent of Nigerian youths express a desire to leave the country.

This places Nigeria in the third position in West Africa among surveyed nations, with Liberia (70 per cent) and Sierra Leone (60 per cent) leading the trend.

Data from Immigration, Refugees and Citizenship Canada indicates that in 2019 alone, 12,595 Nigerians successfully relocated to Canada.

The aspiration of many Nigerian individuals to immigrate to Europe and America is a prevailing sentiment, significantly impacting local industries, including furniture manufacturing.

In this business, skilled craftsmen use a combination of traditional techniques and modern tools to shape and assemble these materials into furniture pieces. The production yield is influenced by factors like design complexity, production efficiency, and workforce skill.

“The primary issue we’re facing with staff, and it’s a nationwide concern, is the “Japa Syndrome.” This phenomenon affects the availability of skilled blue-collar workers,” Ighodalo said.

She said production levels have seen a decline because apprentices require extensive training and supervision, unlike skilled artisans who could complete tasks efficiently.

“To address this, I am considering the establishment of a training school once the situation stabilizes,” she said.

 She emphasized the importance of refining and educating the workforce to unlock their full potential, advocating for a shift from a focus on money to value creation.

Despite the tough nature of dealing with blue-collar staff, Ighodalo praised dedicated team members, with two women overseeing critical aspects of operations.

The effectiveness of DO.II Designs Ltd’s training approach is evident in their showroom, set up by a team member trained by their skilled staff. Ighodalo cited the success story of a team member who returned to work after maternity leave, showcasing the positive outcomes of their training programs.

Discussing the skilled craftsmanship landscape, Ighodalo praised artisans from East African countries like Ghana, Togo, and Benin. She emphasized the need to attract skilled masters and trainers from around the world, addressing the challenge of impatience among Nigerian learners.

 “We have a few. To be honest, I wouldn’t lie, the other East African countries—Ghana, Togo, Benin—are very skilled. Usually, craftsmanship is a handed-down skill. You do an apprenticeship, you learn from your master, and so the better your master, the better your skills, the better your intelligence, and your devotion to your skills, the better your skills.

“That even says a lot about Nigeria. Our West African brothers and their artisans are skilled. With Nigerians, the ideal thing, that’s why I said a training school is to get them, get masters, skilled masters and trainers from anywhere in the world.

Whether it’s West Africa or Europe or Asia. Get them skilled masters and train them, but you know the problem like somebody said, Nigerians are always in a hurry, before they finish the training, they’ve gone.

Then when they get there, some of them will send you a message. “Madam, I’m sorry I left like that,” and they wouldn’t tell you where they’re going. “When will you take me back?” and this doesn’t mean they wouldn’t go again. We’re in a hurry; we don’t wait to finish learning the skill.

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