ERJ staff report (TP)
Lagos – DN Tyre and Rubber said it would be willing to return to tire manufacturing in Nigeria if the government could bail them out of debts.
Speaking to Real Sector Watch, Olufemi Babayemi, company secretary at DN Tyre and Rubber (formerly Dunlop Nigeria plc), said the firm is in discussions with the National Automotive Council.
Currently, DN Tyre and Rubber is involved in imports rather than manufacturing.
Nigeria’s manufacturing arena is a complicated affair due to the import of second-hand tires, often called ‘Tokunbo', dwindling rubber supply, low international rubber prices, as well as a poor power supply.
Michelin closed down its manufacturing plant in Port Harcourt in 2007, owing to the harsh business environment, increase in second-hand imports, smuggling and high energy costs.
Later in 2008, Dunlop, now DN Tyre, shut down its plant after recording a loss of N2 billion (€9m), owing to infrastructural challenges, which made it difficult for it to cover overhead and variable costs and pay back loans borrowed from some banks.
Late last year there were indications Michelin could return as the Federal Government has offered tire manufacturers a five to ten-year tax holiday as part of its commitment to the new automobile policy.
However, findings have shown that low yield in plantations and dwindling international prices could discourage entrants. The price of rubber in the international market fell 50 percent in April this year, while the international price nosedived to $170 (€125) per ton (0.907 tonnes), from $350.
Stakeholders said that smuggling and second-hand tires, which put the two giant tire makers out of business, have worsened, while power supply outage to industrial zones has risen to 8.3 hours per day by the second half of 2013 (H2 2013), from 7.8 hours per day obtained by the first half of the same year (H1 2013).