«Subsector Assessment of the Nigerian Hides and Skins Industry Prepared by: Chemonics International Inc. 1133 20th Street NW Washington, DC 20036 ...»
The export skins and leather industry is huge, believed to be worth around $4.4 billion for raw hides and skins, $14 billion in rough-tanned and finished leathers of all types and $25 billion for footwear with leather uppers. Over the last two decades, the average growth in trade has been 3% for raw hides and skins, 10% for rough-tanned and finished leathers, and nearly 8% for footwear and leathers. In developing countries, however, the percentage growth in both rough-tanned products and footwear has been increasing at over 12% per year.
In total, developing countries export nearly $19 billion worth - much more than the major commodities such as meat ($2.7 billion), rubber ($3.7 billion), cotton ($2.5 billion) or coffee ($10.7 billion).
C.1. Global Trade in Hides and Skins Global trade in hides and skins has experienced significant increase in demand within the past decade and there are indications that it will continue to grow as disposable income improves Chemonics International Inc. 9 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 worldwide. Going by FAO figures as of December 1999, the average volume of trade in raw hides and skins was estimated at US$4.44 billion. Cattle hides accounted for 90% by weight of raw hides and skins production (see Table 3). However, tanners and shoe factories prefer goat and sheep skin for fashion shoe manufacturing. Though the production of goat and sheep skins are currently estimated at 10% by weight of the global total, there are strong indications that demand for goat and sheep skins is likely to grow at well over 5% per annum due to the demand for good quality shoes worldwide.
Table 3: Global Trade of Hides and Skins of Farm Animals Origin
C.2. Global Demand for Raw Hides Global import of hides was static between 1995 and 1999. The average import volume was 2.2 million tons per annum with Italy, China, and South Korea, making approximately 50% of the imports (see Table 4). The United States, Germany and the former USSR, on the other hand, were the leading exporters of hides (see Table 6). However, more recent export figures from the former USSR have substantially decreased, presumably due to their current economic issues.
Table 4: Major Global Importers of Raw Hides (Wet Salted, ’000 Mt)
Between 1982 and 1999, the global trade in cattle hides (wet salted) grew from 1.58 million metric tons to as high as 2.2 million metric tons, representing a 71% increase in trade in seventeen years.
However, an annual decline in trade of 0.4% is anticipated till 2005. The cause of this decrease is probably one of supply rather than demand. As noted previously, hides are a by-product of the meat industry and as European and North American consumer preference shifts to poultry and seafood, instead of red meat, there is a reduction in the number of cattle being slaughtered
It is quite interesting that the developed countries, despite the fact that they are the major consumers of finished leather products, export the bulk of wet salted raw hides traded globally. The United States, Germany, the former USSR, the Netherlands, etc., are the main exporters of hide worldwide.
Apart from Italy, a developed country and a major importer, most of the hides exported end up in developing countries like China, South Korea, Hong Kong, etc, where they are tanned and processed. It is understood that because of difficulties of supply from the former USSR (see Table 5), China and other nations are determinedly seeking new sources of supply including West Africa.
Table 5: Major Cattle Hide Producing Nations (Millions of Pieces)
Approximately 40% of the hides produced worldwide are processed into shoes. Apart from domestic sourcing of hides by Asian and some Latin American countries, they still import hides from the developed nations to meet international market demand for shoes and leather products (see Table 6).
C.4. Global Demand for Sheep and Lamb Skins Global demand for sheep and lambskin grew from 146,900 tons in 1985 to 173,200 tons in 1999, an increase of 18% over two decades (average growth rate of 0.9% annually). This is much lower than the 71% increase within the same period reported for wet salted hides of cattle origin. There are however, suggestions that demand will grow at 5% or more annually in the next two decades due to demand for good quality footwear which are made predominantly of sheep and goat skins. The demand for this product is largely driven by major importing nations such as, China, France, Italy, Figure 3: A flock of Dorset breed of sheep Turkey, etc. as shown in Table 7 below. on an English farm Table 7: Major Global Importers of Dried Sheep and Lamb Skin (’000 Mt)
C.5. Sheep and Lamb Skin Global Supply Developing countries account for more than two-thirds of the world’s sheep and goat flocks, and their production share of these animal skins has been projected to expand to more than 80% by the year 2005. This reflects increased productivity, resulting from programs targeted at raising the standard of animal husbandry and efficient utilization of livestock products. Asian countries are by
Analysis of international trade data indicates growth in imports of sheepskin in a number of markets. The estimated global production of this commodity in 2000 was 394,000 tons and export trade value was $569m. This is slightly above the 1982/84 averages of $437m but far below the $1.12 billion average export trade value from 1994-97. Global export trade in this commodity has been relatively slow. The majority of the largest exporters of sheep and lambskins are developed countries, but collectively the developing nations produce the largest volume (see Table 9).
Table 9: Major Exporting Countries of Sheep and Lamb Skins (’000 Tons)
C.6. Goat and Kid Skin Global Supply Global production of goat and kid skin has been growing over the past ten years and continues to grow. World output in 1990 was 188,200 tons and 2000 production was estimated at 242,700 tons.
Developing countries accounted for 95% of this output, which is dominated by Asia (168,700 tons), Africa (30,300 tons), and the Middle East (24,500 tons). The output of the developed countries was only 12,000 tons (see Table 10). It is not clear why this is so.
C.6. Goat and Kid Skin Global Demand Demand for goat and kids skin is limited and has declined from 32,900 tons in 1982 to 18,000 tons in 1999; a decline of 45.3% within two decades. Connected to this, the value of export trade in this commodity has been declining over the past five years. Total export trade in 1995 was $102m and it declined to $81.4m in 1999.
Export trade in goat and kid skin is dominated by the developing countries, which have steadily increased their share of the market from 70% in 1995 to approximately 93% in 1999. Africa accounted for 23% of the value of global export in 1995 and it has increased its share to 28% in 1999. The African export market is dominated by Ethiopia, Rwanda, Tanzania and Burkina Faso. Other major export regions include the Middle East, which contributed 13% of the value of global export in 1995 but systematically increased its share to 23% by 1999. In the Middle East, Lebanon, Afghanistan and Sudan are the major exporting countries. Asian Figure 4: Premium quality leather made of countries’ share of the market was 35% in Nigerian goatskin.
1995 and increased to 40% in 1999. The Asian export trade is dominated by China and Nepal (see Table 11).
Nigeria has been an exporter of sheep and goatskins for decades. It exports goat and sheepskins as well as leather to the EU countries but this has declined significantly even as demand for these commodities continues to rise in other major markets. In China, for example, the value of sheepskin imports has almost doubled from $180 million to $330 million within 1998 to 2000, with goatskin imports increasing from $30 million to $55 million within the same period.
D. Demand for Leather Products
The world’s leather and leather products industry has changed significantly within the past 20 years.
Currently, global trade in leather and related products is estimated at $70 billion. The United States, India, Brazil, China, Italy, and Spain dominate global trade in leather products. The trend in the industry suggests that developing countries, which have the highest number of farm animals, also import hides and skins, which are then finished into various leather products for both local and export markets. These countries, being aware of the economic potential of value added leather processing, have made considerable efforts in developing the industry.
Demand for leather products is on the increase for a variety of reasons, and the increase is projected to continue beyond 2005. The most obvious reason is an increasing level of disposable income in developing nations, and the demand expresses itself primarily through the footwear industry, which is the major end-user of leather. With the majority of leather manufactured into shoes, the demand for leather shoes can be used to determine the aggregate demand for hides and skins. This will continue to be the case, although perhaps not as precisely, as an increasing share of leather is absorbed by other end-uses, such as clothing and upholstery. According to FAO statistics (see Table 12), export trade in leather shoes in 1999 stood at $25 billion. Exports from developing countries rose from $1.93 billion a decade ago to $11 billion by the end of 1999, accounting for 44% of the world trade in leather shoes. On the other hand, Europe’s share fell from 75% to 54% and there are indications that it is likely to fall further.
The United States is the largest importer of leather products and accounts for about 22.5% of global imports. It is distantly followed by Germany, which accounts for 10%.
From the figures provided in Table 13, it is clear that Italy, China, Germany, Brazil, UK, Portugal, India and Indonesia collectively control 50% of the leather products export market.
Globally, footwear industries are the major end users; accounting for approximately 36% of leather traded globally, and developed countries account for 54% of global consumption of leather products. Consumers in more affluent societies are placing more emphasis on quality and the strongest growth in demand is in developed countries with long established tanning and leather industries, e.g. Italy, the UK and the US. Higher production costs, due in part to restrictive environmental laws and regulations, have reduced leather processing in the developed countries. In the past two decades, hides and skins produced by developing countries have increasingly been processed to leather prior to export by developing countries.
F. International Trade Standards, Quality Specifications and Pricing The type of hide or skin selected depends on the end use product, and as such it is necessary that the grading of this commodity be understood. Grading is based on species, size, thickness and condition (holes, varied thickness, scoring, patches, etc). Hides and skins are usually graded as 1, 2, 3, and scrap, with 1 being the best quality. For example if the finished leather is to be used for clothing, Grade 1 hides are desirable as the thickness is uniform, it has a large surface, limited holes and patches, etc.
The Nigerian livestock industry has gone through various challenges in the recent past. During the colonial days, the industry was structured to produce high quality, hygienic meat products. The byproducts of the industry, which are predominantly hides and skins, were gathered, processed and exported overseas. Public health ordinances were respected and enforced by government agents posted to livestock trading posts and abattoirs. The reverse presents itself today. Livestock/meat inspection agents are no longer active. Animals are being slaughtered outside of official abattoirs, making it increasingly difficult to systematically harvest hides, skins and other by products of the industry. Several factors contributed to this decline, including the introduction of the 1986 structural adjustment policy. The policy brought along with it massive decline in demand for livestock products as they became unaffordable. Hides and skins, which ordinarily should have been processed into leather, became food for the poor and ultimately a delicacy, which even today is highly valued by the rich and the poor in the nation’s urban centers. The purpose of this section is to examine the Nigerian hides and skins industry and come up with strategies for improving its services and products for both domestic and international markets competitiveness.
B. Nigerian Production
Cattle, sheep, pigs, poultry and goat operations dominate the Nigerian livestock industry, but our discussions will be limited to cattle, sheep and goats, which are the traditional sources of hides and skins in the country. Table 14 shows the very marginal increase worldwide in the production of farm animals since 1997.
Table 14: Nigeria Farm Animal Population (1995 –2000)
With this large percentage of livestock raised in nomadic fashion, and relatively small number of ranches or feedlots, extraction of livestock is largely done from the stock raised by the nomadic herdsmen. During the dry season, nomad herdsmen trek to the southern part of the country to take advantage of the forage available for grazing. This style of cattle production is vital for the existence of these herds, since the resources of the North would not be sufficient to support yearround grazing, and there are no watering facilities to supplement natural water sources. There are some conflicts which arise between the nomads and farmers on whose crops these animals occasionally graze.