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«Subsector Assessment of the Nigerian Hides and Skins Industry Prepared by: Chemonics International Inc. 1133 20th Street NW Washington, DC 20036 ...»

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Unlike the developed countries, Nigeria has no commercial cattle feedlots; neither does it have commercial cow calf farms. Table 15 shows a sharp decline in the number of cattle slaughtered and those numbers explain the decline in the quantity of hides and skins harvested.

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The information provided in Table 15 is from officially recognized abattoirs. The downward trend in the number of farm animals slaughtered appears to have started in 1986 with the introduction of the Nigerian Structural Adjustment Policy (SAP). The significant reduction in the number of animals slaughtered impacted negatively on the local hides, skins and leather industry.

However, there are indications that most of the animals are slaughtered in unofficial abattoirs where records are either not kept or are not incorporated into official statistics. Some animals are slaughtered in unofficial abattoirs due to religious provisions, and some are slaughtered there in the belief that government abattoirs are prohibitively expensive.

B. 1. Imports

The quantity and value of imports completes the production picture. Although there are no reliable official records, FAO data suggest there are some imported live animals (see Table 16), and anecdotal evidence shows that nomadic herds cross borders relatively freely, to access resources and markets. Whether the number of imported livestock is included in the official production statistics is unknown.

Table 16: Quantity and Value of Selected Nigerian Live Animal Imports

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A typical farm animal is raised for meat and when slaughtered it is dressed. This process includes the removal of hides and skins as well as the viscera of the animal. In many cultures, the viscera becomes edible after further processing. The hides and skins are generally regarded as inedible and are processed into leather. Depending on the health, age, weight and nutritional status of the animal, hides and skins can account for as high as 15% and as low as 7% of the dress out weight of the animal (a typical dressing percentage of a well managed farm animal is 60 - 65%).

D. Sources of Hides and Skins in Nigeria

Hides and skins are obtainable in commercial quantities from abattoirs located all over the country, especially in the Northern states. Finished leathers on the other hand are obtainable from tanneries and also from traditional tanners, both of which are also located in the North. Nigeria exports predominantly leather made of skins (sheep and goat) to the European Union. Most of the leather of goat origin is from the Red Sokoto breed, which like most goats tends to overgraze, and also has difficulty breeding, but which is also acknowledged for its good quality –Moroccan-style leather.

Unfortunately, the Red Sokoto Goat is currently being over exploited and it is now being considered for protection as an endangered species.

E. Domestic Supply of Hides and Skins

In 1997 Nigeria produced 27,000 tons of cattle hides, a level that has remained relatively static since (see Table 17). The production of sheep skin, on the other hand, increased from 2,800 tons in 1995 to 5,000 tons in 2002, while the production of goat skin rose from 10,200 tons in 1995 to 12,200 tons in 1996 and has remained relatively static since.

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Nigeria’s output of hides and skins has been relatively static over the past six years. This could be related to the decline or static demand for meat, which has remained unaffordable for a large part of the population for well over fifteen years. A recent improvement in average wage scales is expected to increase demand for red meat products, and concurrently production of hides and skins.

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64,033 61,655 2,378 73,764 26,748 47,016 137,777 88,354 49,423 96.29% 3.71% 36.26% 63.74% 64.13% 35.87% Source: NARICT Jos Extension Centre Surveys

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There are many shoe manufacturers in the country and FAMAD Plc. is the largest. The company requires approximately 22,000sq.ft of various grades of leather per day to operate at full capacity but currently operates at 10% (2,000sq.ft daily) capacity, despite the fact that it owns a tannery (Great Nigeria Tanneries in Kano). The story is the same for other institutional shoe manufacturers such as Lennards, Silver Shoes, Perfecta, or for the small-scale producers. Many of the small-scale producers depend on imported leather to remain in production.

Assuming a ratio of six shoes to a square meter of leather and with shoes accounting for 75% of the leather consumption in the country, the estimated national demand of leather for shoe manufacturing is 4 million sq meters (43 million sq ft), while the total demand for leather products is estimated at 5.33 million sq meters (57million sq ft.) It is interesting to note that local tanneries

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In Nigeria, hides and skins when properly prepared are considered a delicacy among certain populations, particularly those from the South. Though it is difficult to estimate the volume of demand for food grade hides and skins, it is clear that a significant proportion of the production is consumed as food. The edible hides and skins are relatively inexpensive in comparison to other meat products, and demand is expected to keep growing due to the high level of urbanization and population growth in the country. It is estimated annual demand for edible hides and skins is over

2.5 million square meters.

G. The Nigerian Tannery Industry

There are 41 commercial tanneries in Nigeria, with a collective installed production capacity of 310,000 hides and 25.5 million pieces of skin per annum. In 1999, operating tanneries produced only 55,000 tanned hides, and then dropped to production of 3,000 units in 2000. This represents operations at 18% and 1% of capacity, respectively. At the same time, the operating tanneries produced 7.5 million pieces of skin in 1999, and 6.9million pieces in 2000. This represented 29% and 27% capacity utilization, respectively.

From the production capacity, it is clear that Nigerian tanneries are designed more to process skins than hides. Even with their rather low installed production capacity relative to international industries, the factories are operating at less than 30% of installed capacity for skins and at 1% for hides.

Currently only sixteen of the 41 tanneries are functional. Twelve of the 41 are designed to produce finished leather and wet blue; only eight are still in operation. Twenty-nine of the 41 tanneries produce wet blue only. Out of this number only eight are functional (see Table 19).

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Most of the tanneries in the country are predominantly based in Kano. Many of functional tanneries are foreign owned, and have a mandate to export high quality leather, with the rest sold to the domestic market. While the government has prohibited the export of untanned hides and skins and wet blue, export trade in such commodities still exists (see Table 20), but is declining.

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There are indications that a sizeable number of hides and skins from neighboring countries are imported into the country and processed into leather. The volume of such importations is undocumented, however.

H. Commodity Pricing and Trend Weight, size, patches, and holes are just a few of the parameters that determine the value of hides and skins. A large proportion of local hides and skins are discounted even in the local market (by as high as 25%) because of these. Hides which are unacceptable for leather products manufacturing, are easily sold for food and can even be sold at a much higher price. Once of the primary reasons for a shortage of hides going into tanneries is that the market for food grade hides is more attractive to butchers than that of the tanneries. The food market pays over 5 times what tanneries pay and is consequently supplied with hides from as far away as Chad, Cameroon and Niger.

Generally speaking, an average sized hide trades for about N3, 000 at the food market. However, information has it that abattoirs pay less than N500 for an average sized hide. Tanneries on the other hand are said to offer between N2 -5/square ft of hide and skin, or approximately N240-600. Some tanners say that they pay as high N500 – N1, 200 for a square meter of skin. Table 21 lists the prevailing retail prices of both local and imported leather at Lagos’s Mushin Market.

Table 21: Current Prices of Leathers in the Nigerian Market

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I.1. Live animals and red meat distribution chain The marketing of livestock and meat products is largely done informally. Cattle are sold in livestock markets, which are usually close to official abattoirs. There are two types of traders in the cattle industry and they are distinguished by the mode of transporting their stock. Nomad herdsmen trek their animals to the south in search of pastures and in the process sell off some. The other type of traders are dealers who buy from nomad herdsmen and farmers either at the farm gate or the cattle market and ship them by road to the point of sale or livestock market using 30 ton trucks. These trucks on the average have a 20-animal carrying capacity and charge approximately N35, 000 per trip from the north to the south.

At the market, there are two types of middlemen. There are those who broker deals between the seller and a buyer, be it butcher or other final consumer, based on an agreed commission, which is usually fixed by the trade association. The other type of middleman purchases the livestock from the seller, keeping and fattening the animals until they can be sold off. In this situation, the middleman is working towards his own profit, rather than a commission on a sale. The middleman is at liberty to sell at any rate convenient to him. Generally the middleman is able to make a profit after having fattened animals to an acceptable weight before sales. In most cases, such transactions are done on trade credit, which is fostered by confidence, and trust in the middlemen.

Sales to butchers on most occasions are also by trade credits to trusted individuals or groups who remit returns to middlemen or cattle owners following daily sales. This is the general trend in the industry driven mainly by trust and personal integrity. Hidden premiums on such credit could be as high as 10% - 15% per month with similar transaction costs transferred to retailers of entrails and hoofs. Red meat retailing is highly gender sensitive. Men retail red meat while women retail entrails and hoofs. This group of retailers also constitutes a distribution chain that focus on local restaurants popularly called “Bukas” or “mama put”. Women, who particularly depend on foodstuffs trade credit to remain in business, dominate this trade.

I.2. Hides and Skins distribution chain

Recovered hides and skins from abattoirs are usually sold by butchers to women who process them to food grade hides popularly called “Ponmo”. This group of retailers consists mainly of women.

However, sales to tanneries are done through buying agents who procure in most cases wet salted hides from butchers and supply to tanneries.

I.3. Industrial grade leather distribution

Good quality industrial grade leather, which is usually graded as A or B, is most often exported by domestic tanneries. Those not exported (which most times are lower grades), are sold locally to middlemen who often provide the tanneries with working capital that is repaid in finished leather at an agreed price and grade. Imported leather is also distributed through a similar chain. Lagos, Ibadan, Aba and Onitsha are the major distribution points for both imported and locally sourced leathers, which incidentally command about the same price in the market (see Table 21 above).

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A. Government Policy/Infrastructure The export of hides, skins, or semi-finished leather (wet blue) is prohibited in Nigeria. However, the information provided in this chapter relates to the export of leather products.

At independence in 1960, agricultural exports account for over 60% of total export earnings and a similar proportion of the gross domestic products (GDP). In the 1970s and 80s, a combination of increasing petroleum oil production and rising prices brought easy and windfall earnings, which diverted Nigeria’s attention and encouraged the neglect of agricultural exports. Over the years, there have been different agricultural policies targeted at improving the performance of the agricultural

sector. The objectives of agricultural policy can be broadly stated as follows:

- Provision of self-sufficiency in food and raw materials for industries;

- Improvement of the socio-economic welfare of rural people engaged in agriculture; and

- Diversification of the sources of foreign exchange earnings through increased agricultural exports arising from adoption of appropriate technologies in food production and distribution

A.1. Federal Ministry of Finance, Budget Office

In the area of exports, there are a couple of government initiatives that exporters enjoy. The Federal Ministry of Finance, working with several agencies including the Nigerian Export Promotion

Council, NEXIM and local commercial banks, has several export-oriented incentives:

A.1.a. Manufacture – In- Bond Scheme The Manufacture-in-Bond Scheme is designed to encourage manufacturers to import duty free raw material inputs and other intermediate products whether prohibited or not for the production of exportable goods, backed by a bond issued by any recognized commercial bank, merchant bank, insurance company or NEXIM. The Bond will be discharged after evidence of exportation and repatriation of foreign exchange has been produced.

A.1.b. Duty Drawback Scheme The Duty Drawback Scheme provides for refund of duties or surcharges on raw materials including packing and packaging material used in the manufacture of products upon effective exportation of the final product.

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