CHAPTER ONE
INTRODUCTION
1.1 THE PROBLEM AND ITS SETTING
Every industry operates within two sets of constraints. Internal constraints are those problems within the organization and over which the enterprise has reasonable amount of control. Personnel problem, capacity utilization and the techniques or process of production are some of such factors. External factors could pose formidable problems to an enterprise. The problems are made more severe by the fact that these problems are caused by factors outside the competence of a given enterprise to control. Examples of such factors are government regulation, traditional or cultural values etc. The bakery industry in Nigeria has been a victim of externally imposed constraint. Hitherto, bakers depended on local millers who produced their vital raw materials, flour from imported wheat. Government banned the importation of wheat and wheat product in 1986, thereby, sending shock waves to this very well established and expanding industry. Wheat products has started to consume an unacceptable amount of the nation’s foreign exchange as the table 1.1.1 below clearly demonstrates, as well as figure
1.1.1 in page 3.Table 1.1.1 Foreign Exchange Spent on Wheat and Food Import 1981 – 1985 Import 1981 1982 1983 1984 1985 N,000 N,000 N,000 N,000 N,000 Total food 1,820,215 1,642,245 1,296,714 843,246 946,567Wheat 159,422 79,629 255,717 243,067 327,870C/o of total 9% 5% 20% 29% 35%` Source: Federal Office of Statistics, Lagos Given the above circumstances, there was a clear need for government action to check the outflow of the nation’s declining foreign exchange earnings through what important. Besides, it can also be argued that there were suitable local substitutes of wheat flour for bread baking; rice, cassava, maize and sorghum have been mentioned as such suitable substitutes. To some people these substitutes were at least as good as wheat as it
FIGURE 1.1.1 FOREIGN EXCHANGE SPENT ON WHEAT AND FOOD IMPORT1981 – 1985
Source: Federal Office of Statistics, Lagos was suggested that local bakers rejecting them were doing so our of ignorance, or out of a slavish preference for imported products or whether one accepts the above arguments or not, what has become clear is that the effect of the ban on the importation of wheat was swift devastating on the bakery industry. In Enugu Urban alone, some famous baking houses closed up. Nigerline bakery, St Georges Bakery, many bakeries and Mother’s Pride Bakery all shut down between the middle of 1986 and the end of 1987. As at the time of starting this project, not every Bakery has resumed operations. A far more reaching effect on this ban on the industry as a whole is that it has quite clearly changes the eating habits of many Nigerians. Ubiquitous bread on the breakfast table has vanished and the frequent sight of peoples snacking on bread in the afternoon has also disappeared. The primary demand for bread products in this country has certainly contracted since then. 1.2
STATEMENT OF THE PROBLEM
Such is the background for this study. Most baking houses are small scale business who face the task of devising survival strategies to deal with major changes in government policy that threaten their very existence. Our focus is on suitable survival strategies for the banking industry given their operating circumstances since 1986. We are interested in finding out how those who are still in business dealt with the new condition in which they found themselves. In particular, we will be looking at the organizational changes, financial management strategies, and other operating techniques that they had to adopt in order to survive. As for the baking houses that closed down, we shall explore whether there were forces other that the ban on imported wheat that engendered their demise. The study will cover a broad section of the bakeries in Enugu urban. See Appendix A.
1.3 OBJECTIVES OF THE STUDY
In general, the study hopes to take a close look at the baking houses in Enuguu urban since 1986. Specifically it is intended to find out the following:
(a) What changes have those who continue to operate made in their structure and method of operation in order to cope with the ban?
(b) What new financial arrangement have they made following rising production cost resulting from the ban?
(c) Have they coped with the sourcing of raw materials?
(d) What new challenges they now face three years after the ban or import flour? For completeness, it is also necessary to examine the cases of those baking houses that were found to have closed down as a result of the ban. Although there may be problems obtaining information from some of these outfits, whose operating records may no longer be available, an effort would be made to access the general operating state of such baking houses before the ban. This should enable one determine whether such baking houses were already having serious operating difficulties before the ban or whether their extinction is to be blamed on the ban.
