Nigeria’s over N25bn Tomato paste industry dying, unless
The N25 billion emerging Tomato paste industry which provided several thousands of jobs to Nigerians is now experiencing disruptions and dislocations. This is partly as a result of government policy which restricts the industry from accessing forex for its critical raw material at the interbank market. This report assesses the impact of the policy. Daniel Obi writes
Common narratives of the present economic recession are alien to many Nigerians but one thing they know is that prices of goods and services including foodstuff have gone up, people are losing their jobs and taste is non-existent anymore. To them, things are simply difficult.
Many of these Nigerians came from the era of blame game of who caused the economic difficulty to asking Buhari to fix the economy. Various actions or inactions such as poor planning and policy conflict led Nigeria to recession described by experts as a significant decline in economic activity which manifests in low industrial production, unemployment and negative real GDP.
Take for instance, the Nigerian government had in June, 2015 excluded 41 items from accessing foreign exchange at the interbank foreign exchange market. This was a move designed to principally save the Naira from pressure. The policy was also targeted at encouraging local production of those items.
In as much as the policy appears to be a well thought out one, perhaps for the medium to long term economic benefits, its immediate wholesome implementation has stifled some industries who were hitherto not prepared for it. And the instant consequence is laying-off staff, closure of certain firms who use some of those items as raw materials. The impact has been negatively colossal including non contribution of those industries to declining GDP.
In fact, government is like a husband that has two wives and it’s in a fix of who to side without courting the wrath of the other when there is conflict. The Naira which is under pressure as a result of low foreign exchange earnings needs protection; government is also conserving the available forex as well as seems to be encouraging the industries which are employing many Nigerians.
Though, the government intention of restricting manufacturers from importing any of the 41 items either as raw material or wholesome is to force them to look inwards but the other side of the policy is that some of the items cannot be manufactured locally in the meantime. Take for instance, the Tomato Paste Triple Concentrate used as raw material in the manufacture of tomato paste is among items restricted from accessing forex at the interbank market. The raw material is significant in tomato processing industry but which is not manufactured domestically.
The policy has of course led to dire consequences for not only in the tomato industry that the government is trying to protect but entire manufacturing sector. Before the policy, it is said that the tomato industry employed several thousands of Nigerians, but this policy has thrown over half of the number into the over-bloated unemployment market with chain reactions effect on security.
Tomato paste processing industry is a recent emergence in Nigeria’s chequered manufacturing industry. Its efforts in boosting manufacturing sector’s low 9 percent contribution to GDP appears further constrained in a country that needs strong manufacturing sector to lift its economy.
According to experts, many factors have contributed to the low share of the manufacturing sector to GDP which include “vulnerability of manufacturing to global economic pressures, as well as the impacts that policy changes can have in reshaping the sector”.
It is expected that if government allows Tomato industry to source forex at the interbank market for its Triple concentrate raw material for the manufacture of tomato paste, the industry would perhaps experience entry of new players into the sector and this would create more employment of Nigerians and assist to boost the economy. Indeed the challenge of scarcity of forex is noted, but care needs to be taken in implementing some decisions.
Nigeria as huge Tomato producer
Nigeria is ranked the second largest producer of tomato in Africa and the 13th in the world with a total production estimated at one million hectares of land producing 1.701 million tones per annum with average of 20-30 tons/hectare. “Yet Nigeria is the largest importer of tomato from China and Italy”. Ridiculous, isn’t it?
It is also said that Nigeria imports about 66,000 tones of processed tomato annually worth over N11.7 billion despite its potential massive local production.
To stop this trend, save money for Nigeria and employ Nigerians, some plants emerged to process the abundant tomatoes into paste for Nigerians. With this development, Nigerians will be able to eat fresher and healthier tomato paste proudly grown and made in Nigeria. “The consumption of Tomato paste in Nigeria is huge, a report says and “Nigerians love tomatoes. Fresh tomatoes and tomato paste form a major component in almost every Nigerian dish – from the delicious red stew to spicy jollofrices/ spaghetti”
Since tomatoes are in rich source of Lycopene (which is a major anti-oxidant), adults and children alike will be stronger and better equipped with the nutrients to face the challenges of personal and nation-building. As we know, healthy person is a happy nation!
Secondly, Tomato Paste production will stop the annual wastages of over 75% of fresh tomatoes across Nigeria. But these efforts and the investments are turning to nullity as the Tomato paste manufacturing sub sector are restricted from accessing forex from Interbank for its Triple Concentrate, an important raw material in their production process. Ordinarily, what this means is that the wastages of tomato would continue with reverberating effect on farmers.
“Looking at the government policy, the Federal Government may have to do more to convince Nigerians and key stakeholders that its economic policies are not crafted to sink the country’s economy and manufacturing sector as not all stakeholders appear to be on the same page with the government as far as this is concerned”, an analyst said .
As it is, the Nigerian government needs to find a balance in protecting the local industries and protecting the Naira and conserving forex. It is believed that Nigeria may resort to being a dumping ground of smuggled foreign substandard Tomato paste with its health implications if local manufacturing firms are stifled.
The dumping of tomato paste most of which are substandard has negative health implications to Nigerians. The management of NAFDAC had acknowledged that large volume of tomato paste in the market were substandard.
In a published report, it was revealed that “91.1 percent of the tomato brands studied failed NAFDAC test with virtually all the packaged brands from China being the culprit” The report further quotes officials of the agency as observing that most of the China-made brands contained far less than the required quantity of tomato concentrate “They were rather filled with bulking agents such as starch and then infused with banned colouring which could cause cancer and lead to organ failure”.
Re-considering Tomato industry for interbank forex
In as much as the policy is designed for backward integration, various stakeholders have asked government/CBN to reconsider its stance on allowing Tomato industry to access forex in the meantime for Tomato Paste Triple Concentrate which is a raw material in processing tomato paste.
The Union of Tomato Paste Manufacturers in Nigeria who is hit by the single policy has in a report appealed to the Federal Government to hold back on the forex policy in order to avail them more time for backward integration. Other bodies including Lagos Chamber of Commerce and other stakeholders have noted that the real sector has been battling with some challenges since the implementation of the forex policy as several investments are at risk, with huge job loss.
According to LCCI President, Remi Bello, in a report the policy has negatively affected the manufacturing sector.
In another report Antoinette Sayer Director, African Department of International Monetary Fund, (IMF) was quoted as saying that the measure is quite detrimental. “It has certainly led to a lot of unhappiness in the private sector, as far as we’ve been aware, and understands that private investors see this as very detrimental to their economic activities”.
“We hope that there will be an opportunity to review those restrictions and permit the exchange rate to continue to adjust. Forex is required for the enhancement of the nation’s capacity to process raw materials into finished goods, such as factory production lines which help in the economic growth of the country,” she said.
It is important to note, according to experts that one single imported item as raw material for local manufacturing triggers increase in production and consumption of local products and services.
As Nigeria struggles to get out of recession, government should reconsider allowing Tomato industry to access forex at the interbank market to fund its critical raw material which is expected to enhance employment and the economy. What is important is to ensure that the forex was applied for the right and requested purpose.