Nigeria faces missed opportunity as demand for plastics rises

Despite being Africa’s largest crude producer, Nigeria has become the biggest market for import of plastics in primary form as petrochemicals set to drive oil demand.

Petrochemicals are components derived from oil and gas that are used in daily products such as plastics, fertilizers, packaging, clothing, digital devices, medical equipment, detergents and tyres. They are becoming the largest drivers of global oil demand, in front of cars, planes and trucks, according to a major study by the Paris-based International Energy Agency (IEA), ‘The Future of Petrochemicals published October 5.

Demand for plastics, the key driver for petrochemicals from an energy perspective has outpaced all other bulk materials (such as steel, aluminium, or cement), nearly doubling since 2000. Advanced economies currently use up to 20 times more plastic and up to 10 times more fertiliser than developing economies on a per capita basis, underscoring the huge potential for global growth.

“Nigeria spends about $11 billion on imported petrochemical related products in a year. You can understand why Dangote Industries is building one of the largest petrochemical complexes in the world in Nigeria,” Emmanuel Anyaeto, director/CEO of California-based Integrated Gas and Energy Services, LLC, said in an interview.

In the years 2008 to 2015, imports of plastic raw materials increased annually by 7.20 percent from 464 kilotons to 754kt. This makes Nigeria, together with Algeria, Africa’s largest importer of plastics in primary forms, according to Europe Plastics and Rubber Machinery (EUROMAP), an umbrella organisation of the powerful European plastics and rubber machinery industry, which accounts for some 40 percent of worldwide production and 50 percent export volumes.

With about 70 percent of raw materials imported (mainly from the Middle East, Europe and Asia) and only 30 percent produced locally, the Nigerian market has great potential for exporters of plastics in primary forms.

The per capita consumption of plastics in Nigeria has grown by about 5 percent annually over the past ten years, from 4.0 kilograms in 2007 to 6.5kg in 2017 and is estimated to be 7.5kg in 2020.

Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then. They are also poised to consume an additional 56 billion cubic metres (bcm) of natural gas by 2030, and 83bcm by 2050.

“You know that oil production does not employ a lot of people. However, if you utilise and process it into refined and petrochemical products such as raw materials for plastics, fertilizers and for petrochemical plants, you will be talking about employing a significant number of people and on top of that you are also impacting the economy, because the products from those derivatives are used daily by Nigerians,” Abdulrazaq Isa chairman /CEO Waltersmith Refining and Petrochemicals Limited told BusinessDay.

However, Nigeria will miss this coming petrochemicals boom except it reverses the current narrative of its petrochemicals industry. Nigeria built three petrochemical plants in Eleme, Warri and Kaduna. These plants have combined capacity to produce 240,000 metric tons of polyethylene; 130,000 metric tons of polypropylene; and 18,000 metric tons of carbon black per annum.

A few years of operation and all the plants became moribund. A research conducted by the University of Benin, Nigeria, identified the reasons for collapse of the petrochemical plants to include irregular importation of feedstock, poor maintenance and lack of technical and managerial capacity.

One of the plants at Eleme was sold to Indorama Petrochemicals in 2006 and now operates at an annual average availability of 99 per cent, having newly-built largest single-train fertilizer plant in the world. Indorama today is building a petrochemical hub in Africa at Eleme.