Thursday, July 29, 2021
More

    UPDATED: Nigeria spends over $200 million tomatoes paste imports annually as Dangote Tomato processing plant remains idle, unemployment, inflation surges

    Must read

    Naija247newshttps://www.naija247news.com/
    Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.
    • Nigerian billionaire Aliko Dangote is barely managing to operate Africa’s biggest tomato processing plant, six years after the factory began production, as he can’t get adequate berries to crush.

    Dangote’s 1,200-ton a day plant is producing at 20% of capacity because farmers don’t have enough resources to boost acreage. The factory was meant to reverse Nigeria’s spending over $200 million importing paste from China and United States. But by 2017, the company had to idle the plant after pests destroyed vast swathes of the crop. It took another two years — and a resolution of a dispute over payment to farmers — for the factory to resume output.

    “We haven’t been able to process enough quantity of tomato to make our operations successful,” said Abdulkarim Kaita, managing director of the Dangote Tomato Processing Plant. “At the moment, we are counting losses.”

    The crisis at Dangote’s tomato plant is emblematic of the challenges faced by many businesses in Africa’s biggest economy. While tomato farming employs an estimated 200,000 people, banks balk at lending to farmers despite President Muhammadu Buhari’s focus on boosting local production. Such policy missteps, entrenched corruption and ethnic tensions are discouraging investments needed to add jobs in a nation that has one of the world’s highest unemployment rates.

    Inflation rate spikes
    Meanwhile Inflation in May stood at 17.93 per cent, still amongst the highest in four years.

    Nigeria’s inflation rate fell for the second consecutive month in May to 17.93 per cent from 18.12 per cent recorded a month earlier.

    The National Bureau of Statistics said Tuesday that the prices of goods and services, measured by the Consumer Price Index (CPI) increased by 17.93 per cent in May 2021 when compared to May 2020.

    Though the scale of increase remained high, it was 0.05 per cent lower than what obtained a month earlier, NBS said.

    There was no respite in terms of increase in food prices as food inflation rose in May to 22.28 per cent, compared with 22.72 per cent in April 2021.

    Inflationary pressures have never abated since the Buhari administration announced a shutdown of Nigeria’s porous land borders with all neighbours in October 2019 in a move seeking to spur mass production of food as well as curb smuggling and associated corruption.

    A dearth of clear-cut implementation road map with realistic timelines for proper development are eroding the expected gains from the government’s bid to encourage local production, said Segun Ajayi-Kadir, director general of the Nigerian manufacturers association.

    Nigeria economic recession recovery
    Nigeria is recovering from its deepest recession in four decades following pandemic-induced restrictions. But a sluggish revival and rising insecurity risks raising social tensions, according to the World Bank.

    Entrepreneurs say the crisis has been worsened by a central bank decision to keep an artificially high exchange rate which has dried up dollar supplies, forcing firms to buy them on the black market at a 40 percent premium.

    “Where the foreign exchange is not available, we are cutting down our operations. For example … we had a tomato-based processing plant, we have shut it down,” Edwin Devakumar, a senior executive with Dangote’s business, told Reuters in an interview.

    Tomato paste is a staple food in Nigeria but the country imports much of its supplies from China.

    Dangote’s plant opened only last year in the northern city of Kano amid much talk from officials predicting a new era of Nigeria producing its own tomato paste, displacing costly imports.

    The dollar scarcity has also forced Dangote to cut down other food businesses such as flour milling, sugar refining and vegetable oil refining, Devakumar said.

    The Dangote plant was to help Africa’s most populous nation cut 300,000 tons of tomato-paste imports from China by using an estimated 900,000 tons of tomatoes lost after harvest every year for lack of storage and processing facilities. But farmers have not been able to supply the factory with the volumes needed to run at capacity.

    The plant is currently processing about 300 metric tons of the fruit each day, the highest capacity it has achieved since 2015, but barely enough to keep the plant operational. Yet, it requires the same power and overheads cost of operating at its full capacity, Kaita said.

    Tomato processors also can’t import the berry to make up for erratic local supply as overseas purchases of the fruit is barred along with as many as 50 other products by the Central Bank of Nigeria, which refuses to provide dollars to import these items. That policy is also fueling inflation, which accelerated to 22.28% in May, about a four-year high.

    Farmers credit
    Meanwhile, tomato farmers can’t get enough credit to boost output as banks are reluctant to lend for agricultural activities. Tillers have also been harangued by armed marauders and kidnappers.

    Tomato paste, like rice, is a prized staple in Nigeria’s culinary repertoire.

    A vital ingredient in meat stews, soups, homemade sauces and rice dishes, tomato accounts for nearly one fifth of Nigeria’s vegetable consumption.

    Nigeria is Africa’s second largest producer of fresh tomatoes with an annual production of 2.3m tonnes, according to a 2018 report by PwC. Paradoxically, the report also found that the West African nation is the continent’s third largest importer of tomato paste, spending about $360m per year on imports between 2016 and 2017. As such, boosting domestic tomato production has been an important element in the Buhari government’s policy of making the country less dependent on food imports.

    Some of the country’s conglomerates believe they can fill this supply gap. Dangote Group, headed by Africa’s richest man, Aliko Dangote, is one of the big players that have jumped into the fray. In March 2016, it invested $20m to start a tomato processing plant on the outskirts of the northern city of Kano.

    The plant, with an installed capacity capable of producing 1,200 tonnes of tomato paste daily, was touted as a game changer. But after engaging over 5,000 farmers whose output would be purchased after harvest, the plant shut in 2017, re-opened in early 2019 and struggled until it became fully operational in February this year.

    Within the same period, Lagos-based food manufacturer Erisco Foods, which had opened a tomato paste plant in Lagos in February 2016, also closed its plant in November that year due to a shortage of the dollars it needed to import machine spare parts and raw materials after Nigeria slumped into a recession.

    Increasing yields

    At the heart of the problem is the lack of a steady, unhampered supply of raw tomatoes. Small- and medium-scale farmers, who account for 90% of domestic production, are grappling not only with a lack of quality seeds and fertiliser but also poor yields, pests and diseases and staggering post-harvest losses due to poor storage and transportation infrastructure.

    In mid-2016 an invasion of tomato-leaf eating moths (Tuta absoluta) wiped out tomato farms in several northern states, the hotspot for tomato production. Prices went up, and production plants, including Dangote’s, struggled as supply dropped radically.

    Between 2006 and 2016, tomato yields averaged 5.47 tonnes per hectare, compared to the global average of 38.1 tonnes per hectare, according to PwC.

    Poor yields often mean farmers are unable to produce enough, leading to higher prices that are unappealing to large-scale processors who want to turn a profit, explains Bola Oyeleke, chief executive officer of the Tomatoes and Orchard Producers Association of Nigeria (TOPAN).

    Most of Nigeria’s tomatoes are grown in the north but have to be transported to the more populous south on poor roads, leading to spoilage on the way. In 2017, Sahel Capital, a fund manager and advisory firm focused on West Africa, reported that 40-50% of tomato production in Nigeria was lost because of poor handling, processing and preservation practices. Big processors like Dangote want to do things differently now.

    The conglomerate has set up a greenhouse nursery where it can cultivate up to 350m tonnes of hybrid tomato seedlings yearly. The hybrid seeds should be able to produce 40-70 tonnes of tomatoes per hectare every season, well above the usual average.

    In collaboration with a financing scheme backed by the Central Bank of Nigeria (see below), Dangote will distribute one hectare’s worth each of seeds to 10,000 smallholder farmers in Kano state. The company hopes that this cultivation scheme will enable the farmers to produce at least 400,000 tonnes of tomatoes annually.

    Spanish food multinational GBfoods, which produces Gino Tomato Paste in tins and sachets, set up a tomato processing plant in Kaduna state last year with a capacity of 30 tonnes per day. Raw tomatoes are to be sourced from a 30-hectare pilot farm that grows more than 15 different varieties, averaging a yield of 40 to 50 tonnes per hectare.

    Others local entrepreneurs
    Olam International wants to stop importing tomato concentrates and ramp up local production to meet the needs of its factory, too. The Singapore-headquartered conglomerate jump-started a 20-hectare pilot tomato farm in northern Kano and Jigawa states late last year to grow its own tomatoes.

    After harvest started this year in February, the company said each of its farms could produce up to 30 tonnes of tomatoes per hectare and expects to begin tomato paste production locally from March next year.

    Olam is planning to support 1,000 farmers and expand to a 500-hectare farm under its out-grower scheme by September this year. It collaborated with World Vegetable Centre, a Taiwan-based research institute, to experiment with 18 varieties of seeds to boost yields.

    Support for smallholders

    Yet small-scale farmers are not entirely out of the picture. Under the Central Bank of Nigeria’s Anchor Borrowers’ Programme, launched in late 2015, the government is providing cheap loans and input subsidies for farmers to cultivate staples like tomato.

    The bank has enrolled 140,848 tomato farmers across 25 states who will receive training and credit to produce raw tomatoes for either direct consumption or for major players like Dangote Tomato Processing, Sonia Foods, and GB Foods.

    The National Horticultural Research Institute credits all these concerted efforts, especially investment in training and technology for farmers, as a major reason for the 25% increase in annual tomato production in the last decade.

    Rosemary Enemuo, analyst at a Lagos-based political and economic risk advisory, says the partnership between large processors and small-scale farmers would “invariably make production and supply seamless” and help to counter pest outbreaks.

    “In the event of pest outbreak, private companies who import machinery for tomato processing can import or prescribe best pest control chemicals or procedures for managing outbreaks,” she says.

    Government policy

    In early 2017, the Ministry of Industry, Trade and Investment announced a policy aimed at limiting imports of tomato paste and boosting domestic production. Measures included only allowing the import of tomato paste through the ports, a ban on the import of tomato paste for retail sale and sharp increases in tariffs. It also removed import duty on greenhouse equipment for the production of tomato paste to stimulate investment in the tomato industry.

    “The issue is that our production demand has not been met so far and we need to increase the volume of supply from the farmers,” Kaita said. Most of the tomato farmers live in remote villages and that makes it difficult for vehicle to go in and bring out tomatoes to the plant.

    To boost the tomato crop, the factory is helping farmers by providing them with improved seedlings and encouraging more people to cultivate the product. The move has helped increase the number of farmers to 6,000 from 1,000 in the last harvest season, but supply still was just enough to meet 20% of the factory’s capacity, Kaita said. Each farmer can produce at least 40 metric tons a hectare.

    The company is now planning to create farming clusters next harvest season and is relying on a proposal by the central bank to provide credit to farmers to boost output.

    Dangote’s $17.4 billion of assets makes him Africa’s richest man, according to the Bloomberg Billionaires Index. Most of his wealth is derived from his cement business. Dangote is now investing $19 billion in a petro-chemical complex near Lagos.

    - Advertisement -spot_img

    More articles

    - Advertisement -spot_img

    Latest article

    WP to LinkedIn Auto Publish Powered By : XYZScripts.com