Exactly a year after Africa’s richest man, Aliko Dangote announced that his $20 million tomato paste factory will commence operations, the factory has already commenced and suspended its production within its short period of existence.
The factory, which commenced its operations in March 2016, shut down two months later in May 2016 due to a shortage of tomatoes in the four producing states in Nigeria. Most of the farmlands across Kano, Jigawa, Plateau, Katsina and Kaduna states were affected by the “Tuta Absoluta” pest attack, which destroyed all the tomatoes species in the farms.
Earlier this month, the Managing Director of the Dangote Tomato Processing Factory, Abdulkadir Kaita, had disclosed that the company is set to begin the production of tomato pastes in February.
However, with the economic condition in the country, it is unlikely that the factory will open in February. Executive Director, Dangote Group, Edwin Devakumar explained that the plant is unlikely to open due to the shortage of dollars to import raw materials. Though, he highlighted that the factory would open when if it is able to obtain an adequate supply of raw tomatoes locally.
Last year, the Union of Tomato Paste Manufacturers in Nigeria through its spokesman, Mr. Nnamdi Nnodebe, hinted that the once vibrant tomato industry might stop existing in 2017 if the Central Bank of Nigeria (CBN) did not amend its policy on Forex to exclude triple concentrate tomato paste from the scope of the 41 items on the restricted list. The triple concentrate tomato paste is used as raw material by manufacturers for further processing into tomato paste, ketchup, and sauces.
Dangote’s influence in the country has enabled him to gain a reasonable level of preference by Nigeria’s apex bank, the Central Bank of Nigeria (CBN). Between March to May 2016, Dangote’s companies bought at least $161 million in hard currency from CBN, estimated to be 9 percent of the total hard currency sold during that period. In a single week in March 2016, one in every eight dollars sold by the CBN went to Dangote group.
Despite his influence, the group has also suffered from the unavailability of the dollar in the Nigerian economy. The dollar scarcity has also forced Dangote to cut down other food businesses such as flour milling, sugar refining, and vegetable oil refining, said Devakumar.
In November last year, it was reported that Africa’s top tomato paste maker, Eric Umeofia, announced his exit from the Nigerian market. He had complained about the inability of his company to obtain forex from the CBN to import its raw materials. Eric Umeofia, the CEO of Erisco told media agencies that he will be exploring alternative African markets by opening up shop in Kenya, Cameroon, Cote d’Ivoire and Ethiopia. His factory closure led to the loss of 1,500 jobs.
Nigeria is the 14th largest producer of tomatoes in the world, the largest producer in sub-Saharan Africa and the eighth largest importer of tomato paste after Iraq and Japan. The country produces about 1.5 million tonnes of tomatoes a year, but over 900,000 tonnes is lost to rot.
Nigeria has a significant demand for processed tomatoes but it imports almost half of its tomato paste from China and Italy. In 2015, the Director General and CEO of the Raw Material and Research and Development Council (RMRDC), Dr Husaini Ibrahim, revealed that Nigeria spends about $1.5 billion annually on tomato product-importation from China and other parts of the world.
Nigeria’s dream for self-sufficiency looks bleak with the various policies the government has adopted to grow the economy. The CBN has maintained an artificial price of the naira by indirectly fixing the naira. The fixing of the currency has shattered investor confidence and reduced capital inflows into the economy. Vice President Yemi Osinbajo said during the World Economic Forum (WEF) in Davos, Switzerland yesterday, that the CBN would implement a free float of the naira when the apex bank has more confidence in undertaking such policy. He, however, did not give any time-frame.