…Forces Erisco exit to China
The dearth of foreign exchange (forex) in the economy has forced the relocation of Erisco Foods Limited, Nigeria’s largest tomato processor with 450,000 metric tonnes capacity to China.
The relocation of $150 million Erisco plant is coming at a time Dangote tomato processing plant with 1,200 metric tonnes daily capacity in Kano is under lock and key.
Sani Dangote, vice president of the group, attributed the closure to unbridled importation of cheap pastes by over 30 Chinese firms.
According to a Tomato Policy Direction Paper made available to BusinessDay, large quantity of tomato paste consumed in Nigeria is being smuggled from Benin Republic and Niger due to duty differentials and forex bans.
Eric Umeofia, president/CEO of Erisco Foods Limited, said on Tuesday in Lagos that China has become an inevitable destination having failed many times to get foreign exchange to import machinery, packaging materials and a major raw material known as concentrate.
“We will now start the business of importation from China, where we will produce and export back to Nigeria,” Umeofia, said.
“We have returned all the C of Os of 2,400 hectares of land given to us by Katsina State government. We have commenced the process of winding down our plant in Nigeria, which will be concluded in nine months. Our products will remain in the market, but it will no longer be branded ‘made in Nigeria’,” Umeofia disclosed.
Dangote said imported products were still far cheaper than locally made ones as China dropped the price of the commodity by 50 percent so as to be able to compete better in Nigeria.
However, the proposed exit of Erisco Foods now leaves the sector to two medium-scale tomato processors—Sonia Foods and Springfield— with less than five percent capacity to satisfy local demand, returning the industry to the trenches.
Tomato importation into Nigeria is estimated at N16 billion by government and $1 billion by the private sector. Erisco Foods is the fourth largest tomato plant in the world and the biggest in Africa.
Umeofia, who invested $150 million into the tomato industry in Lagos and Katsina, had last month threatened to exit Nigeria in 30 days if the central bank continued to ignore its call to make FX available for the importation of inputs and packaging materials or at least enable it access 60 percent of FX made available in the market for manufacturers.
According to Umeofia, the decision to relocate was predicated on government’s inability to check dumping of tomato pastes in Nigeria and the CBN’s refusal to provide FX with which to import inputs and machinery.
He said the CBN had refused to allow Erisco Foods use its own deposit of $460,000 generated from foreign operations before the 41-item FX ban, wondering why the apex bank would turn around to make FX approval for importers of substandard goods, mostly foreigners, when the largest tomato processor and employer of labour in the industry had got nothing from the 60 percent FX allocation meant for manufacturers.
“We have lost N3.6 billion to dumping and we have goods worth N6 billion at the warehouses because we cannot sell them. We will now join Indians, Lebanese and Chinese to import tomato pastes into Nigeria. We have started disengaging workers. Over 1,500 workers will lose their jobs,” he said
He said the Kastina State project was supposed to provide jobs for 30,000 to 50,000 people within two to three years, regretting that this plan, including his export plans, had been thwarted by the inconsistencies in the policy and economy.
Nigeria is the 13th largest producer of tomato in the world and the second after Egypt in Africa, yet the country is still unable to meet local demand because about 50 percent of tomato produce is wasted due to lack storage facility. The country produces 1.5 million tons per annum, with 0.7 million metric tons post-harvest loss, even as tomato demand is put at 2.2 million metric tons per annum.
The Manufacturers Association of Nigeria (MAN) had said in August that 272 firms had shut down on the back of poor management of the foreign exchange market. Poor management of the FX market has seen investors flee Nigeria in the last 14 to 17 months.
“Our expectation was to place a total ban on tomato importation as the government did on cement and fruit juice,” he added.