Tomato Paste: Paying price for Nigeria’s economic downturn

Nigeria is ranked as 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 tons per annum with average of 20-30 tons/hectare. Yet Nigeria is the largest importer of tomato from China and Italy. Approximately 66,000 tons of processed tomato worth over N11.7 billion are imported annually despite its massive local production of raw tomato.

Aside from tomatoes being a rich source of Lycopene which is a major anti-oxidant, tomato can be used for the manufacture of paste and other bi-products. Currently there is a high rate of wastage which has been put at over 75% of fresh tomatoes across Nigeria.

Since the triple concentrate tomato paste is not produced locally, this has to be imported and then value added by local processors with benefits such as employment, taxable income to state, production technology, growth of local industry and the county’s economy.
To this end, analysts are of the view that, Federal Government has to convince Nigerian entrepreneurs 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.

For these analysts, 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.

Daily Times checks reveal that the introduction of the policy restricting 41 items from accessing Forex at the interbank market has dealt a huge blow on the manufacturing industry, especially the tomato paste sector, due to the inclusion of triple concentrate by the Central Bank of Nigeria.

The dumping of tomato paste most of which are substandard has negative health implications to Nigerians. The management of NAFDAC had acknowledged that a large volumes 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”.

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. For instance, the Triple Tomato 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. Tomato paste processing industry is a recent emergence in Nigeria’s 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 in to 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 taking some decisions.

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. In a published report, the manufacturers through the Managing Director, Sonia Foods Industries Ltd, Nnamdi Nnodebe are asking for more time to invest in backward integration.

Other bodies including Lagos Chamber of Commerce and other stakeholders have noted that the real sector has been battling some challenges since the implementation of the forex policy as several investments are at risk, with huge job loss.
According to the Lagos Chambers of Commerce and Industry (LCCI) President, Remi Bello, 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 also 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. Cashew nut is used for a variety of purpose, same with cassava and sugar cane; Triple Concentrate is need for the production of tomato paste, tomato puree and many other bi-products.