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Saving the Tomato Processing Industry

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tomato paste - Investors King
  • Saving the Tomato Processing Industry

Recently, the federal government indicated its readiness to lift the forex ban it placed on some 41 items in 2015.

Minister of Finance, Kemi Adeosun, had, in the 2017 Fiscal Policy Roadmap, said the federal government, “will replace administrative measures on list of 41 items with fiscal measures to reduce demand pressure in the parallel market.”

Since the announcement, stakeholders in the industry have been in a dancing mood as the restriction of access to forex in the official window sent many of them out of business.

Also, the demand for tomato paste in Nigeria has outstripped supply ever since the Central Bank of Nigeria (CBN) started implementing the policy restricting 41 items from sourcing forex from its official window. This has led to a massive mark-up of price. Profiteering became the order of the day with substandard tomato pastes flooding the market as unsuspecting consumers suffer the backlash.

Experts believe the health of Nigerians might be compromised with smugglers and sellers of tomato paste desperate to meet the difference between market demand and actual product supply. With the dying local tomato paste industry closer to the verge of extinction, smuggling of substandard tomato paste becomes inevitable to opportunists.

Fake Products

At a joint press conference in Abuja organised by Comptroller General of the Nigerian Customs Service (NCS), Col Hameed Ali (rtd.), and the acting Director-General of National Agency for Foods and Drugs Administration and Control (NAFDAC), Mrs. Yetunde Oni, on the outcome of laboratory tests conducted on the alleged “plastic rice” imported into the country, Oni said the seized rice was, “contaminated with micro-organisms above permissible limit.”

The NCS Comptroller General, who was represented by the Deputy Comptroller-General, Mr. Umar Ilya, said the NCS would continue to do what is possible to rid the country of adulterated products.

While the NCS is doing its best to curb the menace of importers of fake products, analysts believe the best solution to counter the menace is to encourage local production until total ban on the 41 items that excludes Tomato Paste Triple Concentrate from forex interbank is removed.

Stakeholders therefore called on the federal government to remove restriction on forex pending when local production of the material starts and becomes self-sufficient.

According to a top player in the industry, who pleaded anonymity, “Tomato Paste Triple Concentrate is one of the essential ingredients used to manufacture the popular tomato paste. This vital raw material is not produced in Nigeria for now.

“In the mean time before local production of the material starts and becomes self-sufficient, government should not be too much in a haste to throw away the bathwater with the baby thereby creating more problems than solutions. One of such problems is managing fake and substandard influx of finished tomato paste products into the Nigerian market. Local production remains the most viable means of securing maintaining high standard of tomato paste products.”

Product Test

Not too long ago, former Director General of NAFDAC, Dr. Paul Orhii, admitted that 85 per cent of tomato paste brands sold in various markets across Nigeria mostly imported from China were substandard and unfit for consumption, “but they still find their way through the borders of the country.”

The former DG also revealed that 91.1 per cent of the foreign brands of tomato paste failed NAFDAC’s product test.

According to Orhii, the tomato paste was filled with bulky agents such as starch and banned colouring that makes the product look reddish. “But this could cause cancer, organ failure, kidney and liver-related ailments among young and middle-aged Nigerians,” he stated.

Another stakeholder, who does not want his name in print told THISDAY that the federal government would be killing two birds with a stone if it revises the ban on 41 items from forex interbank activities, especially for an item such as Tomato Paste Triple Concentrate.

According to him, “This would ensure people retain their jobs in that sector and those who have already lost their jobs can be reabsorbed as experience is crucial in the production of tomato paste. The demand for Triple Concentrate Tomato Paste is not for itself as a concentrate, but its derived use to add form and utility in the production of finished products such as tomato paste, ketchups and sauces. There is a significant addition of value in the process of conversion and given the capacities that has evolved over time. Nigeria can become the hub of tomato paste re-processing for the surrounding less developed neighbouring countries, thus replacing Chinese finished products imports in these places.”

He added: “Take for instance, cassava that is grown in Nigeria; this crop is used for many other things aside food. Even as food it can be purchased for different kinds of food. Sugarcane is not just for food consumption, it is also used to make ethanol fuel for vehicles and other machineries. Nigeria produces an estimated 1.5 million tons of fresh tomatoes every year, making it the 13th biggest producer in the world. Most of it goes to service the fresh tomato market in the country.

“Tomato paste plays its role, primarily as a substitute for fresh tomatoes, when there is reduced availability of fresh tomatoes; tomato paste variants are used to shore up supply and reduce scarcity. Tomato paste is also a very good way to store tomatoes that would ordinarily go bad in their natural and fresh state being a seasonal crop with Nigeria still lacking adequate storage facilities.

“Nigeria had developed a vibrant local processing industry but the importation of finished tomato paste products over the years has been affecting the growth of the industry. Hence out of the imported $170 million tomato paste in 2014 around $50 million was for the triple concentrate. 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 country’s economy.”

He added that, it was also virtually impossible to feed the local demand for Triple Concentrate till the local processing industry evolves over time to acquire and execute the required backward integration to make this possible.

He said the U.S, European and Chinese tomato paste industries were examples, which took many years to establish and standardise.

Protest

The decision to include Triple Concentrate Tomato Paste amongst 41 prohibited import goods is still raising dust amongst consumers, labour and manufacturers alike and many have been expressing frustrations over the forex policy.

Director General, Nigeria Employers Consultative Association (NECA), Mr. Olusegun Oshinowo, asked succinct questions in an interview: “What is it that has made the CBN to prohibit tomato paste manufacturers from the foreign exchange that should not be extended to numerous products including petroleum? Right now, NECA is trying to determine how many companies are set for redundancy. This cuts across all sectors.”

He added that, “Petroleum maybe the mainstay of the economy today but the future of that sector looks very bleak as global pricing for crude oil keeps falling. This is perhaps the major reason why the government has intensified its drive to diversify Nigeria’s economy in a bid to shore up the country’s revenue.

“Oil aside, the consistent fall in Naira’s value has not spelt good tidings for entrepreneurs, who have been producing and groaning from the already hostile production environment. Manufacturers especially those in the tomato industry are merely holding on to the last straw as they do business but with the exclusion from forex activities it is tantamount to an execution of the tomato industry.”

On his part, President of Manufacturers Association of Nigeria (MAN), Frank Jacobs, said several of his member companies were presently operating below capacity and only few may be able to survive.

“The forex policy is not just killing the tomato industry but does more than that as it effeminates the purchasing power of the consumer and this consumer impotence is replicated all over the country as they cannot afford to buy because of inflation and loss of jobs. The policy also eliminates the possibility of sales increase as the few people with jobs have to cater for those who just lost theirs,” he said.

According to the President, National Union of Food, Beverages and Tobacco Employees, Lateef Oyelekan, “All the companies involved in the Forex exclusion should be given the latitude to plan for backward integration, as one of the downside of the policy is that it has started leading to massive job loss.”

“Hence the best approach would be a phase-wise implementation which will facilitate local backward integration of the key players through sound and stable policies and support measures. This will also retain and build the local processing capabilities of the downstream re-processing industry, so that in the long-run, not just Nigeria but the entire region can be serviced using local capabilities.

“The CBN, while desperate to get the economy up and running should appreciate that some items cannot be treated with levity. If you take away Cassava, you are not just dealing with Cassava but you are dealing with Garri, fuel made from Cassava, Abacha salad, African Salad and many others. Tomato Paste Triple Concentrate is not just an item on the list but a raw material that goes beyond providing food on the table but also jobs to millions of Nigerians,” he added.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness - Investors King

Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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Private employers

As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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