- Curbing Substandard Tomato Pastes Imports
Eromosele Abiodun writes that the federal government should keep to its promise to replace administrative measures on the list of 41 items barred from the official window of the forex market in order to curb the importation of substandard tomato pastes into the country.
Recently, the federal government indicated its readiness to lift the foreign exchange (forex) ban it placed on some 41 items since 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 the 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.
Importation of 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 microorganisms above permissible limit.”
NCS Comptroller General, who was represented by the Deputy Comptroller-General, Mr. Umar Ilya said the NCS will continue to do what is possible to rid the country of adulterated products.
While the NCS is doing their 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 even though there is so attempts and claims the raw material is still massively being sort outside the shores of Nigeria.
“In the mean time before local production of the material starts andbecomes self-sufficient, government should not be in too much of 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.”
NAFDAC 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 in 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,” stated.
Another stakeholder, who does not want his name in print, said that the federal government would be killing two birds with a stone if it reverses 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 significant addition of value in the process of conversion and given the capacities, which have 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 county’s economy.”
He added that it is 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 United States, European and Chinese tomato paste industries are examples, which took many years to establish and standardize.
Consumers, manufacturers 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 said: “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), Franks Jacob said several of his member companies are 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.
Oil Prices Drop on Stronger U.S Dollar
The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.
The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.
The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.
“Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.
“The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.”
The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.
A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.
Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.
Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.
“This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.
Oil Rises as Threat of Immediate Iran Supply Recedes
Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.
Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.
A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.
It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.
Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.
“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.
To meet rising demand, U.S. drillers are also increasing output.
U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.
Oil Prices Rise as Demand Improves, Supplies Tighten
Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.
Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.
U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.
“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.
“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”
Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.
The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.
“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.
The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.
IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.
The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.
On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.
U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.
It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.
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