The managing director and chief executive officer of Sonia Foods Industries Limited, Nnamdi Nnodebe, spoke with Blessing Anaro on the challenges facing the manufacturing sector. Excerpts
How will you describe the Nigerian tomato industry?
This industry is lucrative and holds a lot of promise for the country. It creates a lot of jobs for Nigerians and has the capacity to create several thousands more jobs. However, the government has not done what it should do to support local manufacturers of tomato. For example, apart from unbridled importation of tomato products, especially those in retail packs, I provide virtually everything in my factory. I provide my own energy, water and security and roads are not yet the way they ought to be. In other countries, there are incentives given to local manufacturers who are really creating jobs but this is not done here in Nigeria. If you go to the market today, you will find that the majority of tomato pastes in retail packs are imported. With the influx of these products, we cannot compete in the market because there is no level playing ground. These imports are far cheaper than what we have here. The industry is key to the Nigerian economy but many things are not what they ought to be.
Nigeria as a country needs to make hard choices to get us out of this quagmire, especially at a time when the economy is slowing with strong consequences on the naira, which naturally means that the road to recovery will be a rough one. I think the government realises this and that’s why the budget for 2016 is hinged on non-oil revenue, with a view to deviating from historical trends. This however means that the manufacturing sector, agricultural and mining sectors are areas we really should focus more attention on. That is why we are appealing that an enabling environment be put in place by government to support us in catalysing a more rapid growth for the manufacturing sector.
There is a backward integration plan initiated by the immediate past government in the industry. How have you keyed into the initiative as a local manufacturer?
Currently, we are working so hard in some states to make sure that within few months, we start backward integration fully. We have already engaged specialists in agriculture that are now in the country. There are also local people that are involved. We are also in advanced negotiations with many states in the northern part of the country to make sure we are there.
My plan is to have farms and make sure that our local people are busy and employed with significant multiplier effects on the economy. You can see what is going on in the oil sector. It is clear that agro processing and manufacturing are the way to go. We are here to support the government in reducing the impact of oil market crash in terms of creating good jobs to ensure that young Nigerians are busy. We also believe that at some point, we will start exporting tomatoes to other countries so that we can repatriate foreign exchange. All things being equal and with the right enablement, I think the real GDP growth will take a boost, thereby bringing about a certain level of recovery.
How much have you, so far, invested in the economy via this sector?
In terms of investments, we have put about N5 billion into this economy. Our investments are in land, machinery and buildings. Currently, we are importing some machines that will help the industry a lot. These machines alone cost between $6 to $7 million.
So you have a problem with importation of all manner of tomato products into the country?
Yes, they are not allowing us to sell at all. Worse still, some of them are sub-standard. Another issue we have today is how much they sell these tomato pastes in retail packs in the Nigerian market. Now, I know how much they sell these products in China. When you calculate the levy, the duty, the Value Added Tax (VAT) and other fees, you will find out that these importers are supposed and expected to pay around 50 per cent. But my calculation is that there is no way they can sell the products at the prices you see all over the Nigerian market if they are paying the right duty. Yes, I know how much the items are sold in China, so, selling these products at the prices we get in the market means they are not paying the right tariff. This means that something is wrong somewhere. Something is not just good enough with our regulatory bodies. For years, we have been asking the government to ban tomato paste in retail packs, but nothing has happened. We have been begging them to ban it because doing so will help the economy. Many companies have no other choice than close down if they cannot compete with importers. So those of us that have facilities here are asking the government to assist us in the form of incentives. We need to grow; we need to have concentrate plants in the country. For now, all of us that are processing tomato here bring in concentrates from outside the country, because no company currently produces triple concentrates in Nigeria. Building concentrate plants will be good for the economy and I am willing to go into it if the government is serious with helping this industry. I took a bold step to establish here. I could have been importing if I wanted but I chose to help the economy. I have over 224 direct workers and several indirect ones.
How did you source some of the funds you have invested in the industry?
My bank, which is a commercial bank, is the one financing my project. You can imagine the double-digit interest rate I will pay back. I have written to the Bank of Industry several times in the past three years. I hope something will come out of this soon.
Doing backward integration and having triple concentrate plants here is quite expensive. To do backward integration locally, you need $7 million at the minimum. Now, we have got farms and we are working seriously to get larger expanse of land. By the grace of God, we will seal the deal with states within one month. To bring down these machines here is also not easy. I have already met some of my foreign partners out there concerning my new move. They are willing to partner with us, but they are afraid of only one thing which is policy somersault. Today they ban, tomorrow they lift the ban. Presently, with the machines we have in Nigeria, I do not think we need tomato in retail packs from other countries. If the government is serious about supporting local manufacturers, then they have to ban these items. I am confident in President Muhammadu Buhari and I believe he will help save this industry from saboteurs.
Are you happy with the Central Bank of Nigeria (CBN)’s foreign exchange market policy?
I will not say I am totally happy with it. Our raw materials are still imported. All the local tomato players here are still importing concentrates. So if you do not have access to foreign exchange, how can you bring in your raw materials? How can you bring in your spare parts? This is the problem we are having. Yes, the CBN policy could be good on one hand, but we are majorly importing concentrates. Those that have the structure on ground are begging the government to give us the license to access foreign exchange at the official rate. We want to be able to open our LCs at the official rate. I think we all should be given equal opportunity to access this like a few others are doing, because we are all Nigerians, and are equally passionate about growing the economy. Due to this policy, we work for one week and shut down the following week, simply because we do not have enough raw materials. I think they should look into this with all the seriousness it needs, so that the needed confidence investors crave can return and the economy can get the needed impetus it desires to grow.
So what is the future of the tomato paste industry in Nigeria?
It has a very bright future because it is a food item. If the government is willing to support us, things will go on well. The market is there, and this is an industry that can develop the Nigerian economy. Other countries of the world protect local manufacturers, especially those in critical sectors like food. We have the right population and the right market, but some importers are taking advantage of it to kill those of us doing local manufacturing in the country. This should not be so.
