Nigeria loses N2 trillion yearly to petrochemicals import

Foam, plastic, paint, textile firms ship in 80 per cent of raw materials
Single petrochemical company can’t meet nation’s needs

NIGERIA’S failure to develop petrochemical plants is largely the reason manufacturing companies are importing about 80 per cent of their raw materials worth over $10 billion (about N2 trillion at the rate of N200 to a dollar) yearly, The Guardian has learnt.

All the foam, plastic, paint and textile companies in the country depend on derivatives most of which are imported because the local petrochemical industry has not received due attention.

Products made from petrochemicals include plastics, soaps, detergents, solvents (such as paint thinners), paints, drugs, fertilizer, pesticides, explosives, synthetic fibers and rubbers, and flooring and insulating materials.

They are also found in such common products as aspirin, cars, clothing, compact discs, video tapes, electronic equipment, and furniture.

The Nigerian National Petroleum Corporation (NNPC) operates four crude oil refineries, two in Port Harcourt and one each in Kaduna and Warri expected to process about 420,000 barrels per day of crude oil. Unfortunately, the present total refining capacity is about 148,300 bpd (35.3 per cent) of installed capacity.

There are currently three petrochemical plants in Nigeria, including Kaduna Refinery and Petrochemicals Company (KRPC), Warri Refinery and Petrochemicals Company (WRPC) as well as Indorama Eleme Petrochemicals Company (IEPC).

Eleme Petrochemicals plant, which came on stream in 1995, was also state -owned until 2006 when it was privatised and Indorama Group took over its management as a core investor.

Warri Refining and Petrochemical Company (KRPC) was designed to produce carbon black while KRPC was also designed to produce Linear Alkyl Benzene to be used in the manufacture of detergents.

Nigeria currently has only one functioning petrochemical plant, Eleme Petrochemicals, which as at 2013 had an annual installed capacity of 300,000 metric tonnes of olefins, 250,000 metric tonnes of polyethylene and 80,000 metric tonnes of polypropylene.

Similarly, Nigeria has only one urea fertiliser plant, with Notore Chemicals 560ktpa urea production and 1metric tonnes per annuum blending plant.

Most petroleum and petrochemical products serve as raw materials or inputs to other manufacturing industries, which ensure the country’s growth in building roads, producing paint for building, ingredients for textiles for clothing and carpets, foams for beddings and furniture, medicines for hospitals, fertilisers for gardens, lubricants for vehicles and machinery, as well as plastics and polymers used in everything from computers to medical equipment to wind turbines and solar panels to cosmetics.

The Guardian learnt from reliable sources that Warri and Kaduna Refineries have abandoned any plan to put their petrochemical components on stream due to their obsolete state.

According to the first President, Polymer Institute of Nigeria, Chief Kunle Ogunade, about 80 per cent of the various polymers used in the country are imported.

He said: “About 80 per cent of our various polymers are imported. We must pressurise our government to build more refineries to make these necessary materials available in the country.”

He also expects the revival of the country’s petrochemical plants in Warri and Kaduna, which he said, had been moribund for several years.

He also spoke on the need for the government to preserve funds in the country by maximising local polymer experts instead of looking abroad for such services that can be rendered within.

Ogunade noted that the petrochemical plants would be able to take care of the production of fertiliser and raw materials for the plastic manufacturing company.

“Though we have Eleme Petrochemical, it is not enough to products all the petro chemical products that the country currently imports. We need at least 10 petrochemical plants in the country for various polymer products.

“At present, Indorama is limited in certain areas. There are many polymer materials that are imported into the country, which should have been produced in Nigeria. The foam industry depends on imported polymer products, as do pet bottle and companies. There is the need to have a petrochemical plant for Toluene Diisocyanate (TDI) .These products can also be used by the pet bottling companies. You can imagine the amount of table water that is being produced in the country at present.

“There is the need for Polyvinyl Chloride (PVC) manufacturing plant as the products have huge market in the country in the form of pressure pipes, waste pipes and many other pipes made from PVC. We can go on and on. Polymer products are also required in the textile industry.”

The Managing Director, Eleme Petrochemicals Limited, Manish Mundra, said Nigeria with its hydrocarbon resources and its strategic geographic location, could become the world’s newest and most attractive location of petrochemical assets, especially keeping in view the North West European and Americas markets.

Stressing that Nigeria is strategically located to serve both Europe and America, he added:“This is the right time for things to be done differently.”

In its 2016 forecast for the country’s petrochemical sector, BMI Research, a Fitch Group Company, noted that Nigeria remains the most significant sub-Saharan African market, in terms of size, growth and future potential.

According to the firm, growth in gas production is set to spur downstream petrochemicals industries, particularly fertiliser and methanol and under the Buhari administration the business environment has improved, even though the decline in oil prices and the depreciation of the naira have had a negative effect.

It explained: “In 2015, Nigeria had olefins production capacities of 550,000 tonnes per annum (tpa) ethylene and 125,000tpa propylene with thermoplastic resins capacities of 240,000tpa linear low-density polyethylene (LLDPE) and 95,000tpa polypropylene (PP). Nigeria’s petrochemicals sector is characterised by low capacity utilisation, frequently disrupted plant operations and a lack of proper resources to operate and maintain facilities.

“The government is attempting to attract foreign direct investment (FDI) into the country’s petrochemicals sector. However, a lack of skilled labour, political and social unrest and sabotage of upstream infrastructure could delay projects planned in the coming years. The focus of investment is the fertiliser sector, which uses domestic gas resources and has access to significant markets in sub-Saharan Africa.

“The Nigerian polymers market will draw in imports for its construction, automotive, packaging and agribusiness sectors. In 2016, 3.9 per cent GDP growth will stimulate 9.8 per cent growth in the construction sector as well as more limited growth in the automotive sector”.

BMI says that urea capacity is set to exceed 8mn tpa by 2020, which should make Nigeria a major exporter of fertiliser, as well as ensuring self-sufficiency in the long-run. Methanol is also set to grow with total additional capacity of 3.6mn tpa over the next five years.

Polymers capacity, it hints, is set to rise in the medium term. Dangote Group is planning a 600,000tpa polypropylene (PP) plant which is likely to come into operation in 2018. Indorama is also planning a low-density polyethylene (LDPE) plant, which could take until 2019 before the commencement of commercial production.

BMI discloses that Nigeria comes in at 11th place in itsRisk/Reward Index (RRI) for the Middle East and Africa with 38.3 points, up 1.1 points from 2015 due to improving market risk caused by improved political stability and ongoing investment in petrochemicals capacities.

“It lies 3.9 points ahead of Algeria and 10.3 points behind Egypt. Its score could rise if all plans come on stream as expected, but bearing in mind past disappointments, BMI remains circumspect about Nigeria’s ability to deliver capacity growth in a highly challenging investment environment”, it said.