Aligning incentives, policies to drive tomato backward integration

While government has no business running enterprises, it has the responsibility of creating an environment for such entities to thrive profitably, either through policy framework or infrastructure. Various stakeholders have argued their positions on how to bridge the nation’s demand-supply gap in the tomato paste industry. With investors expressing interests in backwardly integrating their processes, government however needs to unveil its policy framework for the industry and align it with sector-wide incentives to encourage investments. FEMI ADEKOYA writes.

Worried by the nation’s high import bill and inability to meet foreign exchange demand by various enterprises, the federal government resorted to exploring incentivised-manufacturing option to attract investment in many sectors.

Designed to be implemented through a backward integration agenda, the federal government seeks to end the waste of the nation’s scarce foreign exchange on the importation of commodities that can be locally produced if encouraged.

Despite the initiatives of government however, the absence of clear policy framework on the backward integration agenda remains a source of concern for stakeholders seeking to invest in certain sectors.

Indeed, the backward integration policy involves a company or country taking charge of the process related to the supply of the raw materials it needs to churn out its finished products, so as to improve the efficiency of its production process, as well as enhance independence and profitability.

Already, the policy has helped to move Nigeria from a nation, which required imports to make up for the short fall in its cement needs, to one that has a surplus in its cement sector, currently being exported to nations in west, Central Africa and beyond.With the cement sector serving as a good example of the success that can result from backward integration, the federal government had been exploring the option in prodding investors to increase their stakes in various sectors, especially in agribusiness.

However, as desirable as the incentive programme may be, the need to appraise the local environment and laws aiding investments is key in attracting investors in the real sector.Unveiling its backward integration plans, Conserveria Africana Limited (CAL), noted that, while it has concluded plans to produce the right quality and quantity of fresh tomatoes required to meet Nigeria’s demand, there is need for government to define its policy direction in the tomato paste sector.

The Chairman, CAL, Francis Ogboro, though acknowledged the fact that the nation currently spends huge amount of money importing tomato paste where as it has the comparative and competitive advantage to produce tomatoes in the country, he however raised concerns about the hasty nature of local production that government seeks, noting that the raw materials for production cannot meet manufacturers’ demands.

“Although Conserveria is not against the Central Bank of Nigeria’s (CBN) forex policy which is geared towards encouraging local production but we are concerned about the timing and the abrupt nature of the decision which seems not to have fully considered the actual situation on ground specifically as it relates to facts and figures on tomato production, processing and packaging in Nigeria.

“We are at loss on the why CBN suddenly came up with a policy of this monumental adverse effects on the tomato real sector as there is currently inadequate primary processing capacity to meet the country’s requirements of triple concentrate tomato paste for industrial use”, he added.According to him, if there is any local manufacturer from which the firm can source its local raw materials, CAL will have no business going outside the country to source for raw material.

Ogboro stated that the company was established 12 years ago and pioneered the manufacturing of locally reprocessed tomato paste in flexible packages in Nigeria investing excess of N5 billion in the Nigerian economy, adding that the company is the licensed producer of popular ‘GINO’ and ‘POMO’ branded tomato pastes in Nigeria with presence in 24 countries in west and central Africa.

“If we can locally source our tomatoes at the right quality, quantity and price, no manufacturer will have a problem producing locally. However, the quality of tomatoes we have in Nigeria is low. It has more of water and less of the juice needed for concentrate production. We are investing in a new seed that will give us the desired output.

“Unfortunately today, not one factory in Nigeria can produce triple concentrate. We realize that we can actually feed the whole West African countries from Nigeria. This resulted in our quest to look at backward integration. We have spent a fortune on this project and we have gone a long way.

“The yield per hectare for producing tomatoes in Nigeria is about six metric tonnes per hectare whereas other tomato producing countries produce about 50 to 60 metric tonnes per hectare. This is one issue we have in Nigeria and we see that we can overcome this challenge. To improve the yield per hectare will take a longer time, which would also require an agricultural reform.

“Increasing the nation’s yield per hectare from six metric tonnes per hectare to about 60 metric tonnes cannot happen within two years, but would require a continuous process. “Other factors affecting tomato production in the country include the lack of vast land holding of farmers and this has made it difficult to do an automated and controlled farming. Controlled farming techniques could be into seeds, types of fertilizers, farming practices.”

On efforts being made by the firm to scale-up production, the General Manager of the company, Zaki Anwar, stated that the company has hired an agronomist to visit tomato growing States in the country in order to get the right yield, stressing that it jointly employed a group of scientists that have developed a particular seedling required to boost the required type of yield for tomato paste production scheduled to arrive the shores of the country in August.

“We also have a pilot programme in Katsina and have zeroed in all the farmers into a cooperative to provide seedling. We are the first company to think of backward integration. Our backward integration policy is very active and we have spoken to our stakeholders, but one major factor hindering the initiative is the lack of clarity in the policies of the federal government,” he said.

Ogboro urged the federal government to support players in the market by seeing them through the backward integration plan. He also appealed to the federal government to temporary delist triple concentrate tomato paste (HS Code – 2002, 9011.00) from the list of 41 items considered till Nigeria bridges the gap between local tomato production and the level of consumption which is anticipated to be achieved in the next two years.

On its part, the Federal Government noted that it would soon commence the implementation of various protectionist policies that would protect investments and innovations of manufacturers in the country.

Minister of State for Industry, Trade and Investment, Mrs Aisha Abubakar said that the policies would address issues of patent protection, reducing substandard products and strengthening the National Quality Infrastructure policy.

The minister said that the ministry would liaise with other relevant ministries, farmers and stakeholders in the various value-chain when formulating the policy.
She said that the policy, which would be ready in the next few months, would enhance production capacity and create jobs in the manufacturing sector.