FX management: Nigeria’s tomato manufacturer threatens to relocate

President/CEO of Erisco Foods Limited, Eric Umeofia, says he is closing his tomato plant in Nigeria and relocating it to China because he cannot access foreign exchange (FX) to import the needed machinery and raw materials to make tomato paste locally.

“We will now start the business of importation from China, where we will produce and export back to Nigeria,” Umeofia, said, as his tomato company, Erisco Foods Limited, has 450,000 metric tons processing capacity.

China has become an inevitable destination for Erisco’s factory because he cannot get FX to import machinery, packaging and concentrates, Umeofia said on Tuesday, in Lagos.

“We have returned the Certificate of Occupancy of the 2,400 hectares of land given to us by Katsina State government. We have commenced the process of winding down our plant in Nigeria, which will be concluded in nine months. Our products will remain in the market, but it will no longer be branded ‘made in Nigeria,” he said.

Umeofia, who said he invested $150 million into the tomato industry in Lagos and Katsina, had last month threatened to exit Nigeria in 30 days if the Central Bank of Nigeria (CBN) continued to ignore his call to make FX available for the importation of inputs and packaging materials or at least enable it access some of the 60 percent of FX made available in the market for manufacturers.

According to Umeofia, the decision to relocate is predicated on government’s inability to check dumping of tomato pastes in Nigeria and the CBN’s refusal to provide FX for import.

The CBN had refused to allow Erisco Foods use its own deposit of $460,000 generated from foreign operations before the 41-item FX ban, he said, alleging why the apex bank would turn around to make FX approval for importers of substandard goods, mostly foreigners, when the largest tomato processor and employer of labour in the industry had got nothing from the 60 percent FX allocation meant for manufacturers.

“We have lost N3.6 billion to dumping and we have goods worth N6 billion at the warehouses because we cannot sell them. We will now join Indians, Lebanese and Chinese to import tomato paste into Nigeria. We have started disengaging workers. Over 1,500 workers will lose their jobs,” he said.

He said the Kastina State project was supposed to provide jobs for between 30,000 and 50,000 people within two to three years, regretting that this plan, including his export plans, had been thwarted by the inconsistencies in government policies.

The relocation of the $150 million Erisco plant is coming at a time Dangote tomato processing plant with 1,200 metric tons daily capacity in Kano is under lock and key.

Sani Dangote, vice president of the group, attributed the closure to unbridled importation of cheap pastes by over 30 Chinese firms, saying imported products were still far cheaper than locally made ones, as China dropped the price of the commodity by 50 percent so as to be able to compete better in Nigeria.

The proposed exit of Erisco Foods now leaves the sector to two medium-scale tomato processors; Sonia Foods and Springfield, with less than 5 percent capacity, to satisfy local demand.

Tomato importation into Nigeria is estimated at N16 billion by government and N305 billion ($1bn) by the private sector. Erisco Foods is the fourth largest tomato plant in the world and the biggest in Africa.

Nigeria is the 13th largest producer of tomatoes in the world and the second, after Egypt in Africa, yet the country is still unable to meet local demand because about 50 percent of tomato produce is wasted due to lack of storage facility. The country produces 1.5 million tons per annum, with 0.7 million metric tons post-harvest losses, even as tomato demand is put at 2.2 million metric tons per annum.

The Manufacturers Association of Nigeria had said in August that 272 firms had shut down on the back of poor management of the FX market, which has caused distortions in the pricing of the naira and discouraged foreign investors from bringing their dollars into the country.