• Wednesday, May 22, 2024
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BusinessDay

Economic reforms by industrial revolution – a practical approach (4)

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 We may need to stimulate industrial growth and investment in the economy by focusing more on developmental projects in the downstream oil and gas sector. Due to the abundance of gas with the availability of condensates, Nigeria appears an ideal investment area for gas-based chemicals, particularly derivatives of ethylene, polyethylene and ethylene glycol, when the high cost of transporting ethylene under pressure to market regions like Asia is considered. Based on this cost advantage, ethylene and benzene being components of styrene (ethenylbenzene), we could become a large exporter of styrene to Asia where styrenic polymer has very high demand growth. If successfully developed, Asian market for styrene would be advantageously exploited, considering that its manufacture consists about 27 percent (by weight) of ethylene. Styrene is the largest benzene derivative (in place of cyclohexane and cumene) with olefinic component (ethylene, a C2 olefinic gas). It is further used for the production of polystyrene and copolymers like films, moulded articles, synthetic rubbers and adhesives.

This trend in the petrochemical supply chain could be exploited now, with our great potentials in ethylene’s relative availability to compete effectively for the eventual shift in the global trade patterns. Presently, the trade trend on aromatics derivatives like benzene, toluene, mixed xylenes and styrene needs to shift significantly from being “net importer” to “aromatics supplier” (through refining process) when the proposed modern greenfield petrochemical refineries by the FG start operation.

The Bonny LNG plant exports condensates and Liquefied Petroleum Gas (LPG) to Europe and North America where these feedstocks are utilised and converted to the finished aromatics derivatives (“organic solvents” like toluene and xylene inclusive). In return, these organic solvents (which are petrochemical intermediates or “raw materials”) are subsequently sent back to Nigeria (as “imports” because of value addition) at very exorbitant costs, instead of netbacks that would be yielding in addition to the already locally available products like LDPE and HDPE (produced by IEPL). The cost advantage we have will continue to be a positive influence on petrochemicals investments in Nigeria. These netbacks are conserved funds that would have otherwise been spent (i.e., foreign exchange for such imports). The new gas-based petrochemical technologies make it imperative that the global market competitiveness of petrochemical products would increasingly be based on low-cost supply. This favours Nigeria as a country to attract larger producers with major investment interest being that innovation in technology and low-cost supply are the major competitiveness factors that will affect the entire petrochemicals supply chain.

Furthermore, primary petrochemicals and intermediates such as methanol, ethanol, ethylene, polypropylene, isopropanol, formaldehyde, resins, ethylene glycol, phenol, acetone, polyols like “TDI”, synthetic rubber, latex, nylon 66, polyvinylchloride and polyvinylacetate are consumed by the end-use markets that also broaden the productive potentials of the diverse value chains under plastics, adhesives, fibres, paper and textile sizing, solvents and cosmetics, pharmaceuticals, paints, urithane foam products, tyres and rubber products. Nigerian manufacturers spend billions of dollars annually importing these organic solvents.

The recent outcry by the NLNG managing director, Babs Jolayemi Omotowa, on the tumbling global gas prices (BusinessDay, Wednesday, March 27, 2013) makes it imperative for foreign investors to capitalise on these great opportunities and optimally exploit the gas value chain to manufacture organic solvents locally. Efforts made in this direction through domestic manufacturers would shift and positively reposition our “productivity profile” through the aggregate activities from a pool of numerous cottage industries located in a particular area as service providers to a given sector of the economy. This value chain approach (using industrial clusters as engine houses) is a strategy that drives every successful economy through sustainability of development (a subtle way to our Vision 20-2020 roadmap). Our mineral deposits and agro-business could as well achieve the optimal utilisation of their raw materials within their domains to process intermediates and finished goods, and generate revenue internally. The success of this strategy shall always post an annual trade surplus in our national current account, all things being equal at the macroeconomic level. LGAs could access the Raw Materials Research and Development Council (RMRDC) in Abuja as an easy way to mapping out raw materials in various localities.

Be that as it may, Nigeria needs to tighten loose ends in the oil and gas sector with a view to achieving optimal goals and making exploits through the availability of abundant oil and gas reserves towards a successful actualisation of our national goal. The economic reform policy ought to revolutionise the entire real sector by the FG generating enormous opportunities for profitable investments through viable and sustainable PPPs – as already observed from the IEPL’s encouraging performance. Still in the gas sector, projects that will aim at extensive gas supply development are needed for both the domestic and international market operations, as well as its infrastructure system development. The FG will equally further promote stimulus for our local content values through projects that will cover activities along the entire gas value chain from the development of our gas reserves. While we shall strive to meet the growing domestic demands, there is also need to create new energy markets within the sub-region.

The strategy for industrial revolution calls for the attraction of foreign investors, especially among the heavy suppliers to Nigeria’s large market, to set up cottage manufacturing outfits that will specifically service their Nigerian customers utilising any of the FG’s numerous Export Processing Zones (EPZs) that best suits their target market within the economy. The Chinese manufacturers – in big commercial cities like Ningbo, Yiwu and Guangzhou where Nigerian businessmen besiege daily for their orders that run into trillions of dollars annually – are an example, now that their government’s strategy includes resolution on opening-up policy to move out and operate in foreign lands. Nigerians import moulded articles to Onitsha market, for instance, amounting to several millions of dollars annually. So several of such cottage industries from Asia could be attracted down. This aggressive marketing strategy portrays a “win-win” situation for both economies involved. It will also avail the government standards regulatory agencies (like SON or NAFDAC) the opportunity to insist on manufacture of standard quality goods and erase the stigma of “made in China” sub-standard goods that flood our domestic retail markets.

It is indeed interesting to hear that at the most recent BRICS Summit at Durban, South Africa, Lin Yifu suggested, “China’s labour-intensive factories could be relocated to Africa”. This is in tandem with my proposal to woo Chinese manufacturers into our real sector. Other added methods that may be applied to achieve the targeted purpose is embarking on trade missions by the organised private sector in collaboration with the FG (Manufacturers’ Association of Nigeria and the various chambers of commerce in the country), as well as trade exhibitions by government agencies like the Nigerian Export Promotions Council and the Nigeria Investment Promotions Council. If we successfully realise these laudable proposals, we will definitely be there playing a big economic role on world stage! 

 

Nwachukwu writes from Onitsha,

Anambra State.

[email protected]

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