• Thursday, July 25, 2024
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Nigerian processors struggle as tomato prices jump nine-fold

Nigerian processors struggle as tomato prices jump ninefold

A ninefold jump in tomato prices in Africa’s biggest economy is piling pressure on processors and forcing them to discontinue processing the fresh vegetable, BusinessDay findings show.

Prices of tomato, a key cooking ingredient in Nigeria, have surged 847 percent year to date owing to the invasion of Tuta Absoluta in major producing states in May and the current rainy season.

The situation has left Nigeria’s tomato paste and concentrate production industry at a standstill as the country’s largest processor and two other medium-sized factories have shut down, perpetuating the importation and smuggling of triple concentrate into Nigeria.

“When tomatoes are out of season like they are today, the prices skyrocket and factories cannot run profitably at these prices. We stop processing,” said a source in a top tomato processing factory who is not authorised to speak on the issue.

“Instead of buying fresh fruits out of season, we make lots of tomato paste during the main season and then we convert it into the retail sachets over the subsequent months when it is out of season and prices are very high,” the source added.

Tomatoes in Nigeria are grown in the dry season (December-April). The rainy season, May to September, is not conducive for growing tomatoes, as rainwater destroys the tomato crop, according to experts.

The surge in the prices of fresh fruits this year started much earlier in May after Tuta Absoluta invaded farms in major tomato-growing areas in the country.

The price hike has now worsened as the country enters the rainy season and starts importing fresh fruits from neighbouring countries to fill the demand gap.

“As you can see the Dangote Tomato Processing Company and its sister company, the Dangote Agro Inputs Green House Project, are currently out of operations now,” a worker at the factory who is not authorised to comment told our correspondent.

According to him, the Dangote factory has been shut down since the off-season owing to farmers’ failure to respect an agreement it entered with the processor to supply the fresh fruits at off-taker rates.

With the off-taker agreement, the firm provided improved seeds, chemicals and other inputs to farmers, to raise their yield per hectare, with an understanding that it will then get tomatoes at specified rates from the farmers, he said.

The farmers, however, eventually sell their produce in the open market whenever prices are high and to the tomato factory only when prices are low, he added.

The price of a big basket of fresh tomatoes in Mile 12 Market, Lagos ranges from N90,000 to N100,000, depending on negotiation, as against N9,500 in January, according to a BusinessDay market survey.

A medium size basket is sold for between N45,000 and N50,000 – an indication that prices have surged by over 847 percent in Lagos markets in six months.

Read also: What households can do to survive as economy bites

In May 2017, the Federal Ministry of Industry, Trade and Investment, the Federal Ministry of Agriculture and Rural Development, as well as industry players introduced a tomato policy to increase local production, improve value addition and attract more investments into the industry.

This prompted the government to impose a levy of $1,500 on a tonne of triple concentrate imported from China, the United States, and other parts of the world, including a 50 percent tariff, to protect the industry.

But six years later, imported tomato pastes are still found across markets. The government is also reluctant to remove the 25 percent import duty policy for greenhouse equipment as contained in the policy paper.

Also, the policy has failed to strengthen the end-to-end linkages in the tomato value chain and increase processing, which was what the policy aimed to achieve. The post-harvest losses and wastages have not stopped.

However, there have been increased activities from Olam, Tomato Jos, GBFoods, and Sonia Foods, with more investments coming into the sector.

Africa’s biggest economy produces 1.5 million tonnes (MT) of tomato per annum, with 0.7 million MT post-harvest loss. Tomato demand in Nigeria is put at 2.2 million MT per annum, leaving a gap of 700,000 MT, according to official data from the agricultural ministry.

The country’s average yield per hectare has remained low at 4.2 MT per hectare, compared with the global average of 38 MT per hectare, according to data from the Food and Agricultural Organisation.

The country relies heavily on imports of tomato paste to meet the existing gap, thus making it the 13th largest importer of tomato paste globally.

According to a PwC report, Africa’s most populous nation is the largest consumer of vegetables in Sub-Saharan Africa with about 22kg per capita, with tomato consumption put at 12kg per capita in 2016.

“The tomato policy is yet to transform the country’s paste/puree industry. The policy needs to be re-evaluated to attain the desired impact,” African Farmer Mogaji, chief executive of X-ray Consulting, said.