What happens after Erisco Foods exit?

Erisco Foods Limited last week announced its plan to leave Nigeria for China in nine months.

The 450,000- capacity tomato paste plant, with $150 million investment, announced that it was packaging up its local manufacturing plant because it could no longer get foreign exchange with which to import tin plates, machinery added concentrates, an essential input.

The company also complained that it was leaving Nigeria for China because the Federal Government agencies had failed to stop unbridled importation of tomato pastes into the country, which are much cheaper than locally produced ones.

“We will now start the business of importation from China, where we will produce and export back to Nigeria,” Eric Umeofia, president/CEO of Erisco Foods Limited, said last Tuesday in Lagos.

 “We have returned all the Certificates of Occupancy of 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’,” Umeofia said.

The relocation of $150 million Erisco plant comes at a time Dangote tomato processing plant with 1,200 metric tonnes daily capacity in Kano is under lock and key.  Sani Dangote, vice president of Dangote Group, had said in Abuja recently that it could not re-open the group’s tomato plant in Kano due to unbridled importation of cheap pastes by over 30 Chinese firms.

Sani Dangote had said 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 news of Erisco’s planned exit elicited several reactions from Nigerians, especially from real sector players.

Many Nigerians saw the announcement as an indictment on a government that has failed to provide the right environment for businesses to thrive.

“For me as a manufacturer, this is bad news and it has become so bad for everybody now. With Dangote not reopening its plant and Erisco going, to come back as an importer, we may now go back to the era of exporting all the jobs to China and India in the industry,” said Matthew Ibeabuchi, manufacturer of chemicals and CEO of Klopp Water Cure Limited.

Erisco has threatened to sack 1,500 workers and believes he does not need many workers in Nigeria as an exporter from China to Nigeria.

Apart from unemployment, some say it means more tomato wastage from the northern part of the country.

Estimates show 50 percent of fresh tomatoes in Nigeria are wasted. Ersico plans to become a big off-taker in Katsina and other parts of Nigeria’s north.

Nigeria is the 13th largest producer of tomato 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 storage facility. The country produces 1.5 million tons per annum, with 0.7 million metric tons post-harvest loss, even as tomato demand is put at 2.2 million metric tons per annum.

 “It means that the country will have more tomatoes wasted,” said Sani Dunguri, who farms tomato in Kaduna.

“If you come to Kano or Kaduna, you see that there are tomatoes everywhere but nobody buys,” Dunguri said.

Erisco Foods got a N2 billion loan from the Central Bank of Nigeria earlier in the year. The CEO Eric Umeofia believes the CBN is responsible for his decision to quit the manufacturing space in the country.  

But some Nigerians told Real Sector Watch that Erisco Foods was not the only manufacturer facing the foreign exchange challenge.

 “There is no dollar anywhere. In as much as I do not think the CBN is managing the FX market well, I believe no company should be favoured above others,” said a foreign direct investor, who chose to be anonymous.

“Foreign investors are the integral part of this economy, creating jobs and contributing to growth. So why shouldn’t CBN give them more FX if they meet its criteria?” asked the investor.