• Thursday, March 28, 2024
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BusinessDay

De-United, Indorama, Dangote, Guinness to lead Nigerian export charge on AfCFTA

Nigerian export (1)

Nigerian export companies such as De-United Foods, British American Tobacco, Indorama Eleme Fertiliser & Chemicals and Dangote Group, among many others, can now grow their margins, expand operations and earn bigger foreign exchange as the African Continental Free Trade Area (AfCFTA) offers them an opportunity to consolidate foothold on the continent.

The benefits are even extended to government-owned Nigerian National Petroleum Corporation (NNPC)/Petroleum Investment Management Company (PPMC), which now has the chance to expand export of naphthalene, a chemical product obtained from petroleum distillation. This product was Nigeria’s biggest export product in the second half of 2017, said the Nigerian Export Promotion Council (NEPC).

With AfCFTA, Nigerian export-oriented companies, which are some of the biggest in Africa, stand the chance to enjoy economies of scale, with lower production costs and increased expansion featuring prominently.

Export-led SMEs, which form at least 80 percent of the lot, can tap into regional export destinations and use them as stepping stones for expanding into overseas markets.

Aba shoemakers who are exporting informally have the opportunity to re-organise themselves to take advantage of free trade benefits. The South African example might help. Due to free trade, large car makers in South Africa source leather for seats from Botswana and fabrics from Lesotho, under the preferential Southern African Customs Union trading regime, a United Nations Economic Commission for Africa’s document shows.

“Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), said in a telephone interview.

“The continental trade is more about economies of scale and the amount of what you produce. The higher you produce, the lower the unit cost, which is why small companies will benefit but not as much as large firms,” Yusuf said.

Nigerian companies dominate about 60-70 percent of the West African market, according to the Manufacturers Association of Nigeria Export Group.

British American Tobacco Nigeria Limited has dominated the tobacco space in Africa, earning $145.48 million in 2017 from exporting tobacco products to Liberia, Guinea, Ghana, Cameroun, Cote d’Ivoire and Niger, according to the CBN Annual Report.

De-United Foods Industries Limited exports noodles to Ghana and Cameroon. In 2017, it earned $30.568 million from exporting to these countries, including the United States. Analysts say the AfCFTA provides an opportunity for companies like De-United to double or triple their earnings with free trade across the continent.

Guinness Nigeria Plc will be a big beneficiary with some of its products selling like cakes in some African countries. The brewer earned $15.06 million just for exporting Malta Guinness and Guinness FES to Ghana and Cameroon, including the United Kingdom.

Dangote Agrosacks Limited sells printed cement sacks (S50 X 69 X 11cm), printed laminated cement sacks to Djibouti, Ethiopia, Ghana, Sierra Leone. It earned $15.5 million in 2017 exporting to these markets.

Beta Glass shipped out bottles estimated at $14.134 million to Sierra Leone, Ghana, Liberia and Cape Verde.

Beta Glass’ 2016 financial statement showed that the company made N1.913 billion foreign exchange gain that year owing principally to its export sales focus to Cameroon, Cape Verde, Gambia, Ghana, Guinea, Liberia and Sierra Leone. Dangote Cement Plc will be one of the biggest beneficiaries, being an exporter of cement to Niamey, Niger Republic, Togo and Ghana. Its export of Dangote Portland Limestone Cement (42.5R) to these countries was estimated at $21.496 million.

Bismark Rewane, CEO of Financial Derivatives, said the AfCFTA would favour Nigeria, Kenya, Egypt and Ghana, among others, but warned that any government that is not effective would fail within the AfCFTA environment.

“Nigeria will benefit. But it will forced to be effective because if not, people can easily go to Cotonou to set up plants,” he told Channels TV, adding that government failures would be glaring under the trade arrangement. Friesland Campina Wamco Nigeria exported $3.87 million worth of Full Cream Milk Powder Peak (12x400g), Full Cream Unsweetened and Evaporated Peak Milk (96x30g) to Ghana and Sierra Leone.

BUA is also another company that can expand export to West Africa.

Chairman Abdul Samad Rabiu said in July 2018 that he would export to Niger and other neighbouring markets. Promasidor is leveraging the West African market to export its Sunvita, Cowbell Chocolate, Loya milk, Miksi milk and Top Tea, among others.

Unilever Nigeria Plc is also exporting to Ghana and Cote d’Ivoire. It earned $8.13 million from shipping out Omo Multiactive Relaunch Powder and Sunlight Sensation Pink.

“What we need is to begin to make our country competitive enough for these companies to maximise the benefits,” Ike Ibeabuchi, a manufacturer, said.

“Nobody builds castles in the air. I want to expand my chemicals plant to several parts of Africa, but where is the infrastructure?” he asked.

Wale Okunrinboye, an economist, said it might be too soon to make a call on the companies that will benefit, given that there is still the second phase of the agreement ahead.

“The first phase was the signing, the second is the ratifying stage where negotiations are more intense; so until the details binding the agreement are clear, it’s easier to expect companies that already export to other African countries will benefit on the back of lower export costs,” Okunrinboye added.

 

ODINAKA ANUDU & LOLADE AKINMURELE