How Indorama sustains manufacturers, boosts Nigeria’s FX earnings
Indorama Eleme Petrochemicals Limited (IEPL) has emerged as a major value creator in the Nigerian economy. It is responsible for the survival, growth and sustenance of many manufacturing companies in Nigeria today. A large number of plastic and allied firms depend on the Eleme-based company for petrochemical resins (or polymer resins) which serve as their raw materials.
The petrochemical company is just one of the several subsidiaries of Indorama-Nigeria Group, which also comprises Indorama Eleme Fertilizer & Chemicals Limited (IEFCL), Indorama PET Nigeria Limited, and Indorama Port Operations.
Since Indorama Corporation of Indonesia became core investor in the old Eleme Petrochemicals Company Limited (EPCL) in 2006 through privatisation programme of the Federal Government, the group has become a game changer in the Nigerian economy.
The petrochemical company has solved the major challenge facing a number of manufacturers— poor access to raw materials. Rather than scramble for foreign exchange to import inputs, the company ensures that manufacturers have access to their critical raw materials, enabling them to save costs and improve margins.
The major resins used by plastic and allied companies are polyethylene and polypropylene. Indorama produces about 45 grades of these products for various industries. About 600 of such companies in Nigeria depend on IEPL for their survival. They are estimated to have over 90,000 workers.
Recently, IEPL completed its 4th Turn-Around Maintenance (TAM), which it completed in record 24 days. This is the 4th since 2006 when it took over EPCL. This is remarkable considering the fact that in Nigeria, TAM is regarded as almost impossible in the refineries and other sectors.
Another subsidiary, Indorama Eleme Fertilizer & Chemicals Limited (IEFCL), has a Train-1 world-class fertilizer plant in Port Harcourt, funded majorly by the International Finance Corporation (IFC). The plant produces 1.5 million metric tons of urea fertilizer, which has revolutionalised farming, boosted food production, helped to ensure food security and propriety for farmers.
Indorama sells about half of the urea production to Nigerian farmers and exports the rest to South America, Brazil, West Africa, Central Africa and other parts of the world, thereby earning foreign exchange which is badly needed by the Nigerian economy. The fertilizer company is one of the biggest non-oil exporters in Nigeria, according to the export records of the Nigerian Export Promotion Council (NEPC).
By the second quarter of 2017, a chemical product known as naphthalene was Nigeria’s biggest non-oil export product. It was exported by the Nigerian National Petroleum Corporation (NEPC).
But the situation changed in the third quarter of that year, as urea replaced the chemical product as the biggest non-oil export product. Urea’s share of the total export within the quarter was 8.82 percent. Incidentally, it was exported by Indorama-Eleme Fertilizer & Chemicals Limited. In fact, in the second half of 2017, the value of Nigeria’s non-oil exports to various parts of the world rose from $592.715 recorded in the first half (H1) of the year to $888.617 million in the H2 of 2017. Companies that were responsible for the dramatic rise in the numbers were the NNPC, Olam International, and Indorama Eleme Fertilizer & Chemical Company Limited.
According to data prepared by the Central Bank of Nigeria, Indorama Eleme Fertilizer & Chemicals Ltd exported $69.815 million worth of granular urea in bulk to Uruguay, Brazil and Argentina in 2017. Due to management efficiency and capacity to provide solution to farmers’ nagging fertilizer problem,Indorama Eleme Fertiliser & Chemicals Limited got $1 billion from the International Finance Corporation (IFC) in June 2018 for the construction of a new fertiliser plant in Nigeria.
Indorama is partnering the Federal Government in its Presidential Fertilizer Initiative (PFI), in which it supplies urea fertilizer to 13 fertilizer blending plants across the country for the production of NPK fertilizers at cheaper cost to farmers across the country.
Nigeria used to import fertilizers worth over $7 billion per annum. Today, the FG has restricted the importation of urea into the country. Indorama has been a beneficiary of the policy. But rather than use it to exploit Nigerians, the company has made huge investments in fertilizer production and helped Nigeria in its import substitution policy by selling fertilizers at cheaper rates to farmers.
Indorama’s Train-1 fertilizer plant is the world’s largest single-train urea facility.
It is building the Train-2 of its fertilizer plant, which is designed to replicate the Train-1 plant, and produce another 1.5 million metric tons per annum (MTPA).
The plant is expected to be completed by 2021. When it is completed, Indorama’s total urea production will be 3 million MTPA. Two million MTPA is expected to be exported to earn foreign exchange, according to the company.
For the records, in 2017, the company turned a wasteland at the Onne Port complex in Port Harcourt into a modern port facility, which now receives big vessels to carry the company’s bulk urea for export. This is a huge contribution to the nation’s maritime sector.
To ensure steady flow of gas feedstock to its fertilizer plant, it also constructed an 83 kilometer gas pipeline running 30 communities across Imo and Rivers states. Through robust community relations engagement, the company is able to manage its pipelines without disruptions.
Furthermore, Indorama PET is a specialised petrochemicals product, also needed in the plastics, beverage, and pharmaceuticals and bottling companies. This is the only PET plant in West Africa. Before the Indorama plant, Nigeria had been importing PETs from South Africa. This eroded the country’s foreign exchange, given the many uses of PET. But today, Indorama exports PETs to West Africa and other parts of the continent.
Recently, managing director of Indorama-Nigeria, Manish Mundra, was quoted as saying that the group’s total Foreign Direct Investment (FDI) in Nigeria will reach $4.6 billion in 2025.
Today, Indorama’s contribution to Nigeria’s GDP is estimated at $2.9 billion annually.
That explains why the company is regarded as the best success story of privatisation in Nigeria.
It is also believed to have one of the best public-private- partnership (PPP) business models in the country, where its shares are owned by the core investor (Indorama), the Federal Government (through the Bureau of Public Enterprises – BPE), NNPC, the Rivers State Government, the host communities of Eleme, and the Nigerian employees. IEPL is perhaps the only company where community has 7.5 percent shares.
Its contributions to Nigeria’s economy are uncountable. First, it creates huge employment for Nigerians. About 7,000 citizens are employed directly and indirectly by Indorama across the country.