Brazil, an emerging economy with 209.5 million people, made $3.5 billion from selling cellulose pulp to China in 2018. In the same year, the South American country earned $10.7 billion from export of forestry products to the rest of the world. These paper raw materials provide foreign exchange for the country and boost foreign direct investments into the country.
The industry has secured private equity deals as well as mergers and acquisitions in recent times. Klabin, Brazil’s largest producer and exporter of packaging paper, secured a $280 million for Puma Project II from the International Finance Corporation (IFC).
Klingele Paper & Packaging Group, one of the leading independent manufacturers of containerboard and corrugated board packaging, recently signed an agreement with Klabin to purchase the kraftliner mill in Nova Campina in the state of São Paolo.
Away from Brazil, Finland has also managed its paper and pulp industry superbly, and now has 54 paper and pulp mills valued at €20.7 billion. The country exported forestry products valued at €12,5 billion, according to the Natural Resources Institute Finland.
“It is amazing that 20 percent of Finland’s exports are paper and pulp. This is a country with 5.2 million people. If they can do it, Nigeria can as well,” Olufunso Somorin, regional principal officer, African Development Bank, said at a webinar organised by the Lagos Chamber of Commerce and Industry (LCCI) tagged ‘Revatilising the Paper Industry: Challenges and Opportunities in Southwestern Nigeria.’
“We need to fix the raw materials problem, and then develop collaborations with other countries that can provide raw materials to Nigeria,” he recommended.
In 1970s to 1990s, Nigeria had three paper mills, including the Nigeria Paper Mill (NPM)Limited located in Jebba, Kwara State; Nigerian Newsprint Manufacturing Company (NNMC)Limited, Oku-Iboku, Akwa Ibom State; and Nigerian National Paper Manufacturing Company (NNPMC) Limited in Iwopin, Ogun State. Only Iwopin is producing but at 10 to 20 percent capacity.
Even if the firms are working at 100 percent capacity today, they can only provide 250,000 metric tons of paper needs as against demand of over 3 million metric tons.
“Nigeria needs 50 small-scale paper mills now,” Oluwaseun Jegede, consultant on market assessment, said.
“The big problem investors see is raw materials, but kenaf is now available all over Nigeria,” he said.
He noted that importation of papers costs Africa’s largest economy N182 billion annually, stressing that investors with $10 to 50 million should step up and tap opportunities in the paper industry, while government must step up with policies to drive the sub-sector.
The pulp and paper industry has a long value chain which includes cellulose, wood products, pulp, packaging, cardboard sheets, and paper, among others. Analysts estimate that the industry is worth $518 billion globally and is booming on the back of increased demand for sanitary products due to the rising cases of COVID-19.
In Nigeria, almost all the paper needs by newspaper houses, printers and publishers are met by imports, and it is raising production costs of these firms on the back of naira devaluation. Naira exchanges at N460/$ at the parallel market, which poses threats for businesses relying on papers for survival.
Investors shunned the sector because of absence of long fibres, which are critical inputs for manufacturing paper. But the kenaf technology is said to be available, which can obliterate the FX risk.
“The good news is that research has shown that tree species needed for manufacturing wood-free bond paper can be grown in Nigeria with a gestation period of six months and not 12years or more as formerly believed,” Layo Okeowo, chairperson, Printing, Publishing and Allied Group, LCCI, said.
“This means that paper production in Nigeria is doable and we only need to share the knowledge across board. Nigeria paper industry needs clusters of smart investors who can tap into the potential of raw material availability in the country. The major area of investment will be the aspect of machinery as the raw materials needed will be readily available,” she further said.
She disclosed that $10million (N4billion) worth of machinery can produce 100 tons of paper per day while $50million (N20billion) worth of machinery would produce 500tones of paper per day, which could be a good start to the bigger journey.
All over the world, there are environmental concerns about the activities of pulp and paper industry players. But analysts believe the country can manage it better.
Toki Mabogunje, president, LCCI, said the continued dependence on paper importation has made policymakers feel relaxed or rather reluctant in pursuing policies that would revamp our paper mills.
Mabogunje, represented by Jumoke Fashanu, deputy treasurer of the LCCI, further said that the non-availability of a national policy on printing combined with the tough nature of the country’s operating environment continues to discourage investment inflows to the paper industry, even as the Federal Government has failed to demonstrate genuine commitment to vigorously restructure and reform the industry.
Biodun Adedipe, chief consultant, B. Adedipe Associates, an economist, said there must be urgent collaborative structures between players in and outside Nigeria.
He called for an integration of production process across the value chain, from forestry to table-top (printed papers and packaging), urging investors to leverage the industry which is seeing huge demand at the moment.
On the other hand, he asked the government to provide supportive infrastructure to clusters of printers and publishers, and challenged the industry to continue to cultivate trees producing long-fibre, wood-free products, in an environmentally-friendly way.
