BusinessDay
Nigeria's leading finance and market intelligence news report.

Soaring cost of newsprint blamed on low internet penetration, imports

Like endangered species, the traditional print media in Nigeria seem to be moving from one challenge to the other, all aimed at ensuring its extinction.
From low readership leading to reduced circulation, lower advertising revenue, and some print journalists migrating to online platforms, it now faces another hurdle: high cost of newsprint.

It is a puzzle however that the price of newsprint used in producing newspapers is soaring in a digital age, when it should actually be falling. Late 2018, a ton of newsprint sold for about $875 against $550 in 2016 and about $200 in 2014. This is happening when a number of readers are turning to online for content, as many news organisations move to online platforms.
When exchange rate of the naira was N170 to a dollar, the price of newsprint per ton moved from $200 to $400. Late last year also, it moved to $875 per tonne but in 2017 it was about $550 per ton. The price movement is the reflection of both the exchange rate movement and the increase in demand. Since then, the value of the naira has continued to fall. The local currency now trades at N360 to the dollar at the parallel market, which has further raised the prices at which newsprint is imported.

Analysts offer some reasons on this trend, arguing that it is happening because internet penetration is still low in Africa. In emerging markets, including Nigeria, they point out that internet penetration, though growing, is still low.
According to figures from the Nigerian Communication Commission (NCC), internet users in the country are currently 103 million. The National Population Commission (NPC) puts the latest estimate of Nigeria’s population at 198 million, which translates to an internet penetration rate of 61 percent.

Further, the analysts note that while the number of Nigerian internet users is growing, a large number of both internet and non-internet populace still rely on newspapers for credible and authentic information.
This therefore accounts for the use of large quantity of newsprints to produce newspapers for content in Africa’s most populous nation. Unfortunately, according to a media analyst, who works in one of the leading newspapers in Nigeria, and prefers anonymity, these newsprints are imported.
Nigeria is largely an import-dependent economy and newsprint is one of the products imported mainly from economies such Finland and Sweden, where internet penetration is about 90 percent. In these markets, the use of newsprint may not be as high as in emerging economies.
“Producers of newsprint in those economies may have shut down some production lines as they now produce on demand for local and more for international market where there is high demand for newsprint,” the media analyst said.

Even the producers of newsprint are finding a way to regulate it to avoid glut in the market, the analyst pointed out. “They don’t produce and keep. They produce as you need and with this they are regulating the quantity of the product in the market,” the analyst explained.
Another factor that has raised the price of newsprint and challenged the traditional media is the difficulty of accessing Lagos ports to evacuate imported items. For over three years, gridlock on the roads leading to the Apapa ports has compounded the woes of traditional media, as transporters have jerked up their haulage fares from Apapa ports to inside Lagos by over 300 percent. They now charge about N700,000 against N150,000 four years ago to convey goods to anywhere in Lagos.

The newspapers will find it difficult to transfer the cost of high newsprint to consumers because the per capita income of the average consumer is still low in Nigeria, and many consumers cannot afford to buy newspapers daily, the analyst further pointed out.
With the high cost of newsprint, traditional print media houses make sure they produce what goes to the market in order to avoid unsold copies. For newspapers, the product is content and much of the content is perishable when compared with books, which can stay over time.
Other observers have expressed apprehension that local production of newsprint at this time may not be the answer, as producers may not break even. They argue that if the local producers incur higher cost than the landing cost of imported ones, there will be no incentive to produce in the first place.

Nigeria has three paper mills – Nigeria Paper Mill Limited (NPM), located in Jebba, Kwara State; Nigerian Newsprint Manufacturing Company (NNMC), located at Oku Iboku, Akwa Ibom State, and Nigerian National Paper Manufacturing Company in Ogun State. The three are not functional at full capacity.
The history of Nigeria’s paper and pulp industry has been a sad tale, a 2015 report by BusinessDay shows. The report noted that in the 1960s and 1970s, the Federal Government established the three paper mills for the purpose of producing bond paper. It pointed out that during 1980s, NPM and NNMC mills performed at about 65 percent capacity utilisation, which led to a reduction in the importation of newsprint to about 17.5 percent in 1986 and 12.5 percent in 1987.

“But this was short-lived as the third mill NNPMC was abandoned in 1983, when the mill was nearly 85 percent completion. Till the time it was abandoned, it did not produce up to 5 percent of its capacity,” the report stated.
As a result, today the market is dominated by imports with about 90 percent of paper used in industry imported.

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