Nigeria: Tomato paste could prove a tasty investment
The domestic production of tomato paste in Nigeria could potentially be an attractive opportunity, according to a recent briefing note by Ecobank.
Despite the fact that Nigeria is sub-Saharan Africa’s largest tomato grower, local production doesn’t currently meet demand. The deficit is made up of imports, especially of tomato paste. Due to increasing urbanisation, consumers are also showing a preference for convenience foods such as tomato paste.
Nigeria imported tomato paste worth US$151m in 2013, with about 75% of product coming from China.
But a recent move by the Central Bank of Nigeria (CBN) barring importers of tomato paste from accessing foreign exchange at the Nigerian foreign exchange markets could incentivise local production.
“It has become imperative to exclude importers of some goods and services from accessing foreign exchange at the Nigerian foreign exchange markets in order to encourage local production of these items. The implementation of the policy will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation,” read a statement by the CBN.
Nigeria’s Dangote Group recently invested in a tomato paste production plant in Kano State that sources tomatoes from nearby farmers. However, according to Ecobank, the Dangote factory has already encountered challenges due to the outbreak of Tuta absoluta, a tomato pest.
Another company trying its hand at the industry is Tomato Jos, a for-profit social enterprise aiming to locally manufacture a Nigerian tomato paste brand. “Our mission is to provide locally-produced, high-quality value-add food products to Nigerian consumers in a way that is profitable and sustainable… We operate across the full tomato value chain (farming, logistics, and processing) and source our raw materials from smallholder farmers,” Tomato Jos co-founder Mira Mehta, told How we made it in Africa in an interview earlier this year.
Strong local supply chains critical
But despite the opportunities, success in local tomato paste processing is not guaranteed.
One of the biggest challenges facing the industry is inconsistent supply of tomatoes. In recent years production fluctuated between a high of 2.08m tonnes in 2006 to a low of 1.49m tonnes in 2011.
Tomatoes are mostly cultivated by small-scale farmers, who generally have insufficient access to inputs such as fertilisers, pesticides and quality seeds. Most of them also don’t use irrigation, which makes them vulnerable to unfavourable weather.
Post-harvest losses are significant due to a lack of storage and distribution infrastructure, as well as poor packaging practices.
Ecobank notes that there is also a threat that the CBN’s foreign exchange restrictions could lead to a rise in illegal tomato paste imports – a trend already witnessed with rice and many other consumer goods. This could cause a drop in local prices.
“Undoubtedly Nigeria’s tomato paste sector is ripe for investment, but the ability of local manufacturers to scale up production to meet demand will ultimately be determined by the strength of local supply chains,” says Ecobank.