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FG moves to clamp down on illegal fertilizer manufacturers and agro-dealers

It is now forbidden for anyone to go into fertilizer business in Nigeria, without registering with the FISSD.

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The Federal Ministry of Agriculture and Rural Development has disclosed that anyone caught producing or merchandising adulterated fertilizers, under the new lawwill be jailed.

This disclosure was made via the Ministry’s official Twitter handle, to the general public. 

The announcement notifies the general public that the National Fertilizer Quality Control (NFQC) Act 2019, is to make sure that every farmer has good and efficient fertilizer for their farms, to boost farming harvest and output. 

The ministry reiterated that it is forbidden for anyone to go into fertilizer business in Nigeria, without registering with the Farm Inputs Support Services Department (FISSD) of the Federal Ministry of Agriculture and Rural Development. However, anyone caught producing or merchandising adulterated fertilizers will be jailed.

This regulation is to address the recurring issues of the effect of substandard fertilizers on farm produceand the market proliferation of adulterated fertilizers in the country, which continues to bedevil farm outputs and harvests in the country. 

Backstory: On the 26th of August, the Permanent Secretary of Agriculture and Rural Development,  Dr. Abdulkadir Mu’azu, reaffirmed the Federal Government’s commitment towards implementing the National Fertilizer Quality Control (NFQC) Act 2019. He ensured that the fertilizer regulatory system is in place, to safeguard the interest of the farmers, as when the regulation is implemented, it will protect farmers from using adulterated fertilizers that are nutrient deficient.

Why this matters  

This policy is important to safeguard both the interest of the farmers and the members of the public, as the initiative is expected to increase agricultural harvest and productivity, in a bid to make national food security a reality. 

The NFQC Act will safeguard interests of fertilizer enterprises, businesses and agrodealers, as it will create part of the enabling environment for private sector investment in the fertilizer industry, and protect the environment against potential dangers, that may result from market proliferation of adulterated fertilizers and the use of harmful substances in fertilizer.

The Executive Secretary of FEPSAN, Mr. Gideon Negedu, reiterated that the new National Fertilizer Quality Control Act 2019, is a game-changer for the nation’s agricultural sector and a powerful weapon for the farmers.

In his view, Prof. Yemi AkinseyeGeorge (SAN), said, “that the Federal Government and relevant stakeholders of the fertilizers industryhave taken the bull by the horn in enacting a robust legal framework for quality control in the country.

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MANUFACTURING

Big players in Paints and Coatings industry suffer 52% profit loss in the first 6 months of 2020

The COVID-19 induced lockdown took a huge toll on the activities of the producers.

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The economic challenges triggered by the COVID-19 pandemic and accompanying issues from foreign exchange illiquidity coupled with the existing structural and regulatory imbalances in the economy constrained the operations of the big players in the paints and coatings industry in the first half of the year.

The knock-on effect of the COVID-19 induced lockdown on the global and domestic value chain like other sectors in the economy took a huge toll on the activities of the producers in the paint and coating industry, as the pandemic disrupted their operations and also their trade segments, and this in extension led to a fall in demand, sales volume, revenue and underlying profits of the players.

The paints and coatings industry is highly fragmented, with small producers accounting for more than half of the total revenues generated in the paints and coatings industry. The big players who have elaborate dominance in the industry include CAP plc, Berger Paints Nigeria Plc, Portland Paints and Products Nigeria Plc and Meyer Plc.

According to the half-year financial results of CAP plc, Berger Paints Nigeria Plc, Portland Paints and Products Nigeria Plc and Meyer Plc, the sales of these companies were severely affected by the pandemic with the cumulative revenues of these companies declining by 12.8% from N7.4 billion to N6.5 billion owing to disruption to the trade segment and the operations of the companies.

On the flip side, Berger paints was the only company that reported a growth in revenue in the first half of this year, with the company’s revenue growing by 16.77%. While the revenue of CAP plc, Portland paint and Meyer declined markedly by 10.71%, 43.27% and 34.82% from N3.91 billion, N1.36 billion and N604 million reported in H1 2019 to N3.5 billion, N771 million and N393 million respectively in the first 6 months of 2020.

Extensively, the raw materials such as resins, pigments and additives used in the industry have to be imported and these materials are subjected to import levies, exchange rate volatility and haulage costs.

Given the current business reality of the paints and coatings industry which is coloured by foreign exchange illiquidity as well as logistics and regulatory rigidities in importing raw materials, the margins of these companies were affected directly, as profitability was suppressed by the hike in input prices.

Although Berger paints reported a 16.77% growth in revenue, the cost impact of the raw materials it used in its operation along with the increase in administrative expenses led to the fall in profit after tax by approx. 72%, with the company spending N812 million on raw materials from N664 million last year it expended last year.

In like manners, the bottom line of Chemical Allied Products Plc and Portland paints Nigeria Plc fell by 30% and 217% respectively. While Meyer’s loss rose by 105% to post a N60.7 million loss from N29.5 million last year.

Survival strategy deployed

With revenue constrained, it is noteworthy that in the quest to make more sales, CAP Plc and Berger paints relaxed their credit policies, this development made trade and other receivables increase by 121% and 30% respectively, this indicates that the top producers of paints relaxed their credit policies in a bid to generate more sales with their buyers cash strapped.

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These industries appear to have returned to pre-pandemic levels

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In the August sequel of the manufacturing and nonmanufacturing Purchasing Manager Index report, the CBN reported that two sub-sectors in the manufacturing space expanded substantially, with the PMI of these subsectors going above the levels reported in February 2020. This development is attributable to the eased lockdown restrictions as operations in these sub-sectors are currently back at pre-pandemic levels. 

In the same vein, Plastics & rubber products, Transportation equipment, Chemical & Pharmaceutical products and Textile, apparel, leather & footwork subsectors expanded in the period under review, though the expansion was low when compared with pre-pandemic periods. 

Cement and Non-metallic mineral products sub-sector remain resilient

The latest figures released by the apex bank suggest that the manufacturing sector continues to grapple with the knock-on-effect of COVID-19, owing to global and domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending and high operating costs. 

Notwithstanding, activities in the Non-metallic mineral products and Cement sub-sectors remain resilient, as the Purchasing Managers Index for these subsectors stood at 66.0 and 64.4  index points respectively, higher than the 65.3 and 62.5 index points reported in  February, before the pandemic induced disruption. 

Back story

 It was earlier reported that manufacturing PMI for August stood at 48.5 index points, indicating contraction in the sector for the fourth consecutive month. Also, out of the 14 surveyed subsectors, 6 subsectors reported expansion (above 50 index points thresholds), while the others contracted.

It is imperative to note that this is an improvement when compared to manufacturing activities in May, June or the performance in July which saw 12 subsectors decline with one reporting no change, while one expanded. 

The drivers

The impressive performance of the Non-metallic mineral products and Cement sub-sectors, according to the manufacturing PMI report, is attributable to the expansion in production, new orders, employment and raw materials’ inventories. 

This is evident in the subsectors’ production which expanded substantially, as the production PMI for Non-metallic mineral products and Cement expanded by 26.9 and 22.3 index points respectively during the month under review.  

The new order PMI, a very important component of the index which tracks the level of new orders received for the month, rose sharply by 20.3 and 22.2 index points respectively.

The sharp rise of 22.3 index points indicate that employment in the cement subsector improved impressively, while employment in the Non-metallic mineral products sub-sector improved by 9.4 index points. Also, raw materials inventory grew substantially in the month under review, despite headwinds from higher input prices. 

Why this matters 

The Non-metallic mineral products and Cement sub-sectors encountered headwinds in key operations as structural bottlenecks, coupled with domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending and high operating costs affected the operations of these subsectors. 

Despite the headwinds which resulted in the contraction of the manufacturing sector, it is important that two sub-sectors are back to operating at pre-pandemic levels, while four others continue to thrive and expand. 

In conclusionthis development indicates recovery as manufacturers continue to benefit from the relaxation of the lockdown, other sub-sectors are expected to expand in subsequent periods as the economy continues to recover.

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