Why Nigeria is losing N180 billion to non-performing paper mills

Hussain Doko Ibrahim, the Director-General of Raw Materials Research and Development Council (RMRDC) disclosed that the non-performance of Nigeria’s three paper mills will cost the country N180 billion by the end of 2015. The paper mills under observation are Nigeria Paper Mill (NPM), Nigerian Newsprint Manufacturing Company (NNMC), and Nigerian National Paper Manufacturing Company (NNPMC), located in Kwara State, Akwa-Ibom State, and Ogun State respectively.

According to him, NPM cost the Nigeria economy N7.8 billion annually between 2006 and 2008. It reduced to N6.85 in 2009, but still came to a total of N30.25 billion by the end of the four years, due to the fact that the company was “comatose”. Within the same time, NNMC cost the economy N74.8 billion, while NNPMC did not even see complete construction. Altogether, N153.05 billion was the estimated loss as at the end of 2009.

Besides the aforementioned, the Nigerian government spends N50 billion every year on the importation of paper, worsening the situation. Another result of the non-performance of the paper mills is the missed opportunity for job creation in the sector, which also amounts to a loss for the Nigerian economy.

The Nigerian paper mills were established by the Federal Government in the 1960s and the 1970s. According to paper and pulp industry analysts, their story is a sad one. Initially, reasonable progress followed their establishment. The NPM produced 42,960 tons of kraft paper by 1986, representing a 66.7 percent capacity utilisation, and the NNMC produced up to 37,581 tons of newsprint by 1990, drastically reducing importation of these products to about 12.7 percent.

By the time the 1990s rolled around, the fortunes of the paper mills changed, and the abandonment and shutting down of the third mill (NNPMC) before completion did not help.

One of the major hindrances to the functional operation of the paper mills in Nigeria is the inability to source long fibre trees. According to Professor Oluwadare Oluwafemi of the Department of Agriculture and Forestry, University of Ibadan, the funds devoted to research institutions in this field were abysmal. He also advised that the government call of the ongoing privatisation process and set up an ‘Indigenous Long Fibre Pulpwood Improvement Programme’.

Privatisation is listed as another reason why the mills are not performing as they should. The process was initiated in the pulp and paper sector to “reduce and eventually stop foreign exchange expenditure on the importation of kraft papers of all grades, newsprint, corrugated cartons and fluting media, writing, printing and cultural papers.”.

In 2006, MINL Limited, an Indian company bought the Nigeria Paper Mill, after several failed attempts in finding a buyer. In 2008, Negris Limited acquired Nigeria Newsprint Manufacturing Company in order to rehabilitate it. NPM witnessed significant improvement after it was privatised, but it is experiencing a delay in the commencement of production owing to a lack of transfer of skills and technology.

Nigeria’s lack of a national level strategy for paper production is responsible for the delay in getting these investors to produce the necessary funds for the paper mills. These funds are necessary to source for long fibre and other raw materials instrumental to the growth of the industry. A faulty electricity supply is yet another challenge for paper millers in Nigeria. Each of the current mills owns power plants, but the cost of operating them is very high.

If a proper plan is not formulated to address the present condition of the paper mill industry soon, the Nigerian government – and the industry – could lose more than the estimated N180 billion in the long run.

The post Why Nigeria is losing N180 billion to non-performing paper mills appeared first on Ventures Africa.