You Say Tomato, I Say Tomato Paste

Background 

Staple crops like cassava, yams, and sorghum dominate Nigerian agriculture, but tomatoes play an important role in the sector and in the economy more broadly. Nigerian tomato production reached an impressive 1.56 million tonnes in 2012. That makes the country the 14th largest producer in the world and the largest in sub-Saharan Africa. Nigeria accounts for 65 percent of total West African tomato production. Despite this, production has actually been slipping gradually since the peak 2 million metric ton tomato harvest of 2006.

Tomatoes are produced throughout the country. The sunnier northern states tend to be stronger in production, while southern ones tend to have better linkages between production and processing opportunities.

Despite the variety of environments in which Nigerian tomatoes can grow, the crop’s yields are consistently low throughout the country—a fact that helps explain the sector’s failure to meet domestic demand. China, by far the world’s largest tomato producer, achieved yields of nearly 50 metric tons per hectare to bring its total production to about 50 million metric tons in 2012. That same year, second-largest producer India had yields of about 20 metric tons per hectare; while the United States, the world’s third-largest producer, had yields of 73 metric tons per hectare. In 2012, Nigeria had yields of less than 6 metric tons per hectare.

Even worse, Nigerian yields have actually been declining in recent years, which helps to explain the broader decline in production.

The drop in yields from 8.3 tons per hectare in 2006 to less than 6 tons six years later happened because of the proliferation of tomato-attacking diseases like bacterial wilt, as well as erratic, destructive weather conditions and flooding.

But low yields are only the start of the problem. Arguably even more important than boosting yields is reducing post-harvest losses. Estimates typically range between 45 percent and 60 percent of the total harvest lost or wasted. This is due to several issues. First, a lack of adequate crating, packaging and refrigeration options leaves the crop vulnerable to rot, pests and disease. Then poor access to markets means that farmers are unable to transport their goods to markets without losing a significant proportion of them. Third, farmers lack access to large enough markets. Lastly, a lack of processing opportunities means that spoiling tomatoes are wasted rather than used in alternative ways.

Tomato consumption and imports 

Currently, the African tomato paste market is dominated by imports coming from just three countries: China, Italy and the United States.

Nigeria is no different from the rest of Africa in this regard, and the country spent an estimated $200 million importing paste from these markets in 2013. Imported tomato paste has become near-ubiquitous in Nigeria. Many of the country’s consumers—particularly in urban areas—increasingly show a preference for tomato paste over fresh tomatoes. This should provide even more incentive for Nigeria to develop its domestic tomato processing industry. Not only would the development of the industry help to reduce staggeringly high waste and loss, but it would also be in line with consumer preferences.

As a continent, Africa’s imports of tomato paste have exhibited a compound annual growth rate of 13 percent between 2004 and 2011, with imports from China accounting for approximately 65 percent of the total, and Italy and the United States making up the rest. Nigeria has followed a similar trend, and its simultaneous positions as the largest producer of tomatoes and the largest importer of tomato paste present clear opportunities for investments.

Policymakers including Nigeria’s former Central Bank Governor and Minister of Agriculture have repeatedly pointed out the size of this problem. Nigerian investors like billionaire Aliko Dangote are now actively trying to solve it. Dangote announced in mid-2013 that he would be building a $25 million tomato-processing plant that will have an annual output of 400,000 tons of tomato paste. The plant will purchase its inputs directly from farmers, a move that is expected to considerably boost farmer incomes.

Although this announcement represents a significant step forward, ensuring that the linkages between farmers and processors are strong will be extremely important. Existing tomato processing plants in Nigeria operate at a capacity utilization rate of only about 33%, despite massive wastage in tomato crops. This demonstrates the horrendous inadequacy of the linkages between supply and demand. Furthermore, the build-out of the Nigerian tomato processing industry will also require farmers to take up the cultivation of crop varieties that are well-suited for making tomato paste.

Ghana: A story of queens and boys 

About one thousand miles west of Nigeria lies another country obsessed with tomatoes: Ghana. Ghana produces fewer than one-fourth as many tomatoes as Nigeria but has had an interesting, and in many ways wholly unique experience in tomato production and marketing.

Ghanaian tomatoes grow all over the country. The Upper East region boasts fairly effective irrigation systems—the result of a 1970s government initiative—which allow for year-round tomato production. Rainfed production hotspots like Ashanti and Brong-Afaho dominate production during the wetter seasons.

Like Nigeria, Ghana struggles to meet domestic demand, and does so only by importing both fresh and processed tomatoes—the former from neighboring countries like Burkina Faso, and the latter from the usual list of China, Italy and the US.

Imports of Burkinabe tomatoes are a seriously contentious issue in Ghana, with farmers unsurprisingly objecting to them, but having little power to change that reality. In fact, many Ghanaian tomato farmers would argue that they have very little power more broadly, and are actually at the mercy of an unusual cartel system.

The National Tomato Trader Association is made up of about 5000 traders—mostly women—who are known as “market queens,” and form the main link between producers and markets. They partner with a group referred to as “lead boys,” who determine which producers the market queens will source their tomatoes from. Market queens and lead boys often form strong relationships, a dynamic which puts tomato producers at the mercy of their sourcing decisions. Producers who are unlucky enough to fail to gain access to these queens and boys are effectively left out of the marketing value chain. Without sufficient markets to absorb their goods, such producers struggle with even higher rates of post-harvest losses (similar in Ghana to those of Nigeria). The depth of these marketing issues is reflected by an unexpected phenomenon: as market queens have shifted their preference towards Burkinabe tomatoes, Upper East producers have been left in debt. Many of them have committed suicide.

For consumers, the market queens, acting as a cartel that restricts supply of tomatoes, elevate purchase prices artificially.

Conclusions 

Nigeria spends more than $10 billion each year importing food items like rice, wheat, frozen fish, sugar, milk and of course tomato paste: all items that the country could very well produce itself. Increasingly aware of this issue, policymakers are beginning to better encourage and facilitate efforts to cut the country’s import bill. In 2012, the Nigerian government launched the Horticulture Transformation Value Chain Implementation Plan. The plan aims to increase production by increasing the area dedicated to tomatoes, offering farmers access to better training programs, and offering farmers access to better agricultural inputs—including disease-tolerant tomato seeds. The Nigerian government is also offering tax holidays and capital allowances to better incentivize participation in the tomato processing industry.

Adding to the industry’s trouble, Boko Haram-driven instability has emerged in Nigeria’s tomato-growing north. But despite this and the other problems, it seems likely that new tomato investment incentives and the appeal of a growing market of 170 million people will entice investor participation. Everyone can come out ahead in such a scenario.