JEAN-MARC RICCA

Nigeria 2021 | INDUSTRY | VIP INTERVIEW

TBY talks to Jean-Marc Ricca, MD of BASF West Africa, about pandemic restrictions, macroeconomic concerns, and the Dangote refinery.

How have the pandemic and lockdown restrictions impacted your business in Nigeria?

Like many organisations, the pandemic came to us totally unexpected. It was, however, an opportunity to us to realize how resilient and agile we are. This helped us recover quickly as we went through the storm. We managed to run operations throughout the shutdown, never shutting down manufacturing and supply chain, having been classified as a business providing essential services. Many of our business units refocused remarkably. The personal care business, for example, was hit hard, as it is extremely sensitive to disposable income; however, the demand for hygiene and disinfectant products dramatically increased, so we rapidly adjusted our supply chains to meet this demand. The human nutrition segment grew because of the increased need and demand for vitamins and micro-nutrients. The hardest-hit businesses were infrastructure and industrial applications, as many companies shut down because they were not considered essential. The fact that we operate across many different segments and industries helped us significantly.

What strategy did you adopt to come back strong, and what is your outlook for BASF in Nigeria?

Keeping operations running at all costs and focusing on our customers proved to be a good decision.Most segments are now back to pre-COVID levels. Most consumers have been locked down for months and have saved money, so as soon as things open up they will start spending. We are not there yet in Europe, though demand in China is stronger now than it was before COVID-19. Nigeria is a unique ecosystem and does not necessarily follow global rules. We have our own consistent set of problems here, namely the port congestion or the foreign exchange topic but once we account for them, the outlook is cautiously optimistic.

Can you tell us about your groundbreaking waste-to-chemicals project?

Despite the pandemic, it was paramount for us to keep investing in innovation capabilities, and, therefore, our laboratories and related projects got a lot of attention. Our flagship project is the waste-2-chemicals project which aims at repurposing plastic waste towards chemical value chains. We succeeded in commissioning the waste-to-chemicals laboratory in Lagos in 2020, despite the pandemic. This facility, which is unique in Africa and likely beyond, provides a research & development platform to study the relationship between waste plastics streams such as polyethylene, polypropylene and polystyrene and their conversion into pyrolysis oils for use in the local chemical value chain. We are currently running our first demo unit, which is the prototype of how this system will be in the future. This will allow us to validate all the parameters for us to go live later in the year. We intend to deploy three more recycling hubs up in strategic communities across the state, demonstrating the level of commitment we have towards enabling value creation in Nigeria.

How does inflation and a weak naira affect your business?

Inflation is a real concern, as it runs as high as 20% for some items, while disposable income unfortunately does not increase that fast. This is hitting people's incomes hard, and driving poverty up. Access to Forex is undoubtedly an issue for us, as we do not have an export business, and we need a large amount of dollars due to the fact that we still have to import a large portion of what we use here. Perceived risk is high, making investment decisions difficult to make, and I do not expect this situation to improve anytime soon.

Do you expect value chain localization to improve this situation, or will you import raw materials in the long term?

Except for our waste-to-chemicals project, which is entirely localized besides being still relatively small, we still import most of our materials, as the chemical value chain yet in Nigeria is still in its infancy. We see change coming as initiatives such as the Dangote refinery for upstream petrochemicals will help seeding further downstream value chains including chemicals.

Will the Dangote refinery make Nigeria self-sustainable and able to export?

Aliko Dangote should be lauded for his vision. It is an exceptional achievement which is expected to be up and running by 2022, as most of the assets are expected to be commissioned by the end of this year. This is will trigger a massive transformation overnight. BASF is very extremely proud to be supporting this project, as it is an absolute game changer. The fact that a solid upstream chemical value chain is being built will accelerate development, and we will see further moves in the direction of downstream petrochemicals, which is positive. This will create a very large massive amount of jobs which are badly needed in Nigeria and may contribute to restore some balance in the Forex space.

What is your opinion on the African Continental Free Trade Area (AfCFTA) and the impact it will have on manufacturing in Nigeria?

There cannot be any discussion, free trade is good, however it is important to protect markets which are not ready. I am pleased Nigeria has ratified the treaty, but we must allow some time to execute it without putting the economy in danger. While agriculture can be a major income earner, more agro-transformations have to be localized. Take the example of shea butter; 60% of shea butter trees are in Nigeria, but Nigeria does not produce much shea butter as most seeds are exported. There is a great deal of work to do in Nigeria in terms of local value addition, but it is not yet ready to open up its borders in a number of segments. It has to be careful not to kill the small Nigerian entrepreneurs who are trying to create local value. If it opens up too fast, it may face stiff and even lethal competition from its neighbors. Free trade is great, but some industries need to be protected for a while as they are not ready.

How will BASF fit within the new economic realities?

We will keep reinstating that for us, it is all about enabling value creation. We will continue to operate in and contribute to sectors where we know we can deliver on all dimensions. Economically as it makes sense in terms of profitability, environmentally as sustainability is now a crucial success factor, and socially through job creation, upskilling, and vocational training.