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Tuesday, July 31, 2012

Multi-billion naira tobacco industry comes under fire

With 20 billion sticks of cigarette valued at N200bn being consumed annually in Nigeria, the tobacco industry is sure a money spinner. However, this may not be for long as anti-tobacco groups mount pressure on President Goodluck Jonathan to sign the National Tobacco Control Bill into law. ADEDEJI ADEMIGBUJI reports. 

The tobacco industry has been described as one of the most profitable in the world. According to a global industry analyst, Euromonitor International, the global cigarette market is valued at $611bn. To market their products, tobacco companies use their enormous wealth and influence both locally, regionally and globally to protect their investment. A stakeholder’s report made available to National Mirror by the British American Tobacco Nigeria (BATN), affirmed that BAT is the world’s second largest quoted tobacco group by market share with brands sold in more the 180 markets, and sales estimated at 708 billion cigarettes globally in 2010. This enormous output according to Euromonitor International is estimated to translate into a gross turnover of 4.84 billion euros for the tobacco giant in 2010. However, the tobacco company’s revenues may come under pressure in Nigeria if President Goodluck Jonathan bows to pressure to sign the National Tobacco Control Bill (NTCB), which has been passed by both the House of Representatives and the Senate. With increasing litigations against cigarette manufacturers, the bill is expected to enforce compliance with the World Health Organisation’s Framework Convention on Tobacco Control (FCTC), which Nigeria is a signatory to.
The bill was drafted by the former Minister of Health, Late Prof. Olikoye Ransome-Kuti.
Senator Olorunimbe Mamora later sponsored and presented the bill to the Senate in 2008. It passed the second reading in February 2009 and a Public Hearing was conducted on it on July 20 and 21, 2009.
According to The Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN) shadow report, “After manipulations by BATN to stop the presentation of the bill to the Senate, the Senate Committee on Health eventually sent the bill back to the plenary in January 2011 and it was eventually passed into law on March 15, 2011.
The House of Representatives also passed the Senate version of the bill on May 31, 2011.
Some of the provisions in the bill are consistent with the key provisions of the FCTC and when the bill is eventually signed by the President of the Federal Republic of Nigeria, it would have successfully domesticated the FCTC in Nigeria.”
The bills when signed into law will punish anyone who promotes, advertises or smoke cigarette in public places among others.
Promotion of tobacco in bars will also attract huge punishment, such as imprisonment with an option of fine. Nigeria is part of the over 40 African countries that have signed the FCTC which forms a basis for NTCB.
As a result, antitobacco advocates insist that the country is obligated to adopt and implement effective legislation aimed at reducing tobacco use and tobacco smoke exposure.
The threat to tobacco industry came as a result of the rate at which consumption pattern continues to increase with the attendant health risks associated with smokers even though the revenues continue to sky rocket, and the industry continues to boom.
With the number of smoker declining in developed countries in the past two decades due to increased awareness about the dangers of smoking and stricter tobacco control measures including high-taxes on tobacco products, big tobacco multinationals have since turned their attention to Asia and Africa with high populations and lax tobacco control measures.
According to a document titled Tobacco Industry Profile – Africa Intended Uses of Report, made available to National Mirror “BAT’s regional structure was reorganised in January 2011 to increase efficiency across the company.
The regional restructuring merged the Africa and Middle East region with Eastern Europe markets.
Currently, BAT’s African operations are organised into four different areas.” One of the regional structures, includes Nigeria.
“West Africa area includes Nigeria, Cote d’Ivoire, Guinea, Cameroon, Senegal, Mali, Burkina Faso, Ghana, Mauritania and Sierra Leone.
Nigeria is the major operational centre for the area with two factories in Ibadan and Zaria and area offices in Lagos,” stated the report adding that, “in 2011, the region accounted for seven per cent of global cigarette sales by volume.
The number of cigarettes sold in …Africa has increased by six per cent over the past five years, from 384 billion cigarettes in 2007 to 408 billion sticks in 2011.”
The report stated further that, “in Sub- Saharan Africa, overall cigarette volume has remained level and only increased by 0.3 per cent in the last five years.
However, at least 26 countries in the region experienced a five per cent or more increase in cigarette volume over the last five years.
The top cigarette consuming countries are South Africa, Nigeria, and Kenya, consuming 47 per cent of the region’s cigarette retail volume in 2011.”
In order to meet regional demand, BATN invested $70m in the Ibadan factory in addition to the earlier $150m investment which was as stated in the Park Lane MoU to generate Foreign Direct Investment (FDI) into the country, generating thousands of direct and indirect employment in addition to paying taxes to the Nigerian government.
The actual growth of tobacco industry was 5.4 per cent between 2007 and 2011 while it is expected to rise to 6.2 per cent between 2011 and 2016.
National Mirror gathered that Nigeria produced 15.4 billion cigarettes in 2010 and imported 5.3 billion. An estimated 0.1 billion was exported while 20.3 billion was consumed locally.
The Executive Director of ERA, Mr. Akinbode Oluwafemi calculated while speaking with National Mirror that with the 20.3 billion pieces of cigarette consumed at an average price of N10 per stick, the total industry revenue stood at N200bn in 2010.
Beyond Nigeria, market analysts anticipate that a shift in demographics will continue to contribute to the overall smoking population increase in Africa.
By 2016, Euromonitor International predicts that there will be 91 million more adults in the region and that cigarette sales will grow by 11 per cent over the next five years.
Meanwhile, multinational companies like BAT, Philip Morris International (PMI), Japan Tobacco International (JTI) and Imperial Tobacco Group (Imperial Tobacco) are increasing their dominance within Africa.
These four multinational companies increased their market share in the Middle East and Africa region by over 100 per cent in the last 10 years -- from 31 per cent in 2002 to 64 per cent in 2011. In 2006, African countries consumed an estimated 250 billion cigarettes, accounting for approximately four per cent of the total cigarettes consumed globally that year.
It was also revealed that Africa has a number of regional free trade blocs aimed at increasing economic development between members According to reports, the top cigarette consuming countries are South Africa, Nigeria, and Kenya, consuming 47 per cent of the region’s cigarette retail volume in 2011.
But if the bill is finally signed into law, the tobacco firms, especially BATN, which is a major investor in the industry, is expected to lose its huge revenue and investment but this is not a certainty.
Apart from BATN who dominates the market, JTI, (JTA) investment will also be threatened. JTI is the fourth largest tobacco company in the world and controls 10 percent of the global cigarette market.
It is the fifth largest in Africa and the Middle East in terms of retail sales volume. JTI sells cigarettes in 20 different African countries including Nigeria, South Africa, Tanzania, Algeria and Morocco and is actively expanding its presence in Africa through acquisitions. BATN has devised many strategies to foster a working relationship with host communities’ ad stakeholders through partnership and lobby.
The firm invested heavily on Corporate Sustainability Projects through the BATN Foundation.
Established 10 years ago, the Managing Director of BATN, Mrs. Beverley Spencer-Obatoyinbo, said in a statement to National Mirror, “The BATNF supports agricultural development and the reduction of poverty in Nigeria by providing sustainable means for communities to be self-reliant.”
But Akinbode believed otherwise. He said the Corporate Social Responsibility spree by the tobacco firm was a mere cajole and trick to kill more Nigerians with tobacco products.
As President Jonathan continues to delay the signing of the bill into law, the founder of ERA/FoEN, Mr. Nnimmo Bassey said, “After the overwhelming support the bill received in the Senate and House of Representatives, it is sad that till date, it has not been signed by the president.
The intervention of the health minister is a singular action that generations of Nigerians will not forget.
Giving Nigerians this gift as we mark the 2012 World No Tobacco Day will be remarkable,” But an industry source told National Mirror that the delay in signing the bill into law is not unconnected with the effects such move would have on the nation’s GDP.
With the huge revenue the tobacco industry is contributing to the national product output, the source maintained that the president’s is taking his time to consider so many factors before he would sign the bill such that the articulation of FDI policy would not be undermined.
National Mirror further gathered from a BATN source that if eventually the bill is signed, the tobacco giant would look for other options to boost its sales in a way that will not violate the provisions of the bill.
But he added that the firm is committed to ensuring the development of the communities where it operates.
BATN said it embarks on continual sustainable agricultural development that entrenches modern farming techniques among farmers.