Since Nigeria does not fully utilise its refining capacity and has to depend on exports of refined crude oil products, and this situation is affecting plastic manufacturers who rely on derivatives from crude oil refining to produce their products.
As a result of this, plastic manufacturers rely on imports of feedstock which forces them to raise the cost for consumers said Shyam Barakale, the general manager of Pentagon Plastic Industries Ltd (PPIL).
According to Barakale, the sourcing of feedstock or plastic raw materials is “our biggest challenge as we do not have any local substitutes and have to import over 90 percent of our requirement.”
“We have to invest a lot in raw material sourcing and this involves sourcing for foreign exchange which makes us vulnerable to volatile exchange rates. This adds to production costs and often results in delays,” said Barakale.
In some oil-producing countries, investors establish refineries as part of efforts to service the petrochemicals industry.
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Pentagon Plastic Industries Ltd (PPIL), was established in 2002, part of the Blchainrai Group, is a manufacturer of high quality, cost-effective plastic housewares, garden furniture, and rigid packaging solutions in Nigeria.
Apart from feedstock, plastic producers in Nigeria have to deal with challenges including inadequate power supply from the grid.
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“If regular and consistent electrical power can be sourced from the grid, we can easily concentrate on our core activity which is plastic manufacturing rather than investing in building and maintaining power plants,” said Barakale.
The company relies on Clarke Energy, a multinational specialist in distributed power generation solutions, to mitigate the impact of inconsistent supply.
“With Clarke Energy, we have a partnership that goes back to 2014. The company carried out a technical study and recommended the deployment of a gas power plant. It has been serving us well since 2015.
“The gas generating has also given us significant cost savings and increased our production efficiency,” said Barakale.
Clarke Energy provided a gas power plant for the PPIL which requires regular maintenance at a significant cost.
PPIL operates two state-of-the-art manufacturing facilities producing over 200 different types of plastic products and generating over $28million in revenue.
The first factory is located in Lagos State caters to the houseware and furniture segments using the latest international technology and equipment.
The second located in Ogun state, inaugurated in early 2020, caters to the rapidly growing market demand of the rigid packaging segment using Husky and Sacmi machines.
According to Barakale, the Nigerian market presents many opportunities for plastic manufacturers with its large population and strategic location to serve other markets in Africa.
PPIL ships its products through their distributors to several African countries including Benin, Chad, Cameroon, Burkina Faso, even as far as Sudan, and this export market represents 20 percent of the company’s distribution network.
Barakale said that PPIL in its 19 years of operation has contributed to the growth of the economy including employing about 500 Nigerians and its export of quality plastics contributes to foreign exchange earnings for the country.
PPIL has established a strong network of distributors located strategically throughout the country. These are complemented by its distribution arms in Kano and Delta states.