Opportunities in Chemical Business and Value chain in Nigeria -By Nwosu Chidiebele

Filed under: Brand Matters,Economic Issues |

 

INTRODUCTION

The chemical industry in any country usually has the greatest business opportunities. In Nigeria, the opportunities in the chemical production and business are immeasurable and very vast that less than 6% of it has been tapped. This is in contrast to developed countries as United States, Uk, Canada and Asian countries whom have a more developed chemical market.

The reason is the fact that almost everything on the surface of the earth is composed of chemicals. Hence there is absolutely nothing that one can do in this life without involving chemical components at one stage or the other.

It is a necessity and no one can do without it. Now, think of it from the food we eat, the house we live, the road we use, the clothes we wear, drugs we take, water we drink, the land we farm, chemicals of various quantities and types have to make all these possible. This is the reason why there cannot be life as it is today without the chemical industry.

DEVELOPMENT

The development of this industry has suffered. It has suffered neglect and setback. The major reason is that most people are ignorant of the vast opportunities the chemical industries hold in terms of business and job creation. The opportunities are vast and more than other sectors of the economy. Nigeria provide a vast market opportunities for many established and would be entrepreneurs to venture in this sector of the economy. The population is growing geometrically and so are the people needs. So, industrialist, entrepreneurs and would be entrepreneurs like you are being relied upon to bridge the gaps. I also want to let you know that the chemical Production industry is a huge market with range of chemical products such as cosmetics, adhesives, beverages, disinfectants, inks, soaps and detergents, industrial chemicals, wood finishes, lubricants to mention but a few going a long way to provide a decent business opportunity for any willing investor. Another positive is the massive income opportunities which is inherent in this industry.

INCOME OPPORTUNITIES

The income earning potential on full scale can give one a lifestyle of choice, leveraging on the increasing population of this country. Nigeria runs a consumption based economy. A cake consumption instead of cake baking economy. It is an open and begging opportunities for more investment in the chemical production and manufacturing business. And with a population of over 160 million whom have to depend on the chemical products to survive, it becomes necessary to start a chemical business of your own. Surely, anyone can start and can start in small scale and with the necessary skills, information and knowledge, success is assured.

MARKET SIZE

Nigeria companies consume in excess of $3.58 billion dollars’ worth of chemicals per annum but produces just $380 million dollar in equivalent creating a short fall of $3.2 billion dollar. The shortfall is filled mainly with importation. There are opportunities for new entrants to enter the industry and take advantage of healthy margins. A small scale producer can leverage on a strategic strength of good quality at reasonable price to create a cutting edge advantage against the big players whose products are of higher prices.

FACTORS FOR CHEMICAL BUSINESS SUCCESS

In the world of chemical business, planning play a very important role in determining its success. Though it is not different in other business, certain step has to follow including the proper procedure to get the right results. To survive and succeed in making any chemical product in Nigeria, the following steps are vital:

PERSONAL ASSESSMENT

This is the first step. Make a SWOT analysis. This is necessary as it will give you an edge and a basic foundation to grow your business.

SWOT means: Strength, Weakness, opportunities and Threats.

Strength: What is your strength? Everyone has the same. Are you a good entrepreneur? Is your qualification, knowledge, training, experience, personality trait, passion, network, and finances among others, at advantage to you? Capitalize on your strength. Your strength lies where you have major advantage over others.

Weakness: Find where your negative points lie. When you identify them clearly then it is much easier to deal with them. Are you poor in selling, keeping books or supervising people? Leverage on areas where you are weak. Find and use the best hands in the area where you have weakness.

Opportunity: Opportunities are untapped or not fully tapped prospects. Finding and filling a gap in the market for any chemical product is an opportunity to make good gains. Eventually, the market might start getting saturated due to increasing competitors. If you invent a product that is needed by people, you have an opportunity. In the Nigerian chemical industry, the opportunities for making chemical products are limitless.

Threat: What potential dangers are ahead of your business venture? These could be government policies, natural disasters like floods, cyclones, draught and conflicts like community clashes, militancy, wars among others. A ban in the use of your major raw material can be a big threat to your operations. Watch out for threat far ahead and do something to survive bad times. Unfavorable competition by imported product occasioned by government policy can affect your business.

After putting it in SWOT, you can now know where to improve upon, leverage or device strategies to survive and succeed as an entrepreneur in chemical business.

EMPOWERMENT

Get the necessary information, contacts and training to empower yourself. It can be motivational, managerial and technical. The first stage is to go for entrepreneurship training if you have not done so. Do not ignore this, no matter your level of academic qualification. There are many centers in Nigeria where you can get this type of training at little or no cost e.g SMEDAN, NASSI, NDE, NASME, CBN, Association of chambers of commerce, Industries, Miners & Agriculture are some of the reliable ones.

PRODUCT SELECTION

This can be a difficult stage but you have got passion. Make a list of chemical products you will naturally want to produce if you had everything you need to do so. Scrutinize and grade them according to market demand. This may require some market survey or consulting a market expert. Make a list of the five most popular and subject each one to:

  • Market demand (present & future).
  • Availability of technical know how.
  • Availability of raw materials.
  • Financial outlay.
  • Present & future health of the industry.

Select one project that is most favored by the above factors. The products must be the ones that you are passionate about. In doing this, you may need the support of a consultant, friends, family members and mentors. In the case of the chemical business project, it may involve choosing an industry instead of a product. This is so because many product can be made in a single chemical industry. For instance, if you choose soap industry, you can still make choice from laundry, toilet medicated, powder or liquid soap. These products have the major raw materials in common. And there lies the beauty and the advantages of chemical processing business.

TECHNICAL SKILL & KNOWLEDGE

For some other business, it might mean less but to survive and succeed in making chemical products, you must get the right type of technical knowledge. It is so necessary to gain a cutting edge especially in a competitive chemical industry. Buy resource books and empowerment manual to gain insight on new products and skills. You must get the right type of knowledge and skills and your key workers must also do same. Find and acquire the appropriate technology which include formulations, equipment and expertise. For your exact product or products, you must consider what the present would be competitors are doing in terms of technical know how and think is important for making quality products at competitive advantages. Look into the future to be sure you are not left behind technologically as it relates to your business.

CONSTITUTION OF THE FIRM

Sit and get a mental and written picture of your proposed company. This is your VISION of this idea you want to call your company. Write down what you want your company to be known for. This is your mission statement. If you want your printing ink to be sold in almost every shop around you, or your company to be the place where every distributor of printing ink would love to be associated, maybe because of your excellent quality service, then these vision and mission can help drive your business forward.

Start your firm constitution by a sound vision and mission and then go ahead to form either sole proprietorship, partnership , private limited company, cooperative society firm or public limited company and get it registered with CAC using an appropriate name that will reflect your vision and vision.

CHEMICAL BUSINESS VALUE CHAIN

The Key Players

The Producer

The producer is the main player in the chemical Industry. He can be a manufacturer, an innovator, a chemical scientist or the creator. He first conceives in his mind what he intend to produce; this is a mental creation and then second carrying it out representing the physical creation. He creates the product from scratch, add value to the product already in the market or may even be alike the same product as in some case in acquiring the patent right and franchise to produce the same product.

In some cases, a producer might also be the chemical scientist who conceives the product and proceed to produce or manufactures it. Income potential as a producer is amazing. On a small scale level, of investment of N200,000 would yield 100% return in a few months and on business stability would offer over 300% return on monthly basis. Furthermore, he wields tremendous power as he can be involved in composition and actual running of his enterprise.

The Chemical Scientist

He is an important player in the Chemical Industry. He is involved in the creation, production and sales of the chemicals. With his formal education and training, he understands the various elements, compound and extractive techniques from raw sources. The chemical laboratory is usually his dormitory and a single discovery or innovative product can shoot him to fame and wealth. His products can impinge every aspect of our lives.

Furthermore, many companies buy some of his chemical products as intermediates in their own manufacturing processes. Often, there are clusters of processes which use the output of one as the input to another. Example, ammonia is made from natural gas and can be converted to hydrogen cyanide. Becoming a chemical scientist can be very rewarding as he earns millions of naira per annum for his researches, consultancy and sales of chemical product. He is also well respected by the public and stakeholders in the chemical industry.

The Armchair Investor

He is a very important in the chemical industry because of his experience, resources and financial wealth. Usually, he is a shareholder; an important stakeholder and contribute positively to the growth and development of the chemical enterprise. He might not have control over the actual running of the enterprise but decisions that can affect the finances and long term growth of the company cannot be taken without his input.

In some cases, he might be the owner of the chemical firm if he owns 100 shares of the firm, in some other cases; it is a partnership whereby it is jointly owned by the 2 or more investors. But know that the armchair investor is a risk bearer and his concerned about the growth of his investment in both short and longer term. His earning is a jumbo determined by his stake and amounts of shares he holds.

The Distributor

He is an important element in the chemical production industry. He is an entity that buys competing chemical products or product lines, warehouses them and resells them to retailers or direct to the retailers or directly to the end users or customers. In some cases, a company chooses its distributor and get them licensed while in other cases, it is an open one where anyone with good capital can buy its products.

Their powers are limited but can be involved in promotional activities; providing strong manpower and cash support to the manufacturer’s promotional efforts. They usually also provide a range of services such as product information, estimates, technical support, after sales services, credit etc to their customers.

Financially, they are robust and with over 100% return on investment in few months.

The Facilitator

From their name, they play a facilitation role. They can play this role in any of the different value chains available in the chemical industry. They can be involved in research, creative and useful information, writing articles, publications, training, business registration and incorporation, composition, funding, planning and even mediatory roles in this industry. He is someone who engages and help people understand their common objectives and assist them to plan how to achieve these objectives. They also enable groups and organizations to work more effectively; to collaborate and achieve synergy.

They play a supportive role and an important factor in the growth of the chemical industry. They earn from the fees they charge for their services and impact is appreciated and respected.

The Miner

If we won’t be import dependent and develop the entire value chain of the chemical industry, then the miner plays a primary but a fiduciary role.

The miner is a key player; an escavator, an explorer, a discovery man and a site maker.

Venturing as a miner requires a mining license which can be painstakingly acquired from the Federal Ministry of Mines and steel development after tendering and verification of vital documents.

A mining license is a wealth license. This is not because it takes a relative effort to acquire but because it gives one access to the country vast hidden wealth. As a result, the financial earnings of a miner will be a mind boggling sum and over time can place one on the fortune map. On the upside, a miner can also double as a chemical exporter and he can enter and sign Memorandum of understanding  (MOU) with foreign firms and as a supplier to the local industries who depend on his raw material as a pre-causer product for production.

The Chemical Importer

The importer is involved in the importation of chemical based products which are not readily available or produced in the country. The importation of chemical based product is a profitable venture for many Nigerians. An applicant wishing to import chemicals into Nigeria should first make an application. He will apply in his company letterhead with GSM number and email which would be addressed to the Director, Narcotics and controlled substance Directorate, National Agency for Food and drug administration and Control, Oshodi, Lagos. The process involves the filing of necessary forms, presentation of other document and payment of required fees and will ultimately be issued with an import license if all conditions are met.

Financially, it is very rewarding with profit running in millions after sales of products. It is also important to note that it is strictly regulated and the license is painstaking acquired.

The Trade Merchant

The trade merchants are important stakeholders in the chemical business value chain as the chemical chain cycle cannot be completed without them. Don’t get it twisted, they are important not because, the chemical industry cannot function without them but because they are closer to the end users and consumers. For a small scale chemical entrepreneur willing to venture into the production industry, he is indispensable and he can provide him with the necessary chemical, equipment, and raw materials to start the production process. He also does direct supply to different institutions such as schools, hospitals, hotels and even research institutes.

On the financial level, he averages good returns on investment if he does well in the marketing of his services. In addition, it is important to note that a trade merchant can as well be an importer of his product just as an importer can double as a trade merchant.

The Primary Supplier

The Primary supplier is also a trade merchant but a primary/raw material merchant. He buys the chemical raw material at wholesale from the miners and supplies directly to the production industries. His position in the chemical value chain is intermediate. He is a key player in the entire value chain but specifically to the production industries who need it as a raw material for producing many chemical based products.

On the financial level, he benefits from the win-win structural arrangement of the industry and if his marketing is not wack, he averages good return from his investment .

On the literary sense, he is a tight-knitted personality, a master planner, a goal getter who identifies his target market, meets them and gains economics of leverage on client base.

Like him or not, his overall contribution to the industry is primary but beneficial .

The Chemical Exporter

The development of the Export market in Nigeria has been a positive one. The uptrend is largely due to the advancement of Information Technology and the downside fortune of the crude oil market forcing investors and government to explore alternative markets.

In line, the chemical export industry holds vast potential that is highly untapped. The primary raw materials for the production of many chemical based products are minerals with huge deposit in the country. For example, sodium benzoate is a preservative for the production of envelope gum. It secondary raw materials are sodium hydroxide and benzoic acid while primary raw materials are sodium chloride and gum benzoin which occur in nature. Another example is Calcium Carbonate which is a filler for the production of shaving powder. It’s raw material is simple limestone mined from the earth. What of Zinc chloride? It’s anhydrous form is an activator for the production of glass bottle adhesive. One of it’s primary substituents is Zinc which is a mineral deposit.

On the geographical sense, Nasarawa, Ebonyi, Plateau and others holds vast potential of our wealth in mineral resources and by research, the country’s financial wealth will sour greatly to over 5trillion Naira per annum if its vast resources in minerals are to be tapped.

The chemical exporter is a leader, a trail blazer and an economy booster and his business acumen and deft business moves will impinge the economy but in a positive sense. Venturing as a chemical exporter is very rewarding for savvy entrepreneurs who have good knowledge of the export market.

The Chemical Consultant

The chemical industry won’t develop effectively without the input and contribution of the chemical consultant. He can be an individual or an entity that has great knowledge of the chemical industry and can give expert advice.

If you have done your basic and have earned a reputable profile in any of the chemical business value chain and it spans for a considerable period in years, I want to encourage you to become a consultant. Owners of chemical based businesses are very concerned about productivity and business bottom line, and as a result, will hire consultants to supplement their staff and save the bloated cost of hiring of hiring a full time employee.

Their job description is a simple one. Consultants aim to improve their clients or organization’s position or profile in the marketplace by helping to solve problems, manage change and improve efficiency.

Furthermore, a consultant has the benefit of flexible work schedule; he can work as a full time, part time, an independent or an employee consultant in large organizations.

A chemical consultant is an invaluable asset; a harmonizer, a professional team player, a change catalyst and a bridge maker.

Financially, it is very rewarding. They earn from the fees they charge for their services which can be neck- breaking ranging from hundreds of thousands to millions of naira over time. This is because they solve intractable problems and the growth and development of the industry depend to a large extent on their expertise.

Overall, their contributions are positive and well respected by the public and stakeholders in the chemical industry.

The Chemical Broker

In a less regulated chemical industry, a broker also referred to as an agent or an intermediary can bridge the value chains and foster more business relationship, enabling the other chain players to work more efficiently and effectively.

A chemical broker is a match maker; a linkman, a deal broker and a buffer between the buyer and the seller. A broker can say certain things to a buyer and certain things to a seller and wind up with a productive discussion. He is different from a chemical supplier as a chemical supplier is an established tradesman. He is also not a facilitator as his primary concern is on deal making and less of leading the industry.

He is also different from a supplier and the facilitator as his remuneration is commission based. His commission is his insurance and wholly depends on the size of the contract he brokers.

For those desirous to partake in this industry but have no start-up capital, you worry no more as brokerage services has come to stay. The era of tight industry regulations and monopolistic tendencies is given way for an open system. This is due to civilization and advancement in Information Technology making the world a global village with complementary positive gains in convenience and leverage.

Now, in the chemical brokerage, there is something called “Finder’s fee”. This is a fee charged by brokers for making a deal. As stated before, it is commission based and the industry standard is 5-10% of the size of the deal. Overtime, this can pull one out of financial doldrums and re-establish him on a higher pedestal.

The Business Analyst

Business analysis has emerged as a core business practice in the 21st century. As a vital link between a firm’s information technology capabilities and its business objectives, skilled business analyst contributes to the profitability of companies, large and small, in almost every industry.

The Business analyst are important in the chemical industry as they help it seize opportunities presented by a rapidly changing marketplace, by preparing you with the skills modern organizations need to remain competitive.

In today’s complex business environment, an organization’s adaptability, agility and ability to manage constant change through innovation can be key to success. Traditional methods may no longer lead to reaching objectives when economic conditions are unfavourable. That is where business analyst comes in.

To venture as a chemical business analyst, one need to acquire core business skills and specialized knowledge which will include excellent and verbal communication, system concepts, cost/benefit analysis, business case development, modeling techniques, methods and leadership.

Furthermore, finding success as a business analyst takes a commitment to your career and proper planning. This is because economic conditions and business changes faster than ever.

Overall, a business analyst is a tactful diplomat; a great communicator, a problem solver, a thinker and an analyzer with the ability to engage with shareholders to understand and respond to their needs in a rapidly changing business environment.

Financially, he is well remunerated if employed by reputable firms who desire to be a market leader in their niche market.

The Marketer

The chemical industry can never be complete without the efforts and contribution of the product marketer. Promotion has its place; creating the necessary awareness of the product to the general public. New releases and new product line testing can be the avenue for the marketers to show his skills and strategies. Hence for any company that wants to be a market leader or to be a big deal, marketing should be at the forefront of its plans.

The marketer might either be employed by an organization or an open position available to any willing individual or interest group. It also opens an opportunity for anyone to position in any of the value chains. Most organizations that have a product to offer the public would welcome any individual whom is willing to promote and sell their products. All one need is to get their product and look for avenues to promote them and earn finder fees in return. This is referred to as affiliate marketing; affiliating to promote someone else product.

Working as a marketer in a conventional company or in an open marketplace can also be rewarding. This is due to fact that product companies understood that marketing is the life of their business and if they eased up on marketing, they will get lapped. Often they are compensated based on sales or referrals they have made for the business.

DIVISION OF THE CHEMICAL INDUSTRY

The products of the chemical industry can be divided into three categories namely, the basic chemicals, specialty chemicals and consumer chemicals. The basic chemicals are produced in huge quantities (millions of tons). They can include chemicals from oil, polymers and basic inorganic. Specialty chemicals are produced in modest kilogramme quantities but with very high value. It covers a wide variety of chemicals for crop protection, paints and inks. With active research and development, specialty chemicals deliver better and more stable profitability.

Last but not the least is consumer chemicals. Consumer chemicals are sold directly to the public. They include for example detergents, soaps and other toiletries.

FUTURE OF THE INDUSTRY

There have been marked increase of new entrant into the industry over the years and as more investors are putting their seed into this industry. All we see is successes, hope and opportunities. The economy of the country is regaining strength after years of economic hardship. We sincerely believe that with adequate power, infrastructure and manpower development, the industry will go in leaps to for the benefit of all.

It is a huge market and everyone with the necessary capital and knowledge would tap from the business opportunities it presents. Nothing is so powerful than an idea whose time has come; and the time has come to invest rightly by investing in the chemical line of business.

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