CAPE TOWN, South Africa, May 5 /PRNewswire/ --
Overall, the global economic downturn has affected sub-Saharan countries less severely than the rest of the world. Despite a slowing in growth in the short term, economies such as Nigeria are expected to show resilience.
Boosted by this relative stability, demand for chemicals across most sectors of the market in Nigeria will increase over the next five years. Furthermore, the non-oil sector will increase its share of the total chemicals market.
The government drive to diversify the economy from oil has led to the implementation of a number of policies to support the non-oil sector, says Frost Sullivan (http://www.chemicals.frost.com) chemicals analyst Kholofelo Maele. Import tariffs for products, including selected fully manufactured food and beverages as well as pharmaceutical and consumer goods, have resulted in increased local manufacture of these products.
This increase in manufacturing activity has had a knock-on effect of increasing demand for specialty chemicals. In addition, plans for complete deregulation of the refined oil products market may lead to increased private investment in this space and decrease the country's current need to import these products.
Despite the positive outlook for this market, a number of key challenges still plague the chemicals industry. These include the country's poor electricity infrastructure and the high operating costs encountered by local manufacturers.
The existing power infrastructure in Nigeria provides limited and inconsistent coverage, notes Maele. The government has however allocated US$5 billion towards power projects and also recently announced a shortlist of companies to invest in the gas sector. It has been reported that Dubai Natural Resources World has entered into a preliminary agreement with the Nigerian National Petroleum Corporation to invest in oil and gas drilling projects and build 1,000 megawatts of gas-fired power generation.
Power infrastructure projects should have a strong impact on the chemicals sector, as they will increase demand for specialty chemicals in the short term. In the medium to long term, increased power capacity in Nigeria will lead to increased efficiencies in the manufacturing sector.
High operating costs as well as a lack of access to raw materials further restrain the development of manufacturing for a wider range of specialty chemicals, Maele adds. However, manufacturers do have some respite, as the government's local content policy aids in shielding them from competition for their products from imports.
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