West Africa Paint Companies on Recovery Path

Despite Nigeria making progress in its post-COVID-19 economic recovery in the last two years, paint manufacturers in the country are concerned about the impact of persistent scarcity of foreign exchange and the high cost of raw materials that they say erodes the competitiveness of their products in the African market.

Paint Manufacturers Association of Nigeria (PMAN) says with the lingering negative effects of COVID-19 on many companies’ operations, arising from the national and international shutdowns, the Nigerian government should urgently introduce and implement economic policies that catalyzes growth of paint consuming sectors such as manufacturing.

“The sector is still being challenged by scarcity of foreign exchange, skyrocketing prices of paints raw materials and packaging inputs as well as sales of finished paint products,” said PMAN chairman Samuel Babatunde in a previous statement.

He said foreign exchange shortages, attributed to low oil production and insecurity, and spike in prices for raw materials including for packaging “have made the business environment unfavourable and unattractive to investors.”’

Nigeria, being a member of the 2018-founded African Continental Free Trade Area (AfCFTA), a free trade area encompassing most of Africa, is likely to lose out its share of the continent’s market due to the uncompetitive products when the African single market is eventually actualized.

In recent months, says leading Nigerian paints company Chemical and Allied Products Plc (CAP Plc), the COVID-19 pandemic coupled with the Russia/Ukraine conflict as well as severe weather changes in North America, disrupted the global supply chain to the detriment of Nigeria’s paints and coatings industry, which relies on imported raw materials and other associated products.

“In 2021, the ongoing impact of COVID-19 combined with several extreme weather events in North America earlier in the year caused significant disruptions across our supply chains,” says Bolarin Okunowo, CAP plc managing director.

She says in the company’s 2021 report to shareholders, “the biggest challenge came from the unprecedented increase in raw material and freight costs, which put our margins and profitability under severe pressure.”

CAP plc, which in July 2021 successfully completed a merger with Portland Paints and Products Nigeria Plc (Sandtex), markets Akzo Nobel’s Dulux in Nigeria through more than 19 agents as well as promoting its own Caplux brand.

CAP plc is an example of paints and coatings companies in Nigeria, which through resilience of their business strategies, have managed to post increases in revenues and even expand operations despite the constraint of accessing foreign exchange and raw materials on time.

The company posted a 60% increase in revenues in 2021 to US$30.6 million, up from US$18.9 million in 2020, as well as achieving 41.1% growth in volume across its product portfolio.

Nevertheless, this performance by CAP could be an indicator Nigeria’s post- COVID 19 economic recovery is paying off at least for the country’s paints and coatings industry.

In 2021 the economy grew by 3.6% compared to a 1.8% contraction in 2020 according to the African Development Bank.

The economy, the bank says, is likely to decelerate 3.2% on average “due to persistent low oil production and rising insecurity.”

“Inflation is projected to remain elevated at 16.9% in 2022 and to stay above pre-pandemic levels in 2023, fueled mainly by rising food, diesel, and gas prices and persistent supply disruptions amplified by the Russia–Ukraine conflict,” the bank says in its latest Nigerian Economic Outlook report.

Notwithstanding the volatile economic condition of the Nigerian economy and its impact on the paints and coatings industry, some international market players are keen on expanding their operations in Nigeria as a springboard to enter the rest of West Africa.

Germany-based Bodo Möller Chemie Group is one of the companies that has expressed confidence in the Nigerian and the larger West African market with the announcement in February 2023 that it is expanding its operations in the region.

Earlier in 2022, the company opened its own warehouse in the Nigerian metropolitan area Lagos from where it has been supplying speciality chemicals such as adhesives, resins, additives and fillers “from leading chemical manufacturers to large and small customers in the paints and varnishes, coatings, printing inks as well as plastics industry, metal pre-treatment and DIY sectors with its own reliable logistics.”

“Africa, especially with the countries of Nigeria, Cameroon, Senegal, Ivory Coast and Ghana, is a growth market with a steadily increasing demand for special solutions for chemical applications,” says Frank Haug, CEO of the Bodo Möller Chemie Group.

“In addition to the high level of application expertise that we have built up over decades and apply in the form of personal consulting services, with our warehouse in Lagos we offer customers very short supply chains and thus a special degree of reliability,” he said.

He said West Africa markets such as Nigeria have become the latest industrial growth zones, “especially for the plastics industry, wall and facade paints, DIY, and many other sectors.”
“However, long supply chains for imports from abroad can be problematic due to the lengthy customs and import procedures,” Haug said.

Bodo Möller Chemie Group, Haug said, has a solution to the desire by West Africa local paints and coatings industry to access markets faster. This is by taking over the local warehousing of standard resins, additives and pigments for the paints and coatings industry.

Volker Oehl, the company’s director of business development, says the tendency in the African continent is to have “long supply chains due to customs and import hurdles, which we can eliminate through our own warehouse and thus realize very short delivery times.”

“Our local industry experts also provide valuable assistance to the local industry in terms of material selection and application,” said Oehl.

In 2017 Bodo Möller Chemie Group made inroads into various African markets in North Africa, where in 2017 it launched the distribution of high performance additives for paints, inks, coatings and printing inks of Dutch company Afcona Additives.

“With this cooperation we are reinforcing our product portfolio in the field of additives in North Africa by completing existing gaps,” explains company managing director Jürgen Rietschle.

Elsewhere in South Africa, Bodo Möller Chemie Group partnered with BASF South Africa in 2020 in the selling and distribution of dispersions for architectural coatings in Southern Africa and in English-speaking countries in West Africa.

“The cooperation with Bodo Möller Chemie gives us the opportunity to offer formulators our comprehensive product portfolio of polymer dispersions, resins and additives combined with technical and market expertise,” says Robert Heger, vice president business management dispersions and additives for construction and architectural coatings EMEA.

“Our aim is always to be more than a supplier of raw materials and support customers with formulation and market expertise, towards new methods, new strategies and in the creation of new market opportunities,” he added.

And as CAP’s managing director predicts, the future of Nigeria’s, and by extension West Africa’s, paints and coatings market looks bright especially with the successful recovery from the supply chain disruptions experienced in 2020 through 2021.

Even with the market uncertainties hovering over the industry largely because of the Russia/Ukraine conflict and a resurgence of COVID-19 especially in Asian markets, CAP and other players in the West Africa region are likely to ride on the resilience they have built into their supply chains and operations to ensure the business recovery and positive performance reported in 2021 continues in the short to midterm.