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RUBBER, HISTORY, USES AND IMPORTANCE TO THE ECONOMY

Rubber is one cash crop that can not be erased from the import and export section of the agricultural extension. It is of high economic importance to a nation’s development and has a lot of value it has also impacted the industrial section as a raw material for many finished goods which has been a great help for many users.

In our present day, the demand for rubber and its by-products has increased unanimously. This has also led to the high increase of industries that has also ventured into the business of production with the raw material.

RUBBER

Our colonial masters encouraged the cultivation of rubber for exports to provide the much needed raw material to feed the processing plants in their countries.

Prior to the Structural Adjustment Programme  (SAP) in 1986, most of Nigerian rubber was exported raw in the form of sheets and lumps. The rubber belt in Nigeria extends from the eastern part of Ogun State through the central and southern part of Ondo and Edo, Delta and Cross River State up to Republic of Cameroon.

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Most of the existing rubber trees in Nigeria are over 40 years old, already over-exploited beyond their economic life of over 25 years.

The African Development Bank through Export the Stimulation Nigerian Export Loan (ADB/ESL), Import Bank (NEXIM), granted exporters in the late 80s led to the proliferation of rubber processing plants in the country.

Local demand for rubber lumps and sheets, the principal raw materials for processing crumb rubber consequently increased. As the rubber lumps and sheets were not enough to feed local processing factories, export of the raw material gradually thinned out.

In the mid 90s rubber witnessed price-crash which adversely affected Asian economies, especially Malaysia, Thailand and Indonesia, and their currencies. The spillover effect blew across rubber producing countries including Nigeria resulting in the distress of over 80% of rubber processing and exporting companies.

The industry has, however, since stabilized and trade has been increasingly gaining momentum because of its high demand, locally and internationally.

Annual Production

Annual production stands at about 150,000 metric tons out of consumed which about locally.100,000M/T are exported. The balance is

By-Products

The main by-product of rubber is crumb rubber which has wide application in the tyre manufacturing and accessories industries.

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Export Price

Price is quoted at terminal market in Asia, London and New York. Now relatively stable after the price crash in the mid 90s, local price is dependent on international market price and exchange rate.

Payment is made in dollars and pound sterling, convertible and stable currencies. Price is a function of quality issues, market forces (demand and supply) and exchange rate.

It requires substantial investments in processing plant to be competitive in the business.

Marketability

Rubber is readily marketable if there are no quality issues. It is exported mainly by factory owners and processors. The world market demand keeps increasing, thereby, putting pressure on prices.

RUBBER

Export demand far exceeds supply and is speculated by market analyst to continue upward swing in the nearest future.

Poor quality products, due to usage of crude and outdated rubber processing machinery/equipment and processing techniques, affect marketability of Nigerian rubber in the international market.

Trade Volume

Trade is not much to accommodate many buyers and sellers. Also the scarcity of raw materials limit production of crumb rubber Inadequate raw materials cause fierce competition and price war amongst factory owners in the industry.

Like other major export commodities, government is making efforts and initiatives to boost production of the commodities.

It is expected that volume of export will increase significantly in the next few years, thereby boosting foreign exchange earnings from the commodity. With over 8 million hectares of suitable land mass for rubber cultivation, Nigeria has the potential of generating over $5billion annually from rubber exports.

Reference Markets

Local reference markets are Sapele, Warri and Ughelli where there are many processing plants, they are Malaysia, Thailand and Indonesia

Business Variables

Business variables are price (local and international), exchange rate, interest rate and weather conditions. The variables swing from time to time either in favour of or against farmers and traders.

Trade Contracts/ Quality Issues

Like other major export commodities, trade contracts are executed by sellers and buyers, which translate into payment if the terms and conditions of the contract are met. Quality requirements are stipulated in the contract or Letters of Credit as the case may be. Poor quality attracts discounts, while good quality attracts commensurate price.

 

International Quality Indices

 Dirt retained on 45mm aperture

Ash content

Volatile matter

Wallace rapid plasticity

Minimum initial value

Plasticity Retention Index (PRI)

Nitrogen content

Quality that falls short of these parameters attracts discount in price. Conversely, higher quality attracts premium price.

Packaging

It is packaged for export in wooden crates.

Export Potentials

Rubber exports are a major revenue earner for Malaysia, Thailand and Indonesia. During the colonial era, it was a major source of revenue for Nigeria until the discovery of oil and gas.

Given the on-going government efforts to boost production of major agricultural commodities, export potentials for rubber is

Profitability

Profit margins of quality are considered of goods, good. Seasonality, Profitability market is, however, forces( function and supply) and prudent management of overheads (demand and business variables.

Mode of Export

The mode of export is formal, through the Ports by Sea as per contract specifications in accordance with government export procedures and documentations.

Proceeds are repatriated through the banks in line with government stipulated guidelines.

 

Trade Associations

National Rubber Association of Nigeria is the umbrella association for farmers, merchants and processors. There are also pockets of small associations at local levels. For more information, contact the Federal Ministry of Commerce.

Business Risks

Quality issues, adverse movement in price, foreign exchange fluctuations, non payment and weather conditions constitute major risks in the business for which traders have no control.

Seasonality

Like cocoa, there are two seasons: main and light season. Production is more regular and higher during the main season.

The main season runs from October to February/March while the light seasons runs from April to July.

 

 

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