Can you give us an insight into the operations of Flour Mills of Nigeria (FMN) and the role of the Agro Allied Division?
FMN started in 1960 as a single flourmill and has expanded to other byproducts of wheat such as pasta, semolina, and noodles, as well as into other fields, such as cement, fertilizer, and animal feed. In order to bag all these products, we established BAGCO, which produces more than one million bags a day. The Flour Mills Group comprises two main pillars of operation: the Food Group, which commercializes, sells, packages, retails, and markets the Group's food products, and the Agro Allied Division, which cultivates crops to provide raw materials for its processing activities. The Division was created five year ago when we identified a need to replace imported raw materials for processing food products with locally grown and processed products. We started off with farms in the North, which were growing maize and soya beans, and have subsequently added another 26 companies and operations to this division, which now supplies raw materials for most of the food products that we produce in Nigeria.
FMN is investing in backward integration along the value chain. What is the rationale behind this, and how do you assess success in this regard?
Backward integration is a new concept in West Africa and arose where countries had become so dependent on imported foodstuffs that it made sense to continue the process with the ultimate aim of effecting a transition to locally produced goods over a period of time. Each of our value chains in Agro Allied has a backward integration program, except for wheat, which is not grown on a commercial level in Nigeria due to unfavorable climatic conditions. However, even in wheat there is an element of backward integration because we produce cassava flour and that is blended with wheat flour to reduce overall wheat imports. With rice, we import, mill, bag, and distribute it throughout Nigeria and support the business with two rice farms that grow, de-husk, and mill the rice on-site. We also have palm plantations where we produce crude palm oil and palm kernels, and that is part of the supply that goes into our edible oil business.
What key challenges do you face in this sector?
One of our challenges has been to improve our crop yields. It has been difficult to source certain varieties locally, particularly for sugar, rice, maize, and soya beans. Recently we have succeeded in identifying and importing seed varieties that give us an acceptable commercial yield. There have also been infrastructural challenges with the crops that require irrigation, such as rice and sugar, which have required irrigation schemes. Proximity to water for irrigation renders operations vulnerable to flooding, and we have experienced such problems. Much of our produce has to be transported from the farm to processing plants. During this process, we have experienced deterioration, particularly with cassava, which doesn't travel well. Transport is time consuming, faces the risk of theft along the way, and incurs the high costs of roadblocks and taxes imposed throughout a journey. One way in which we have overcome this challenge involves processing closer to our agriculture centers, and then transporting the finished product to our distribution centers.
What is your take on the Agriculture Transformation Agenda (ATA)?
The ATA is critical for Nigeria in terms of rekindling its agriculture sector, and diversifying away from oil and gas. The ATA and the national industrial revolution (NIR) are two programs the President is using to drive transformation of these sectors and make the nation less dependent on the oil sector. We have aligned many of our objectives to support the ATA program. The crops, raw materials, and value chains we are in are those Nigeria needs to feed its people. Through this alignment we have become the main supporter of the ATA in Nigeria. We now have over $500 million invested in agri-processing in Nigeria and much of that came about because of the ATA.