SHARE PRICE DOUBLED OVER PAST YEAR

Nigeria 2019 | INDUSTRY | VIP INTERVIEW

TBY talks to Paul Gbededo, Group Managing Director of Flour Mills of Nigeria (FMN), on feeding the nation, major agriculture investments, and finding the right crops for Nigeria.

What have been the latest investments in agriculture in the last few years?

Our strategic vision is to feed the nation every day. As the leading food and agro-allied business in the country, our focus has always been to build linkages and to become fully integrated right from the upstream, midstream, and downstream sectors across the food value chain. In the agro allied space, we have continued to consolidate on our investments in the five key value chains of starch, sweeteners, protein, oil and fat, and grains. In Kwara State, we have a 3,500 ha Cassava farm, where we are cultivating about 2,500 ha and producing cassava tubers in partnership with smallholder farmers and farmers groups through an outgrower scheme. We have also invested in a processing plant where we convert the Cassava tubers into high-quality cassava flour, and have very recently developed a local content product line, by introducing Golden Penny Garri to the market. Garri is a very popular staple food in Nigeria; and while the product itself is not new, this is perhaps the first attempt to produce Garri at an industrial scale.

What crops today are the most relevant in your portfolio?

We are directly involved in the cultivation of sugarcane, cassava, maize, palm, and soybean. While a significant percentage of our wheat is still imported, we have over the years invested considerably in developing local capacity. We are active supporters of the Wheat Farmers Association of Nigerian with research and development, provision of high yielding seeds and through other initiatives aimed at promoting Nigeria's vision for self-sufficiency in wheat production. Palm oil, is however, our mainstay. I trust you remember that Nigeria used to be the biggest producer of palm oil in the 1950s and 1960s. While it is no longer news that we have long lost our edge in the global market for palm oil, the government is already working hard to return to the world stage. We must however, boost local production, and become self-sufficient before we can think about exporting again. FMN has over the years invested heavily in the development of the oils and fat value chain in Nigeria. In Edo state we have a 4,500 hectares of oil palm plantation that provides raw materials for our edible oils factory.

What crops could Nigeria be self-sufficient?

Maize is a common crop across all the states of the federation. Sadly, a significant amount of Maize is still imported, today. While Nigeria produces about 10 million metric tons of Maize annually, her growing population is a clear indication that there is a huge shortfall between what is produced and the increasing mouths that needs to be fed. With the ever-increasing demand for carbohydrates; it might take some time to build capacity for self-sufficiency in Nigeria. There are however, other crops where we have significant competitive advantage, though there must be a sustained focus and renewed support to increase capacity and attain self-sufficiency and then subsequently export. Although, I must point out that improved levels of exports for certain crops are not necessarily an indicator that we have achieved self-sufficiency for that crop. Soybean is a fitting example in that regard; it is produced locally and is also exported, but we have not attained self-sufficiency. The export of soybean is purely based on import parity and the demand for non-GMO soybean. Nigeria should continue to build its capacity in crops where we have a competitive advantage for not just local consumption but with value addition. With soybean, we can extract the oil and process it as edible vegetable oil, and still be able to export the soybean meal after the extraction of the oil. This provides value addition, which is what we are doing in Flour Mills.

How would you assess the current business environment?

Things are improving at the macro economy level. Policies are now clearer, more stable and are being properly executed. Newer policies that are introduced are also more inclusive, which is extremely important to encourage invest. The government's initiative for the ease of doing business in Nigeria has been extremely helpful, especially in the areas of the much-needed infrastructural development. We have also observed improved monetary policies. Lending is now better, and rates are cheaper.

What is the role of FMN in import substitution?

First, we must lay the foundation for agriculture by looking at soft and hard infrastructure. We recently announced a partnership with DowDuPont to develop high yielding hybrid seeds for Nigeria in maize, soybean, cassava, and palm oil. The partnership will also promote modern farming techniques and practices for local production, including crop protection. There is almost no gainsaying that we need to build capacity in that space. We also need to lay the foundation for fertilizers. Already, several companies have started to move into that sector. We also need to take a closer look at proper agronomy methods – to train, and increase capacity in the proper methods of choosing the right seed, chemicals, and other modern agronomic practices. Irrigation is also extremely important as we cannot continue to rely solely on rain-fed agriculture. The government needs to build an efficient irrigation system for agriculture to truly succeed. The government also has to develop crop-processing zones as crops cannot be grown in the north and processed in the south. Agriculture needs to be linked with processes and an ecosystem needs to be established. That is our model, and our vision is to get Nigeria onto the map of developed agriculture states.

What do you expect for FMN and the general business environment in 2019?

Nigeria has just emerged from what can be easily described as some of the most challenging times for businesses. 2015 and 2016 were particularly challenging years. While we are appreciative of the improving economy, things are still somewhat fragile, although it is important to note that the government is doing everything possible to build the base for stability. 2019 can only be a growth year for us in terms of increasing our market share in the sectors that we operate. Our share price more than doubled over the last year. In the agro-allied space, we are securing our supply chain and ensuring that our core food business continues to get stronger.