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Tag: diversification

  • Sad tale of Nigeria’s diversification drive

    Nigeria’s push to leverage the non-oil export sector to diversify the economy, earn foreign exchange and create jobs has continued to flop. Apart from the sector’s poor performance in the last quarter, the recurring rejection of Nigeria’s key export-bound agricultural products at the international market is hurting the diversification drive. Experts and operators argue that unless government agencies improve the quality of export products and address the nation’s decrepit infrastructure, among others, the sector will not be sufficiently galvanised to contribute to economic diversification, Assistant Editor CHIKODI OKEREOCHA reports.

    Things are not looking up for Nigeria’s push to reposition the non-oil sector and diversify the economy. Prospects of leveraging the sector to give impetus to the country’s transition to a non-oil economy are bleak. Apart from the sharp drop in the volume of non-oil exports, the rejection of Nigeria’s export-bound agricultural products at the international market has yet to abate.

    According to data from the National Bureau of Statistics (NBS), the value of Nigeria’s non-oil exports dropped from a high of N577.62 billion in the first quarter of 2018 to N163.33 billion in the third quarter of the same year. It was a 71.72 per cent drop. The total non-oil exports, which stood at N577.62 billion in the first quarter, fell to N218.4 billion in the second quarter, before it further went down to N163.32 billion in the third quarter of 2018.

    According to the NBS, the non-oil exports used in the computation includes agricultural produce, raw materials, solid minerals, manufactured goods and energy goods. The Bureau was emphatic that export in the third quarter was still oil dependent, with the country earning N4.146 trillion from crude oil export during the quarter under review. “In the third quarter, crude oil remained the majority of total exports (85.4 per cent),” it said.

    The NBS added that non-oil products accounted for 3.4 per cent, while other oil products accounted for 11.20 per cent of total exports in the quarter under review. It, however, put the total value of Nigeria’s external trade at N9.025 trillion during the third quarter of 2018, compared to N6.90 trillion in the second quarter, representing an increase of N2.2 trillion or 30.7 per cent.

    The NBS report, which clearly shows that the non-oil sector is still grappling with formidable obstacles and is currently not in good shape to drive economic diversification, said total export component of this trade was N4.9 trillion. This represents an increase of 7.8 per cent over the second quarter of last year, and 35.7 per cent over the third quarter of 2017.

     

    A sector hit by export rejections

    As if the about 72 per cent drop in the value of Nigeria’s non-oil export trade is not enough setback for an economy still battling to recover fully from recession, requiring a vibrant non-oil sector as wedge, the continued rejection of the country’s export bound agricultural products by the importing countries may have added to the sector’s woes.

    Just last week, Vietnamese buyers rejected 37, 000 tonnes of Nigerian cashew because of the high price of the commodity. The Deputy Executive Secretary, Federation of Agricultural Commodity Associations of Nigeria (FACAN), Mr. Peter Bakare, said the product’s price volatility was due to lack of conducive business environment, which made the price of raw cashew from Nigeria to be higher than the price of finished product in the international markets.

    “The banks in Vietnam that usually provide the loans to their buyers for purchase complained that the prices of the finished products are less than the price of raw materials.

    “The Vietnam financial institutions, therefore, backed out of the business, stressing that it is not a profitable venture for its farmers, so the produce are stuck in Vietnam now,’’ Bakare said, adding that over 67, 000 tonnes of cashew were also still lying in the warehouse in Nigeria.

    For that cashew export misadventure, Nigeria lost about $79, 550, 000, about N28 billion. The price of processed cashew, according to operators, is about $2, 150 per ton at the international market.

    But the association’s President, Dr. Victor Iyama, blamed the botched cashew export business on Nigerian and foreign produce merchants who he accused of engaging in speculative buying in the Nigerian produce market. According to him, people were in the habit of rushing to the market and just paying any price on produce, no matter how high.

    The FACAN president also heaped the blame on foreigners who, according to him, come into the Nigerian market and overprice the produce because they want to get ahead of the competition. “It is a lesson for us that we should not just rush into the market and buy at any price we see, and escalate prices in the process,” he said.

    To prevent a reoccurrence, Iyama said: “The government needs to check the influx of foreigners into the Nigerian produce market. They come in because they have money and the moment they see somebody pricing produce, they go ahead and offer to pay a higher price. Eventually, the produce price becomes very high locally.”

    He also made a case for value addition on Nigeria’s export products. Hear him: “I am advocating that more of our cashew should be processed and consumed locally. Also, we should sell more of the processed ones instead of raw cashew.”

    While pointing out that cashew was not on the terminal market, so the price was subject to negotiation, Iyama said people could renege on the contract they made with the sellers, giving all kinds of excuses. “They can say, for instance, that the shipment came late, especially with the situation we are currently experiencing at the ports,” he said.

    For now, it may be difficult, according to Iyama, to put a figure to the loss suffered by operators as a result of the rejection of the 37, 000 tonnes of Nigerian cashew until the new cashew season when it will be possible to assess what was sold and leftover, as well as the profit and the losses.

    What is clear, however, is that the rejection of the consignment dealt a severe blow to Nigeria’s push to transit to a non-oil economy by riding on the crest of a vibrant non-oil export sector. This is so because cashew nuts have become Nigeria’s leading agricultural export product.

    According to the NBS, cashew nuts in shell is Nigeria’s leading agricultural export product for the second quarter of 2018, with an export value of N38.5 billion, from N5.03 billion in the first quarter of 2018.

    After losing the top position to sesame seeds since the third quarter of 2017, cashew nuts bounced back to the top of Nigeria’s agricultural export list with a growth of 665.4 per cent from the first quarter of 2018.

    Cashew nuts in shell also accounted for about N9.8 billion in the third quarter of last year, compared to about N38.4 billion in the second quarter of last year. The nuts were exported mainly to Vietnam and India in values worth N4.8 billion and N4.7 billion.

    The cash crop is grown in 19 states, including Abia, Anambra, Akwa Ibom, Benue, Cross River, Delta, Ebonyi, Edo, Ekiti, Enugu, Imo, Kogi, Niger, Nassarawa, Ogun, Osun, Oyo, Taraba and Kwara. And Nigeria, which produces 120, 000 tonnes of cashew nut yearly, also has the capacity to produce more.

    This must have been why cashew made the list of Nigeria’s 11 strategic products with high financial value to replace oil. Others include palm oil, cocoa, soya beans, rubber, rice, petrochemical, leather, ginger, cotton and shear butter.

    Under its Zero Oil Plan, which targets to replace oil as a major foreign exchange earner by boosting non-oil export, the Federal Government through the Nigerian Export Promotion Council (NEPC) had set an ambitious target of realising $100 billion revenue from non-oil export annually.

    Under the plan, which hopes to position the sector to contribute about 20 per cent of the nation’s Gross Domestic Product (GDP), the NEPC identified 22 priority countries as markets for Nigeria’s 11 strategic products with high financial value to replace oil.

    According to NEPC’s Zero Oil Plan, “Nigeria’s trade has been largely driven by exports of petroleum products, which contribute about 17 per cent to GDP, signifying about 90 per cent of total merchandise exports and more than 65 per cent of government’s income.

    NEPC Executive Director/Chief Executive Officer Mr  Segun Awolowo was emphatic that if Nigeria could effectively key into the council’s plan of taking advantage of the opportunities in the agricultural sector, there would not be any need to depend on oil revenue for survival.

     

    The yam export misadventure

    The botched cashew export business is not the only serious setback that has hurt Awolowo and indeed, the Federal Government’s plan to latch on agricultural produce export to wean Nigeria of its dependence on oil revenue for survival. The performance of the country’s widely celebrated yam export initiative has also not been sterling.

    For instance, the Chairman, Technical Committee on Nigeria Yam Export, Prof. Simon Irtwang, said Nigeria was unable to achieve 50 per cent of its target to export, about 5, 760 tonnes of yam, to different countries in 2018. “We are still targeting 5,760 tonnes for exportation this year, which was the same target last year,” he said, in Abuja.

    Although he noted that there were no cases of yam rejection at the international market in 2018, Irtwange, who is also the President, Yam Farmers, Processors and Marketers Association of Nigeria, said the committee was unable to do up to 50 per cent of last year’s target because of some difficulties and logistics problem, which the committee was vigorously trying to resolve.

    Irtwange specifically said the 1986 Export Prohibition Act and other logistics issues were hindering successful operations of yam exports in the country. Hear him: “……The challenge we are having is because there is an Export Prohibition Act in place. Once they (UK authorities) see our yams there, they will say it is contraband because they are aware of the ban on export of yam out of Nigeria because our country prohibits it.”

    He, however, noted that his committee had written to the Ministers of Agriculture and Trade about the Act to put pressure on the National Assembly (NASS) to revisit it. He said although, some efforts have been made at the NASS, his committee does not know where the Act is currently hanging at the NASS.

    Irtwange, however, appealed to the government to provide incentive for farmers to produce sufficient yams across the country this year, as this will encourage farmers to go into large scale farming.

    But it is doubtful if a rethink of the 1986 Export Prohibition Act by the NASS as canvassed by Irtwange would change Nigeria’s uninspiring yam export narrative. For one, the Act is only a fraction of the challenges facing non-oil exporters, especially agro- exporters.

    Other constraints said to be holding operators down include dearth of infrastructure, especially inadequate warehousing and storage facilities, which lead to huge post-harvest losses; difficulties in accessing foreign exchange for export; inefficient marketing arrangements which make it difficult for agro-exporters to market their products.

    Others include poor power supply, high port charges, lack of access to low-cost funds from banks, poor logistics and input support etc. The delay in the implementation of the reviewed Export Expansion Grant (EEG) is also said to have forced many exporters to stop using their money to export.

    The alleged failure of the relevant ministries and agencies to address these challenges is believed to be responsible for Nigeria’s continued poor outing in the non-oil export business, particularly yam export.

    At present, Nigeria is the biggest producer of yams in the world, accounting for 67 per cent of the tuber staple, according to the Minister of Agriculture and Rural Development,  Audu Ogbeh. But despite her supposed comparative advantage in yam production, Ghana, her less resource-endowed neighbour, currently accounts for about 94 per cent of total yam exports in West Africa.

    Ghana’s dominance of the sub-region’s yam export market also covers markets in the US, Canada, UK and Europe. Those knowledgeable in the dynamics of international agro export recall, for instance, that between 2005 and 2010, yam production in Ghana contributed about 16 per cent of the country’s GDP.

    Since then, the Government of Ghana has moved a notch higher, developing the National Yam Development Strategy and Yam Export Strategy. This was to increase her yam export from the current 35, 000 metric tonnes to as high as 400, 000 metric tonnes. It was on the strength of this strategy that the country targeted revenue of about $5 billion in 2018.

    However, while Ghana’s yam export trade, which is backed by robust regulation and guidelines, employs millions of her citizens, Nigeria’s first widely-celebrated attempt to earn a minimum of $8 billion annually from yam exports ended in a fiasco. Under her yam export initiative, which was flagged off on June 29, 2017, in Lagos, the first batch of 72 tonnes of yams was exported to Europe and the US.

    The shipment, which left the shores of Nigeria amid much fanfare, was in three containers of 24 metric tonnes each; one container went to the UK; the rest, US. Regrettably, however, three months after the shipment to the US, the authorities there rejected the yam, citing poor quality of the consignment.

    Although Ogbeh and other relevant agencies in the sector vowed to take drastic measures to halt the further rejection of Nigeria’s yams and indeed, other export-bound agricultural products, the failure of the Technical Committee on Yam Export to achieve its 2018 target and the rejection of Nigeria’s cashew export by Vietnamese buyers are indications that the country has yet to get its act right.

    Experts, who spoke with The Nation, said Nigeria’s recurring failure to adopt a quality management system approach towards improving the quality of her agricultural produce exports is largely responsible for the non-oil export sector’s woes particularly the yam export initiative.

    For instance, a Quality Management Practitioner and National President of Association of Systems Management Consultants, Mazi Colman Obasi, said Nigeria’s lack of a national quality infrastructure was responsible for her poor showing at the international commodity market.

    According to him, a national quality infrastructure is a system of institutions, which jointly ensure that products and services produced in the country meet predefined specifications. It also provides technical support to companies so they can improve their production processes and ensure compliance with regulations or international requirements.

    But as things are, Nigeria has yet to put these structures in place, otherwise Irtwange would not have suggested that because of the Export Prohibition Act, “It is even better to label our yams Ghana yam for it to be accepted in UK markets.’’

    Even the Standards Organisation of Nigeria (SON) Director-General, Mr. Osita Aboloma, echoed the same embarrassing sentiment when he reportedly said due to the global acceptance of yams from Ghana, Nigerian yams are usually relabelled Ghana yams and exported to the US from Ghana.

     

    Beans, cocoa also hit

    Cashew and yam are not the only agro-allied products from Nigeria to suffer rejection and fail to meet export target, respectively. Recall, for instance, that because of lack of national quality infrastructure, the European Union (EU) in June 2015 banned the importation of Nigeria’s dried beans on grounds that it contained high level of pesticides considered dangerous to human health.

    Although the relevant government agencies said they were working to get the EU lift the ban, the European body was not impressed by measures taken by Nigeria to resolve the issue. Accordingly, it extended the ban by another three years, citing the continued presence of dichlorvos (pesticide) in dried beans imported from Nigeria.

    While the authorities and operators in the non-oil export business were still ruing the EU’s extension of the ban on importation of dried beans from Nigeria by three years, the US also added to Nigeria’s woes when it banned the importation of Nigeria’s cocoa into its market. Again, lack of functional laboratories for testing and certifying products before export was cited as reason.

    The consensus of experts is that a vibrant non-oil sector was fundamental to economic diversification, rapid revenue base expansion, sustainable growth and employment generation. They, however, argue that Nigeria has consistently failed to get its act right by putting in place functional laboratories for testing and certifying products before export.

    The Founder, Centre for Cocoa Development Initiative, a Non-governmental Organisation (NGO), Mr. Robo Adhuze, noted, for instance, that lack of seriousness by the Federal Produce Inspection Service (FPIS), the agency responsible for checking and certifying agro-allied products leaving the country, was robbing Nigeria of the benefits of a vibrant non-oil export-based economy.

    According to Adhuze, “Quality standards have moved from physical standards to biological standards, but FPIS appears not be up to speed with this reality.” He recalled, for instance, that about five years Ghana suffered the same fate as Nigeria’s when over 2, 000 metric tonnes of her cocoa beans were rejected by Japan.

    Japan’s Chocolate and Cocoa Association of Japan appealed to Ghanaian authorities to take immediate steps to reverse the excessive agro-chemical residues found in cocoa beans exported to the Asian country.

    Adhuze said Ghana, a country famous all over the world for its very high quality cocoa beans, rose to the challenge by putting in place appropriate and adequate measures to guarantee the quality of her cocoa products for export.

    He expressed disappointment that while Ghana’s standards regulatory authorities took steps to reverse the excessive agro-chemical residues found in their cocoa beans, Nigeria was unable to do so. The result, he said, was the harvest of import ban now threatening the non-oil sector, especially in the area agro-allied products.

  • U.S. advises Fed Govt on economic diversification

    UNITED States (U.S.) Ambassador to Nigeria Stuart Symington has advised Nigeria to diversify its economy toward pursuing deeper growth and development.

    Symington gave the advice at the Nigerian-American Chamber of Commerce (NACC) Annual Dinner and Inauguration of Otunba Oluwatoyin Akomolafe as NACC’s 18th President in Lagos.

    Symington, in a statement yesterday by Ebuka Ugochukwu, the Communication Manager, Nigerian-American Chamber of Commerce said that the Federal Government should reduce its dependence on crude oil.

    He said: “Let us make the Nigerian brand what God has made it which is the green and white. There is need to diversify the economy in order to pursue development and a better future.

    “The entire world is getting old while Africa and Nigeria is getting younger, because they are growing six times faster over the next three years, faster than even India or China. The question about this growth being a blessing or a curse, is dependent on us as a country.”

    According to him, Nigeria has the opportunity to leverage the very best of U.S-Nigeria relationship, joined together by ties of blood, education, investment and other factors to unite it.

    The envoy said: “We all have a secret opportunity to do well alone and to do good together.

    “Nigeria is a land of the free and the home of the brave. Changing the world and making it a better place is a task left for us all to do.”

    A former Chairman of Nestle Foods Nigeria, Chief Olusegun Osunkeye, said that Nigeria has to unearth the golden opportunities for economic growth and development with agriculture and ICT which were viable alternatives to crude oil export.

  • The need for economic diversification

    As Nigeria continues to face revenue challenges despite high crude oil prices, there arises a need for the federal government to urgently implement policies aimed at growing and diversifying the country’s shaky revenue base.

    Nigeria’s 2018 budget deficit currently stands at N1.954trillion, a reduction of N56billion over last year, on the back of expected increased revenue from oil. Moreover, according to the Debt Management Office (DMO), the nation’s external debt figure stands at N6.779 trillion whilst domestic debt was at N12.15trillion in June 2018.

    However, the ugly truth is that, in a matter of years, revenue from oil will be a thing of the past and both federal and state governments are ill-prepared for this imminent crisis. A look at the sequence of events which unfolded in Osun State when the oil price tanked, leading to a reduction in FAAC, reveals the state’s struggles to pay staff salaries for almost a year.

    A bone of contention at federal government level at the moment is the proposed sale of the Ajaokuta Steel Company, ASC, under the privatisation programme aimed at raising more money to implement the country’s 2018 deficit-based budget. This is coming on the heels of the recent sale of the Nigerian Security Printing and Minting Company, NSPMC, to the Central Bank of Nigeria for similar reasons.

    Key national assets like the ASC and NSPMC ought to be guarded as a projected source of long-term revenue generation, but perhaps that argument is null in light of audit reports that a hefty injection of approximately $652 million is required for the revitalisation of the steel factory.

    The reality in Nigeria today is that, state governments struggle to keep up with their expenses and as a result, the gap between the income of most states and their expenses widens daily. For the most part, investment banks assist state governments by financing these deficits. However, this is not a sustainable practice as expenses continue to outgrow income.

    Major sources of revenue for most states in Nigeria are mainly external; the Federal Account Allocation Committee (FAAC), Joint Account Allocation Committee (JAAC), Value-Added Tax (VAT), Dividends and Grants etc., and internal sources; Internally Generated Revenue.

    However, there is a third source of funding/revenue which has remained relatively untapped up until now, and this is the funding from the private sector especially those backed by business-type activities or the state’s IGR (i.e. debt serviced from future cash flows from IGR and business -type activities). Also states can partner with the private sector by investing in projects/businesses (by establishing a state corporation), allowing the private sector to run these companies and the state government can re-coup its capital as well as returns from these companies; an example is the Lagos State Municipality Waste Management Company Limited.

    Looking at the external sources of revenue mentioned earlier – FAAC, JAAC, VAT, Dividends and Grants – the only area we haven’t realised revenue in, as a nation, is dividends, as state governments hitherto have not made significant investments in companies and private sector corporations.

    A valid example of the benefits of dividends is the Gombe State and GTBank parallel; Gombe State was established in 1996 with FAAC allocation of more than 100 million naira.

    In 1991, GTBank began commercial banking operations with less than 100 million shareholders’ funds. Today, Gombe State has one of the lowest internally generated revenue of N5.272 billion, whereas GTBank has gross earnings of N419billion and net profit of N169billion. If the state of Gombe had invested up to 50% in GTB in 1996, Gombe would not be in the state it is in right now, just by getting dividends from a company like GTBank as a significant shareholder.

    One key point to note is that, Lagos State currently has the highest internally generated revenue (IGR). Its budget stands at N1.4 trillion for 2018. Lagos State is the only state that has been innovative about the structure of financing its infrastructural needs. The state appointed Lagos Municipality Waste Management Company Limited (MWMCL) as its waste management vehicle and went ahead to issue a green bond backed by an ISPO on the IGR of the state. This is the first time a bond is not being tied to the ever-fluctuating oil price and it remains the single biggest investment in the environment.

    Other states need to realise this is a pioneer move that Lagos State has embarked on, one which they equally need to follow suit. Public Private Partnerships are increasingly being modelled in countries around the world and are not only cost-effective, but if properly structured, will provide a viable profit-sharing system and revenue stream capable of bridging and eventually solving Nigeria’s budget deficit issues.

     

    • By Kayode Fadahunsi, CEO, Prosperis Holdings, Lagos.

  • Seplat targets acquisitions, diversification to drive growth

    Seplat Petroleum Development Company Plc plans to acquire additional assets that would help in strengthening and diversifying its growth base as the indigenous oil and gas company seeks to create greater values for stakeholders.

    At the annual general meeting yesterday in Lagos, the board of Seplat said the company will explore both organic and inorganic opportunities to deliver its growth strategy.

    Chairman, Seplat Petroleum Development Company Plc, Dr Ambrose Orjiako, said Seplat has always been an ambitious company and it continues to see Nigeria as a world-class opportunity set.

    “In addition to our organic growth opportunities, we maintain our clearly defined strategy of balancing this with inorganic expansion and will leverage our competitive advantages to seek out carefully considered, price-disciplined and value accretive acquisition opportunities,” Orjiako said.

    He noted that the company had in 2017 focussed on stabilising its core business and successfully repositioned to resume a growth trajectory. Seplat recorded profit before tax of $44 million.

    According to him, Seplat moved into the current business year on a substantially firmer operational and financing footing with a high-quality portfolio that offers a material and predictable production base combined with a large inventory of production and development drilling opportunities that it plans to capitalise on.

    Chief Executive Officer, Seplat Petroleum Development Company Plc, Mr. Austin Avuru, said the proactive and decisive management as well as strong underlying fundamentals have seen Seplat emerging from an exceptionally challenging period with a much fitter and stronger business that is equipped to deliver long-term value for shareholders.

    He noted that gas has remained a key revenue driver, which underlines Seplat’s gas domestication strategy and the robustness of gas as a key source of growth and diversification.  Seplat’s gas business contributed $124 million, 27 per cent of total revenue in 2017.

    “We look ahead into 2018 and beyond with a strong sense of optimism and from a position of both strategic and financial strength. Every aspect of our business and management has been stress tested in the extreme during the past two years and I am delighted to be able to say that we have proved our ability to withstand severe external shocks to the business,..” Avuru said.

    He outlined a three-pronged growth strategy that includes optimising the large inventory of oil production drilling opportunities to grow production, capitalising on early mover advantage in the domestic gas sector to further grow upstream and midstream production and processing capacity and to use its good financing position to selectively consider and executive value accretive acquisition opportunities.

  • Diversification: Agric sector growth as panacea

    To World Bank Consultant Prof Adebiyi G. Daramola, ending food importation cannot be a walk in the park. The immediate past Vice Chancellor of the Federal University of Technology, Akure (FUTA) said concerted efforts must be made to grow agriculture by seven per cent to the rewind poverty. In his lecture entitled: “Sustainability of growth and the future of agriculture in Nigeria”, the professor identifies the problems and suggests the way forward. The paper was delivered in Abuja at the Agriculture and Food Summit organised by Vintage Press publishers of The Nation.

    According to Wikipedia, Nigeria is a middle-income, mixed economy and emerging market, with expanding manufacturing, financial, service, communications, technology and entertainment sectors.

    It is currently ranked as the 30th-largest economy in the world in terms of nominal Gross Domestic Product (GDP), and the 23rd-largest in terms of purchasing power parity.

    It is the largest economy in Africa; its re-emergent agricultural and manufacturing sectors became the largest on the continent in 2013 before the oil prices crash and subsequently the recession. It produces a large proportion of goods and services for the West African subcontinent.

    Previously hindered by decades of macroeconomic mismanagement under the military, economic reforms of the democratic governments have put Nigeria back on track towards achieving its full economic potential. Under democracy, Nigerian GDP at Purchasing Power Parity (PPP) has more than tripled from $170 billion in 2000 to $451 billion in 2012, and an all-time high of $568.5 billion in 2014 before the decline owing to recession.

    Although estimates of the size of informal sector (which is not included in official figures) put the actual numbers closer to $630 billion. The latest official estimates put Nigeria’s GDP as at 2016 at $405.5 billion, followed by Egypt at $336.3 billion and South Africa at $294.8 billion for the same period.

    Correspondingly, the GDP per capita doubled from $1400 per person in 2000 to an estimated $2,800 per person in 2012 (again, with the inclusion of the informal sector, it is estimated that GDP per capita hovers around $3,900 per person). (Population increased from 120 million in 2000 to 198 million in 2018). These figures were revised upwards by as much as 80 per cent when metrics were recalculated subsequent to the rebasing of its economy in April 2014.

    Although oil revenues contribute about 70 per cent of government revenues, oil only contributes about nine per cent to the GDP. Nigeria produces only about 2.7 per cent of the world’s oil supply. Although the petroleum sector is important, as government revenues still heavily relies on this sector, it remains a small part of the country’s overall economy in terms of both employment and contribution to GDP.

    According to a Citigroup report published in February 2011, Nigeria will get the highest average GDP growth in the world between 2010 and 2050. Nigeria is one of two countries from Africa classified among 11 Global Growth Generators countries. Even at projected economic growth rate of 2.1 per cent for 2018 International Monetary Fund (IMF), Nigerian economy is still considered to be robust.

    The most recent initiative at revamping the Nigerian economy by the current administration is the Economic Recovery and Growth Plan 2017-2020 (ERGP). This bold initiative is resting on certain principles which include focus on tackling constraints to growth, leverage the power of the private sector, promote national cohesion and social inclusion, allow markets to function and uphold core values. These principles are to guide the country in delivering three broad objectives of the ERGP, namely, restoring growth, investing in our people and building a globally competitive economy. The good news now is that the country is out of recession, the price of crude oil is climbing, external reserve is growing and foreign direct investments are flowing into the country.

     

    The agriculture sector

     

    Agriculture in many developing countries like Nigeria remains the highest employer of labour. It has been estimated that approximately 30 per cent of Nigerian population of 198 million are employed in agriculture. Nigeria ranks sixth worldwide and first in Africa in terms of farm output.

    The sector accounts for about 18 per cent of GDP and almost one-third of employment. Nigeria has 19 million heads of cattle, the largest in Africa.

    Though Nigeria is no longer a major exporter, due to local consumer boom, it is still a major producer of many agricultural products, including: cocoa, groundnuts (peanuts), cotton, rubber and palm oil.

    In the colonial era, Nigeria’s agricultural policy was export cash crops oriented because the colonial masters depended on the country to produce raw materials for their agro-based industries.

    At independence and few years after independence, the country’s population was about 55 million people and domestic production of food crops was enough as at that time. No food import bills were recorded and export cash crops were bringing foreign exchange to the regional governments to finance their capital expenditure budgets. Then, the civil war period of 1967 – 1970 constituted a setback for the growth of agriculture sector. Through the 1970–1999 era, the agriculture sector witnessed serious decline. The military government relying on the oil windfall found it easier and cheaper to import food items into the country than to develop the rural areas and promote agricultural transformation.

     

    A typical case of ‘the Dutch disease’

     

    The first decade of the democracy witnessed some modest but largely uncoordinated efforts to revamp the agriculture sector. Therefore, there were some successes and growth recorded within the sector. They were largely due to favourable weather and efforts of the Federal Government. However, in the last seven years, cocoa production, mostly from obsolete varieties and over-aged trees has increased from around 180,000 tons annually to 350,000 tons. This increase is due mainly to favourable weather conditions and improved management, especially production inputs.

    The agricultural sector suffers from extremely low productivity, reflecting reliance on antiquated methods. Agriculture has failed to keep pace with Nigeria’s rapid population growth, so that the country, which once exported food, now imports a significant amount of food to sustain itself.

    However, efforts are being made towards making the country food sufficient again. The rice revolution has reduced our dependence on importation by at least 90 per cent. Thanks to Kebbi, Anambra, Ebonyi, Nassarawa, Lagos, Ekiti and some other states that have stepped up rice cultivation. The business model of LAKE (Lagos-Kebbi) Rice remains a reference point. At many social events now, local rice is always the favourite menu.

    Also the substitution of HQCF in the bakery and confectioneries industry pioneered by the ATA with the active support of the Federal Institute of Industrial Research, Oshodi (FIIRO) has also significantly boost demand for cassava flour.

    So many other value chains have also received some boost, e.g. soyabean. Just that their results have not been as successful as that of rice and cassava. The major agricultural products include cassava (tapioca), corn, cocoa, millet, palm oil, peanuts, rice, rubber, sorghum and yams.

    Since 2003, livestock production has also been increasing, in order of metric tonnage, featuring eggs, milk, beef and veal, poultry, and pork, respectively. Since that same year, the total fishing catch was 505.8 metric tons and also growing. Not as much efforts have been expended on the livestock subsector as has been done on crops.

    Therefore productivity growth has not been as high within the livestock subsector. In fact, some people have argued that the old known cattle routes have been eliminated due to pressures of physical development and urbanisation. This development has been identified as one of the reasons for the farmers/herdsmen clashes not only in Nigeria but all over Africa where open grazing is the culture.

    However, ranching has been tested to lend itself to better cattle productivity and improvement based on evidence from more developed countries have suggested.

     

    Challenges of the agricultural sector

     

    The agriculture sector in Nigeria is unable to fully unlock its potentials due to so many reasons that we need to highlight here. They are not presented here in order of importance. Nonetheless, addressing each of them simultaneously will unlock the potentials and can even make the sector grow by double digits annually.

     

    Agricultural policy

     

    In the last seven years, Nigeria has been getting the agricultural policy right, starting with the Agricultural Transformation Agenda (ATA) and now the Agricultural Promotion Policy (APP). The best approach is to constantly review the policy to make it more favourable and responsive to developments in the macroeconomic environment and even outside world. There is the need for a standing policy group that will not only be working on agricultural policy but will be constantly interfacing with the economy-wide policy group to ensure that no inconsistencies are allowed. There had been instances in the past where taxes, tariffs and interest rates were not harmonised leading to negative impacts on agriculture.

     

    Technology

     

    Deployment of technology within the agriculture sector in Nigeria is still abysmally poor. Our agriculture sector is yet to take advantage of modern technology. One major reason for this state of affairs is the low electricity generation within the country. Many modern agricultural technologies these days are electricity-dependent and Nigeria will not be able to benefit from them.

     

    Infrastructure

     

    One major infrastructure that discourages investments in agriculture is the absence of rural feeder roads. It hampers market linkages as farm produce cannot be easily evacuated and taken to nearby markets. This problem has led to many on farm losses, which was estimated to be as high as 40 per cent of production. Electricity from the grid is another major problem both on farm and for value addition. The absence of electricity has made it impossible for some useful technologies to be adopted. As the population continues to grow at about 2.5 per cent annually in Nigeria countries like China and India have invented technologies that allow less land to be used to produce more farm output. However most of them require electricity for deployment.

    Storage facility like silos, barns is another major setback for agriculture. There are periods of surplus and scarcity based on seasons. As a result of the lack of facility for storage small farmers become price-takers. Similarly, the absence of dams has restricted the number of cropping and made farming to be weather-dependent and solely rain-fed agriculture.

    The opportunity for dry season rice farming in some states of the North have made farmers to be busy and engaged all year round.  This constitutes part of unlocking of potentials. The guaranteed market offered by LAKE Rice also offers off-taker opportunity.

     

    Credit facilities

     

    Agricultural credit is very important in farming (being a high risk enterprise because it depends on weather and other hazards that are outside the control of the entrepreneur) but not attractive to lenders. So, for a very long time, investment funds have been very scarce for the agriculture sector. Many agriculture businesses can’t be profitable at the 25 – 30 per cent charged by commercial banks. The Agricultural Bank which is the development bank was grossly underfunded and operated more like public service than a for-profit bank. NIRSAL came on stream with ATA and sponsored by the Central Bank of Nigeria (CBN) as an intervention for agricultural financing has significantly mitigated risks that hitherto Nigerian banking sector has been wary of. It protects both the lender and borrower, coupled with agriculture insurance. As a result, a lot of private sector lending has been flowing into the agricultural sector making it a very good intervention

     

    Land tenure

     

    In many states of Nigeria, especially the southern part, the ownership and control of land, although vested in state governors according to the land use decree, in practical terms still resides with families. Even states have to pay compensations to land owners if it is to be acquired for public good.

    Therefore, there are still challenges associated with prospective farmers. Access to sufficient land required for profitable and commercial agriculture has always been, and remains a binding constraint. The irony in southern Nigeria is that, those who own the land, usually through inheritance, are not interested in cultivating it or are absentee landlords, while those that genuinely want to farm, don’t have access to the farmlands.

    A presidential committee, previously headed by Prof Akin Mabogunje, has been busy working on this issue. The leadership of the committee has recently changed to Prof Peter Adeniyi.  The committee is reviewing the land use decree with a view to removing all the impediments preventing the availability of land for both public and private uses. It is important to note herein that this factor is one of the serious constraints preventing new entrants from going into farming. The exorbitant cost of buying the land is a disincentive to budding entrepreneurs in the agriculture sector.

     

    Markets

     

    The organisation of agro-inputs dealers under the ATA has been a major breakthrough for agricultural sector in Nigeria. Inputs (such as fertilizers, credit, improved seeds, agrochemicals, tractors, etc) have been privatised and seriously catalyzed to stimulate efficient distribution for different value chains. Examples include the e-wallet system, CBN-supported NIRSAL (formal credit) and so many innovative systems.

    Output (products) of different crops value chains have been developed to the extent that derived demand for farm products have gone up with on and off farm processing using adaptive and modern technologies. The industry and market linkages involve the development of off-takers that use primary farm products as inputs in their production processes.

    The initiatives to boost agricultural business models of out-growers with the support of robust extension services led to revolution and growth in the farming sector. Standards (grades, cartels, barriers) are some of the quality challenges that the markets were facing in accessing organized markets locally and overseas.

    Part of the intervention of the government under ATA was to ensure that standardisation, grading and quality control were integrated into the agricultural products market. These various efforts led to tremendous improvement and growth in the agriculture sector of Nigeria. The new agricultural policy recognizes these and is only trying to build on the solid and successful foundation laid by the ATA.

     

    Support institutions

     

    In order for any system to succeed the importance of institutions cannot be over-emphasized. The design team of ATA recognized this important factor in transforming the agricultural sector. Many of the institutions met were dysfunctional, whereas, the sector could not function well without first reforming and strengthening some of the institutions.

    The team proposed the steps to be taken and many of the institutions were reformed. Examples of some of the institutions reformed include the National Seed Service, Extension services, Cooperative department, Animal husbandry, Grains Reserves, Women in Agriculture, etc. There isn’t enough time for me to go into the details of the reform and strengthening of each and every institution.

    One key direction common to all is the need to make them sustainable in order to support the transformation within the sector. It is however important to mention the new set of school leavers that are increasingly finding their feet in agriculture.

    They are undergoing training in institution like International Institute for Tropical Agriculture to become a new generation of agripreneurs. They form part of the new paradigm shift by engaging in agriculture as a profitable business. This mindset is one of the innovative ways by which the growth in the agriculture sector can be sustained.

    Processing:

    The need for value addition in order to enhance the employment opportunities available within the agriculture sector as well as improve farm-gate prices were at the heart of linking farmers to the processors. There is no gainsaying the fact that processing also has the possibility of prolonging the shelf life of a product that would otherwise been wasted due to spoilage and perishability. Some of the successes recorded under processing in the cassava flour substitution in the flour milling factories. The is also the expansion in demand arising from soybean for livestock feed-milling business,

     Security 

    This is a clear and growing threat to the growth and sustainability of the agriculture sector in Nigeria. There has been pilfering on farmers’ farms from petty thieves especially where security lapses exist.

    However, a threat that has started growing of late is the herdsmen menace in the Northcmetri of Nigeria. Incidentally, the Benue State that is worst hit by this terrorist activity is the food basket of the country. Truth must be told that the Nigerian nation for many years has not bothered to make plans for the livestock centers and cattle ranches in many states of the federation.

    With increasing urbanisation and climate change, many of the old cattle routes have disappeared while fodder land for their crops, have also gone with the urban development. The new trend whereby cattle herdsmen use rustling as an excuse for moving around with lethal weapons which are used for attacking villagers, farmers and kidnapping is unacceptable in a decent society.

    The threat to lives and properties has made many farmers to abandon farming in the affected States of Kaduna, Benue, Nasarawa, Adamawa and Taraba. There had also been reported cases in Kogi, Enugu and Oyo States. This security threat poses great danger to the sustainability of the growth of agriculture in Nigeria.

     Climate change 

    The change in climate due to human activities and environmentally hazardous by-products of our existence have contributed significantly to global warming, desert encroachment and environmental pollution. Precipitations have declined and become more erratic leading to droughts and flooding in some areas. Perennial rivers are drying up and forest areas are succumbing to population pressures. Agronomic calendars and timing of operations are no longer certain and yields are no longer as predictable as they used to be in the past.

    In order to address some of these consequences of climate change, the resuscitation and rehabilitation of irrigation schemes and dams in northern Nigeria where desert encroachment is threatening is ongoing.

    The advantage of this is that many northern states like Kebbi, Sokoto and Zamfara are producing dry season rice paddies on their farms. Serious afforestation efforts are also being promoted by federal and States governments.

     Agricultural insurance 

    Although agricultural insurance is available in the country to indemnify farmers against loss of investments on their farms, the new dimension of threats to life was not anticipated by the schemes at inception. The Nigeria Agricultural Insurance Corporation also received some boost and working capital from government as part of the ATA in order to respond to the increasing demand for agricultural insurance within the country.

  • Diversification: Steel industry to the rescue

    If well harnessed, Nigeria could earn $3 billion in foreign exchange from the steel industry. In this article entitled: “Reviving Nigeria’s steel industry for economic development”, Frederick Owonka, identifies the industry as one of the major pillars of the diversification efforts of the President Muhammadu Buhari administration.

    Thanks to corruption, poor management, sponsored sabotage and fake news/barriers created by competitors/importers afraid of competition, professional litigants, many industrial initiatives have either collapsed or were abandoned. Nigeria’s steel industry is one of the key economic sectors abandoned by the past administrations in the country, and no reasonable government can afford to see such huge investments go into waste.

    Since the Buhari administration was elected into office in 2015, the country has witnessed a rigorous and well-focused commitment to revive the country’s abandoned industrial projects. The steel industry is one of the major pillars of Nigeria’s economic diversification efforts. Undoubtedly, the Buhari administration has demonstrated real commitment to this national endeavour.

    Local production of steel will significantly reduce Nigeria’s importation of steel and save Nigeria a minimum of $3 billion dollars in foreign exchange per year. In a world that has grown furiously competitive, no nation can afford to rely on one export commodity. It is, in fact, no longer safe for Nigeria to depend entirely on oil as the main revenue earner.

    One of the key objectives of privatisation is the desire to achieve efficiency and profitability. Besides, the success or failure of privatisation also depends on the technical experience and competence of the investors taking over public enterprises.

    Premium Steel and Mines Limited, fully owned by Nigerians with 50 years of successful track record in key sectors & major industries of the economy is making impressive progress in terms of achieving Nigeria’s economic diversification initiatives.

    According to the Managing Director and Chief Executive Officer (CEO), Prasantra Mishra, Premium Steel and Mines Ltd, will produce 50 per cent of Nigeria’s steel needs in the first phase of manufacture.

    With its facility at Ovwian, Aladja, Delta State, the company has pledged to meet more than 50 per cent of steel products need during the first phase of production. Premium Steel has been allocated Iron ore mines in Kogi and will commence mining soon. Mr. Mishra, who announced this at the official commissioning of the steel and mining facility, said it was high time “Nigeria, sustainably and inclusively converged with the rest of the world to enhance industrial and Gross Domestic Product (GDP) per capita income.

    Mishra explained: “We are touching the lives of the local communities, particularly through accessible and affordable healthcare, employment, women empowerment, education and sustainable development.

    It is not enough for investors to make profits, but they should also make positive impact on the lives of the communities where they serve. In line with this objective, Mishra noted that his company is committed to Nigeria’s industrial and economic revolution to lay the foundation of efforts to address poverty and inequality by creating job opportunities, and wealth creation.

    The former Delta Steel Company (DSC), which was estimated to produce 1.2 million tons of various steel products per annum, is currently being run by Premium Steel and Mines Ltd.

    Backed by sound experience, these local investors have remarkably transformed the former DSC into modern industrial success story. The company is now retooled with state-of-the-art equipment and “it is ready for competitive production as the wheels spin once again”.

    Ranked as one of Nigeria’s best steel mills to produce the BS 4449 grade steel, Premium Steel has the capacity to produce high capacity and quality products to be used for high-rise buildings, bridges, flyovers, malls due to its tough mechanical and remarkable strength.

    No less important government support is essential to the success of the investors. Mishra praised the Buhari administration’s industrial transformation agenda, describing it as the “prerequisite for economic development and sustained per capita income. He also recognized the dynamic leadership style, guidance and support of the Mines & Steel Development Minister, Dr. Kayode Fayemi, for what he called Fayemi’s ‘strong initiative.’”

    According to the minister’s road map for development, his ministry is capable of contributing $27 billion dollars to the country’s GDP.

    According to the road map, Nigeria’s aspiration was to be Africa’s mining mineral processing centre last year and in 2020; it seeks to make Nigeria compete in the global market for refined metals and minerals from 2018 to 2030 with the ultimate goal of achieving globally competitive mining sector.

    Read Also: Twist in the Ajaokuta Steel tale

  • Diversification: Steel industry to the rescue

    If well harnessed, Nigeria could earn $3 billion in foreign exchange from the steel industry. In this article entitled: “Reviving Nigeria’s steel industry for economic development”, Frederick Owonka, identifies the industry as one of the major pillars of the diversification efforts of the President Muhammadu Buhari administration.

    Thanks to corruption, poor management, sponsored sabotage and fake news/barriers created by competitors/importers afraid of competition, professional litigants, many industrial initiatives have either collapsed or were abandoned. Nigeria’s steel industry is one of the key economic sectors abandoned by the past administrations in the country, and no reasonable government can afford to see such huge investments go into waste.

    Since the Buhari administration was elected into office in 2015, the country has witnessed a rigorous and well-focused commitment to revive the country’s abandoned industrial projects. The steel industry is one of the major pillars of Nigeria’s economic diversification efforts. Undoubtedly, the Buhari administration has demonstrated real commitment to this national endeavour.

    Local production of steel will significantly reduce Nigeria’s importation of steel and save Nigeria a minimum of $3 billion dollars in foreign exchange per year. In a world that has grown furiously competitive, no nation can afford to rely on one export commodity. It is, in fact, no longer safe for Nigeria to depend entirely on oil as the main revenue earner.

    One of the key objectives of privatisation is the desire to achieve efficiency and profitability. Besides, the success or failure of privatisation also depends on the technical experience and competence of the investors taking over public enterprises.

    Premium Steel and Mines Limited, fully owned by Nigerians with 50 years of successful track record in key sectors & major industries of the economy is making impressive progress in terms of achieving Nigeria’s economic diversification initiatives.

    According to the Managing Director and Chief Executive Officer (CEO), Prasantra Mishra, Premium Steel and Mines Ltd, will produce 50 per cent of Nigeria’s steel needs in the first phase of manufacture.

    With its facility at Ovwian, Aladja, Delta State, the company has pledged to meet more than 50 per cent of steel products need during the first phase of production. Premium Steel has been allocated Iron ore mines in Kogi and will commence mining soon. Mr. Mishra, who announced this at the official commissioning of the steel and mining facility, said it was high time “Nigeria, sustainably and inclusively converged with the rest of the world to enhance industrial and Gross Domestic Product (GDP) per capita income.

    Mishra explained: “We are touching the lives of the local communities, particularly through accessible and affordable healthcare, employment, women empowerment, education and sustainable development.

    It is not enough for investors to make profits, but they should also make positive impact on the lives of the communities where they serve. In line with this objective, Mishra noted that his company is committed to Nigeria’s industrial and economic revolution to lay the foundation of efforts to address poverty and inequality by creating job opportunities, and wealth creation.

    The former Delta Steel Company (DSC), which was estimated to produce 1.2 million tons of various steel products per annum, is currently being run by Premium Steel and Mines Ltd.

    Backed by sound experience, these local investors have remarkably transformed the former DSC into modern industrial success story. The company is now retooled with state-of-the-art equipment and “it is ready for competitive production as the wheels spin once again”.

    Ranked as one of Nigeria’s best steel mills to produce the BS 4449 grade steel, Premium Steel has the capacity to produce high capacity and quality products to be used for high-rise buildings, bridges, flyovers, malls due to its tough mechanical and remarkable strength.

    No less important government support is essential to the success of the investors. Mishra praised the Buhari administration’s industrial transformation agenda, describing it as the “prerequisite for economic development and sustained per capita income. He also recognized the dynamic leadership style, guidance and support of the Mines & Steel Development Minister, Dr. Kayode Fayemi, for what he called Fayemi’s ‘strong initiative.’”

    According to the minister’s road map for development, his ministry is capable of contributing $27 billion dollars to the country’s GDP.

    According to the road map, Nigeria’s aspiration was to be Africa’s mining mineral processing centre last year and in 2020; it seeks to make Nigeria compete in the global market for refined metals and minerals from 2018 to 2030 with the ultimate goal of achieving globally competitive mining sector.

  • Diversification will bring more benefits, says Guinness MD

    The ongoing efforts to diversify the economy from dependence on crude oil will enhance national development and create more opportunities for Nigerians, Guinness Nigeria Plc Managing Director, Mr Peter Ndegwa, has said.

    He said the diversification of the economy and improvement from a raw-material only country to manufacturing economy will create a more stable national economy with better opportunities for the citizens.

    In an interview, Ndegwa said: “I like two things the government is saying, one is: diversify from oil. The overdependence on oil is basically part of what you are speaking about, and then add more value locally rather than being an import country. So, it is not just dependence on oil, but add more value. Let’s localise production, source locally, let us export. In particular ECOWAS is a big market for Nigeria. The regional blocks are within Africa, we can source more trade regionally within Africa.’’

    He explained that Guinness Nigeria has confidence in the diversification and local manufacturing programme of the government, noting that the company has seen increase in its exports to other West African countries, including Ghana and Cameroun.

    He pointed out that the economy has witnessed commendable improvements in foreign exchange management and power supply.

    “There is no doubt that a number of areas have improved. First will be the availability of liquidity on the foreign currency side, especially for manufacturers who import raw materials and also spare parts for our plants. We have seen some level of stability both in terms of the expected range of price versus the volatility we have seen in the currency before. That is good because it improves predictability, ability to plan and even when costs are higher, it helps that we know what the price is, which is key,” Ndegwa said.

    He outlined that the availability of gas has moderated the fluctuations suffered in recent period, which shortage forced companies to use diesel, which is more expensive, less environmentally-friendly and more erratic.

    “Previously, we had incredible delays in getting work permits or travel permits. However, in these areas, we have seen some level of improvements. Areas I feel we could improve further are the congestion at the seaports. Our exports have doubled in the last 18 months and one of the reasons why we are doubling exports is to get foreign currency, which is very helpful for us. But we have seen some level of delays as a result of the congestions at the ports, both in terms of outbound and inbound of raw materials. As a result, two things happen to the business eventually, we incur demurrage and more transport costs and also when we don’t get the materials on time, it is challenging to ensure continuity of production. However, it is good to see that government wants to spend more money on infrastructure,” Ndegwa said.

    He however noted that despite some operating challenges, Guinness  has continued to grow its business by investing in production capacity to produce spirits locally, adding that the company now produce products, such as Smirnoff, Gordons, and McDowells, locally instead of importing, thus saving the country some foreign currencies.

    He pointed out that local manufacturing allows the company to price these brands at the right price so that consumers can afford them.

    “Our investment in spirit shows that we are committed to the future. The second is we have also increased our local sourcing. We used to source about 40 per cent locally; now we are sourcing about 75 per cent of local materials like sorghum, glass, packaging materials like labels and crown corks. This reduces our cost of doing business,” Ndegwa said.

    According to him, innovation continues to be a core part of the company’s business. One aspect of the innovation is the spirits innovation however it has also expanded participation in some of the other categories, including beer and soft drinks. Guinness Nigeria is the only total beverage business which has spirits, beer and soft drinks, giving it a bit more opportunity to service consumers, compared to if it were specialists in a particular area.

    “It is about expanding our portfolio through innovation and also through building existing brands. It is about lowering our costs both through local sourcing and locally produced brands instead of importing. We also continue to drive our productivity agenda, which is all about reducing waste and being more effective. Finally, it is being close to the consumer in terms of the way we go to market, our products being better distributed,” Ndegwa said.

    He outlined that Guinness Nigeria is focused on sustainable growth by ensuring that it conducts its business in a responsible way and in line with its global objective of not only to be the best performing business, but also to be the most trusted and respected.

    According to him, Guinness Nigeria would not have been in Nigeria for 67 years if it had taken a short cut in the way it drives its sales. So, the company’s campaign on responsible drinking of alcohol is in tandem with its sustainable business growth objective which emphasises responsibility in the way that consumers engage with alcohol so that people can have a balanced lifestyle that incorporates alcohol in their ways of celebrating or enjoying themselves.

     

  • Diversification will bring more benefits, says Guinness MD

    Diversification will bring more benefits, says Guinness MD

    The ongoing efforts to diversify the economy from dependence on crude oil will enhance national development and create more opportunities for Nigerians, Guinness Nigeria Plc Managing Director, Mr Peter Ndegwa, has said.

    He said the diversification of the economy and improvement from a raw-material only country to manufacturing economy will create a more stable national economy with better opportunities for the citizens.

    In an interview, Ndegwa said: “I like two things the government is saying, one is: diversify from oil. The overdependence on oil is basically part of what you are speaking about, and then add more value locally rather than being an import country. So, it is not just dependence on oil, but add more value. Let’s localise production, source locally, let us export. In particular ECOWAS is a big market for Nigeria. The regional blocks are within Africa, we can source more trade regionally within Africa.’’

    He explained that Guinness Nigeria has confidence in the diversification and local manufacturing programme of the government, noting that the company has seen increase in its exports to other West African countries, including Ghana and Cameroun.

    He pointed out that the economy has witnessed commendable improvements in foreign exchange management and power supply.

    “There is no doubt that a number of areas have improved. First will be the availability of liquidity on the foreign currency side, especially for manufacturers who import raw materials and also spare parts for our plants. We have seen some level of stability both in terms of the expected range of price versus the volatility we have seen in the currency before. That is good because it improves predictability, ability to plan and even when costs are higher, it helps that we know what the price is, which is key,” Ndegwa said.

    He outlined that the availability of gas has moderated the fluctuations suffered in recent period, which shortage forced companies to use diesel, which is more expensive, less environmentally-friendly and more erratic.

    “Previously, we had incredible delays in getting work permits or travel permits. However, in these areas, we have seen some level of improvements. Areas I feel we could improve further are the congestion at the seaports. Our exports have doubled in the last 18 months and one of the reasons why we are doubling exports is to get foreign currency, which is very helpful for us. But we have seen some level of delays as a result of the congestions at the ports, both in terms of outbound and inbound of raw materials. As a result, two things happen to the business eventually, we incur demurrage and more transport costs and also when we don’t get the materials on time, it is challenging to ensure continuity of production. However, it is good to see that government wants to spend more money on infrastructure,” Ndegwa said.

    He however noted that despite some operating challenges, Guinness  has continued to grow its business by investing in production capacity to produce spirits locally, adding that the company now produce products, such as Smirnoff, Gordons, and McDowells, locally instead of importing, thus saving the country some foreign currencies.

    He pointed out that local manufacturing allows the company to price these brands at the right price so that consumers can afford them.

    “Our investment in spirit shows that we are committed to the future. The second is we have also increased our local sourcing. We used to source about 40 per cent locally; now we are sourcing about 75 per cent of local materials like sorghum, glass, packaging materials like labels and crown corks. This reduces our cost of doing business,” Ndegwa said.

    According to him, innovation continues to be a core part of the company’s business. One aspect of the innovation is the spirits innovation however it has also expanded participation in some of the other categories, including beer and soft drinks. Guinness Nigeria is the only total beverage business which has spirits, beer and soft drinks, giving it a bit more opportunity to service consumers, compared to if it were specialists in a particular area.

    “It is about expanding our portfolio through innovation and also through building existing brands. It is about lowering our costs both through local sourcing and locally produced brands instead of importing. We also continue to drive our productivity agenda, which is all about reducing waste and being more effective. Finally, it is being close to the consumer in terms of the way we go to market, our products being better distributed,” Ndegwa said.

    He outlined that Guinness Nigeria is focused on sustainable growth by ensuring that it conducts its business in a responsible way and in line with its global objective of not only to be the best performing business, but also to be the most trusted and respected.

    According to him, Guinness Nigeria would not have been in Nigeria for 67 years if it had taken a short cut in the way it drives its sales. So, the company’s campaign on responsible drinking of alcohol is in tandem with its sustainable business growth objective which emphasises responsibility in the way that consumers engage with alcohol so that people can have a balanced lifestyle that incorporates alcohol in their ways of celebrating or enjoying themselves.

     

     

    “Abusing alcohol is harmful and we do not want harm in our society. Part of our responsibility is to ensure that there is increased awareness of the dangers of alcohol misuse and how to reduce related harm. And where we have carried out a number of these initiatives we have recorded a reduction in the incidences of abuse. This means that a lot of the work we have done around the “don’t drink and drive” initiative has had impact. So the level of awareness is much higher.

    “We believe that we will create a better society if we have a better understanding about alcohol use and its role in a balanced lifestyle. That is why it is not in conflict with our commercial interest. In fact, it supports our ability to be in business because we will be a more respected organization if we are seen to be responsible,” Ndegwa said.

  • Sahara Group hinges growth on synergy, diversification

    Sahara Group hinges growth on synergy, diversification

    Sahara Group has reinforced commitment to sustaining its growth and expansion across global markets through diversification, collaboration and innovation.

    The Nigerian energy conglomerate, which currently has operations in over 13 countries across four continents, stated this in its second Sustainability Report tagged: “Sustainability through Synergy.

    The Report which highlighted activities in 2016 within Sahara Group’s Power, upstream, downstream, midstream and infrastructure divisions was presented in accordance with the Sustainability Reporting Standards of the Global Reporting Initiative (GRI).

    According to Executive Director and Co-founder Sahara Group, Tonye Cole, the report reaffirms the organisation’s commitment to transparency and business integrity. “We are delighted to be leading the charge for a paradigm shift that aligns business reporting in Africa with global best practice. Sahara continues to demonstrate how businesses can grow from humble beginnings to become conglomerates through diversification, collaboration, innovation and resilience. The Sahara story, since we commenced business in 2016 has been driven by creativity and an endless passion for daring the impossible.

    “The 2016 sustainability report covers critical aspects of our business and we believe such reports are required to safeguard the future of African businesses and enhance their competitiveness globally,” he added.

    Notable highlights in the report include key investments and innovation in the power sector, where Sahara Group has emerged as one of the largest privately owned power institutions in Sub-Saharan Africa. The report also highlights the adoption of a Supply Chain Efficiency strategy that is expected to drive synergy, growth and sustainability of its businesses across the entire energy value chain.

    In addition to providing information on the various business divisions, the report also sheds light on Sahara Group’s core values, people, economic performance, stakeholder engagement, health and safety records as well as the activities of Sahara Foundation – the Group’s corporate responsibility vehicle.

    Sahara Foundation which hitherto had implemented several projects in Health, Education, Capacity Building, and the Environment, adopted the extrapreneurship platform in 2016 to enable it empower more beneficiaries through shared platforms.

    The report captures the admission of Sahara Group into the Vanguard Board of the World Economic Forum Partnering against Corruption Initiative (PACI). The Board is responsible for developing strategies for designing corruption out of countries and regions through various initiatives.

    Sahara Group is currently working on a new initiative with the PACI community towards helping to Rebuild Trust and Integrity in Businesses with a major focus on Nigeria and Africa as a whole.

    In line with its membership of the Private Sector Advisory Group of the United Nations Sustainable Development Goals Fund (SDGF), Sahara has been working with various partners to promote the implementation of the 17 SDGs of the United Nations.

    Sahara Group is partnering with the SDGF, The Kaduna State Government and other agencies of the United Nations, on project “Food Africa” which seeks to empower young farmers, eradicate poverty, provide employment, reduce wastage and improve sustainable food production in Nigeria. The plan is to replicate the project across the continent.