Market News

Multinationals pump billions into backward integration projects to beat FX crunch - BUSINESSDAY

MARCH 20, 2017

Multinationals and conglomerates are investing billions of naira in backward integration projects in many parts of Nigeria to source more inputs locally and rely less on foreign exchange.
“We have invested something close to the region of $300 million in backward integration projects in Cross River State.

DOWNLOAD APPS AT https://www.abokifx.com/ ABOKIFX.COM

This year, our plantations are going to start fruiting,” Christos Giannopoulos, managing director/CEO, PZ Cussons Nigeria Plc, told BusinessDay.
PZ Wilmar, which is a subsidiary of PZ Cussons, has acquired over 50,000 hectares of oil palm plantation in Cross River State.

The firm acquired the defunct Calaro Oil Palm Estate, formerly owned by the Cross River government, as well as the 12,805 hectare Kwa Falls oil palm plantation, formerly owned by Obasanjo Farms. It also bought the 5,450-hectare Ibiae Oil Palm Estate and another 8,000 hectare estate in Biase.
Backward integration occurs when a company buys its suppliers or internally produces segments of its supply chain.

Though many of the investments started in the last administration, multinationals and conglomerates have continued to fast-track operations in these projects to reduce their dependence on dollars for the importation of inputs, machinery and spare parts. Some of them, however, who need dollars to import necessary equipment for backward integration have suspended operations, but others are still expanding operations.
Dangote Sugar is investing over $2 billion in six states in the country through its Savannah Sugar plc in Numan, Adamawa State, North-East Nigeria. It is already expanding plantations in backward integration projects in sugarcane and has pledged to extend this investment to Nasarawa State.

DOWNLOAD APPS AT https://www.abokifx.com/ ABOKIFX.COM

Abdullahi Sule, managing director, Dangote Group’s sugar productions, said last September that the group would commit $170 million to the development of rice and sugar plantations on the 17,000 hectares of land in Nasarawa State.
Nigeria is currently hit by recession, characterised by dollar scarcity and low consumer purchasing power. The inflation rate is 17.78 percent while firms can hardly access cheap funds as the Monetary Policy Rate remains at 14 percent. This, however, does not deter multinationals and conglomerates.
Flour Mills of Nigeria, through its sugar subsidiary known as Golden Sugar Estate Limited, is investing $300 million in sugar production at Sunti, Niger State.

DOWNLOAD APPS AT https://www.abokifx.com/ ABOKIFX.COM

At the 2016 annual general meeting held in September 2016,  John G. Coumantaros, chairman of Flour Mills Group, said the first phase of the group’s investment in local sugar production would produce over 100,000 metric tonnes (MT) of sugar, create over 15,000 new jobs, and generate 10 megawatts (MW) of excess electricity from cane fibre.
For the purpose of backward integration in palm oil, Flour Mills subsidiary, Agri Palm Limited has plantations at Ugbogui and Iguiye, near Benin City in Edo State, and has expanded to 4,000 hectares (ha) of established palm in the first phase of local palm oil production needed to support the upstream needs of the group’s oil refining operations in Ibadan.

DOWNLOAD APPS AT https://www.abokifx.com/ ABOKIFX.COM

Despite a lot of backward integration projects of Lafarge Africa, Nigeria’s second largest cement maker, the multinational has continued to explore limestone and gypsum.
A senior government official in Ebonyi State Sunday Ugwuocha, who assists Ebonyi State governor on cement and salt production, told BusinessDay that the state has just signed a memorandum of understanding (MoU) with Lafarge to enable the cement maker invest in limestone exploration.

“Owing to the backward integration policy of the government, our operations grew from three million metric tons (mt) in 2008 to 8.5mt in 2012, with investment of over one billion Euros. Further investment of over $565 million is currently being made in the additional 2.5mt capacity cement plant in Mfamosing, Calabar, Cross River State,” said Michel Puchercos, managing director of Lafarge Africa Plc, in a recent interview.

FrieslandCampina WAMCO, producer of Peak Milk and Crown Milk, currently has four locations in Oyo State where it houses and supports local herdsmen who provide milk from local cows. In 2015, the dairy maker engaged and trained over 920 women and 726 men Fulani milk producers and potential small-holder dairy farmers in Oyo State.
Olam International in early 2016 acquired BUA’s wheat milling plants for $275 million. Olam has made backward integration investments in wheat and noodles and has also  achieved forward integration through its acquisition of the entire equity stake in Titanium Holding Company, the parent company of OK Foods, according to a 2016 KPMG report.

DOWNLOAD APPS AT https://www.abokifx.com/ ABOKIFX.COM

ODINAKA ANUDU  

 

SEE HOW MUCH YOU GET IF YOU SELL

NGN
USD
GBP
EUR
Real Time Analytics