Olaseni Durojaiye looks at the Federal Government’s quest to diversify the economy from the oil sector
As the country takes headlong this challenging year, as had been severally predicted by both analysts and international finance organisation, particularly due to the slump in oil prices at the international market, economy watchers have hailed the efforts of the federal government at diversifying the economy from oil. The initiative, described by some economy watchers as a paradigm shift many believe holds the key to revamping the Nigerian economy.
However, analysts argued that government cannot embark on the journey to diversify the economy alone and contended that a major determinant in the success of the initiative to diversify the economy would depend to a large extent on how the private sector aligns with the vision.
“Nigerian businesses have a major role to play if the economy must diversify from oil sector into other sectors particularly agribusiness and manufacturing. As a matter of fact, the smart way to go for any Nigerian business is to veer into manufacturing of goods that the country has its major raw materials in abundance,” an economist, Oye Makinde, stated, adding that, “it’s a win-win for Nigerian businesses to do so, both on the medium and long term considering that the need for foreign exchange to import raw materials is eliminated; that way what you get is, they produce in Naira and earn foreign exchange from their exports.”
Among other wholly-owned Nigerian businesses, BUA Group appears to have aligned with government’s policies of diversifying the economy with bias for export and generating foreign exchange. This is discernible from the company’s medium term strategic posturing, particularly in its cement and sugar operations. The group, which currently plays in a handful sectors of the economy including infrastructure concession and port management, real estate and extractive industry, is one of the leading lights in sugar and cement production through which it currently targets the international commodity market.
Diversifying its Operation
BUA Group has over the past few years embarked on a series of strategic acquisitions which has seen the group’s business portfolio expand to include the Cement Company of Northern Nigeria (CCNN), Obu-Edo Cement, BUA Flour Mills, BUA Sugar Refinery in both Lafiagi, Kwara State and Bassa, Kogi State; BUA Pasta, BUA Ports and Terminals, and BUA Estates amongst other agribusiness holdings.
The company made its initial foray into business in 1988 and has grown from strength to strength over the years contributing to the growth of the Nigerian economy in the process. The company’s operations at the time led to the formation of its manufacturing concerns; the flour plant in Lagos, which was driven by huge demand for flour at the time being its premier manufacturing concern. The group now has flour mills, pasta plants, a sugar refinery in Lagos and another one that is soon-to-be-commissioned in Port Harcourt, River State; vegetable oil processing mills and the cement projects.
BUA Group’s recent divestment of its flour business to Olam International in a deal worth $275million is seen by industry watchers as a major milestone for the group. Besides that it is a demonstration of commitment to its medium-term strategy, observers opined that it aligns with the need for a strategic focus on business areas with greater potential for export where the sourcing and utilisation of foreign exchange is less and most of the materials needed for production can be sourced locally, whilst also positioning its current line of foods and infrastructure businesses for market leadership.
Commenting on the deal, Executive Chairman and Chief Executive Officer of BUA Group, Abdulsamad Rabiu, explained that “Over the years, we have run one of the largest and most efficient flour milling businesses in Nigeria and are confident in the value it will add to the buyer’s operations. Our group’s strategic focus will now be to diversify to business areas with greater potential for export where the sourcing and utilisation of foreign exchange is less and most of the materials needed for production can be sourced locally whilst also positioning our current line of Foods and Infrastructure businesses for market leadership.”
Aligning with Government’s Policy
It will be recalled that BUA Sugar Refinery acquired the Lafiagi Sugar Company formerly owned by the Federal Government and its plant located in Lafiagi, Kwara state in 2010. Having successfully turned around the plant and upped its production capacity, significant work has gone into its 20,000-hectare sugar plantation in Lafiagi. This is besides extensive work that is going on at its 50,000 hectares of farmland in Bassa, Kogi State in the same North Central Nigeria as Kwara State.
Industry watchers contended that the acquisition comes with multiple benefits. These include employment generation in the host communities and beyond, community development as well as giving the country a stronger foothold in the international sugar market which would in turn fetch foreign exchange and boost its GDP on the long run.
According to Rabiu “with global prices of crude oil plummeting and demand for foreign exchange going up, BUA’s projects will help create badly needed jobs in Nigeria, diversify the group’s business further, and stimulate the Nigerian economy as well as support the government’s roadmaps for the agriculture and extractive industries,” he stated.
As part of its medium-term growth strategy, BUA Group is expanding the backward integration of its sugar plantations in Kwara and Kogi states in Nigeria in an effort to reduce Nigeria’s dependence on imported raw sugar while supporting the value chain in sugar production within the country.
“Extensive work is ongoing in our 20,000 hectares of farmland in Lafiagi, Kwara State and another 50,000 hectares of farmland in Bassa, Kogi. The two operations form the fulcrum of our backward integration programme for sugar and this will further reduce Nigeria’s dependence on imported raw sugar while supporting the value chain in sugar production within Nigeria. We recently started production of cement from our 3 million metric tons per annum cement plant in Obu, Okpella, Edo State,” a company official stated.
Similarly, indications are that the firm is determined to replicate same strategic approach in its cement business. With most of the raw materials for cement currently being sourced locally, the company has scaled up its operations significantly with minimal dependence on foreign exchange and will soon start exporting to neighbouring countries from both the Obu mining site, Edo State and Sokoto plants which are currently undergoing 3.5million Metric tons Per Annum (MTPA) and 1.5million MTPA capacity expansions respectively to bring the Group’s cement production capacity to around 10 million MTPA by 2018.
“We believe BUA Group will be one of the top five companies in Nigeria within the next few years, provided it sticks religiously to its growth strategy,” Makinde noted.
Corporate Social Responsibility
To activate its corporate social responsibility (CSR) policy which is conceptualised to impact its host communities from state to village and ward levels, the company established a Community Relations Committee. Membership of the committee is made up of thought leaders drawn from state, local and community levels; at the core of its objectives at inception was to serve as an effective mechanism between the company and the communities and to advise the management on all matters relating to community relations. The untiring efforts of the committee manifested in the inauguration of several interventionist projects in different parts of the country.
BUA group, through Cement Company of Northern Nigeria (CCNN) practically built the Kalambaina resettlement town from scratch. The company bankrolled electrification and installation of transformers of the new town and constructed several access roads. This is besides the construction of a mechanised borehole, complete with water tanks, all in 2014.
The same year, the company also constructed and equipped Islamiyya School and a modern Primary School in Kalambaina resettlement village to bring primary education closer to the people of the town. The adoption of the erstwhile Wurno Road Model Primary School has not only transformed it into a modern school, it has also caused a name change as it is now known as Sokoto Cement Primary and Secondary School.
Chief executive officer of the group told THISDAY that, “being Nigerian-owned and very proud of our indigenous roots, we are keenly aware of our corporate social responsibility to our host community and the country as a whole which is why we frequently give back to our host communities through donations, sponsorships of various initiatives and projects related to sports and health care through the BUA Foundation.
“At BUA, we have a passion for what we do. We are not only helping to grow the Nigerian economy, but also touching lives, I think what is really important is to do things right, to work hard for your company and for the people around you,” he stated.
It was also gathered that these are in addition to other donations, assistance and sponsorship of events such as the annual Argungu International Fishing and Cultural Festival and support for programmes which have direct impact on local communities.
CCNN, according to a resident of the seat of the Caliphate, Mallam Babakura Maishanu, “has been partnering the state government since the company was acquired by BUA group. They have intervened in the state in areas that include education, housing, road construction, health as well as skill acquisition and youth empowerment; and this has further endeared the company to the government and people of Sokoto state,” Maishanu stated.