Amidst uncertainty about the federal policy on milk, the Ekiti state government and frontline consumer goods player Promasidor Nigeria Limited raced off the starting block in July. They agreed on a collaboration that would see Promasidor Limited engage the facilities at the Ikun Dairy Farm for production of milk. It is the kind of partnerships that Nigeria needs currently.
Promasidor Limited had grown its portfolio since the successful introduction of its market-changing Cowbell powdered milk sachets. Then as now, power supply was inadequate, making storage difficult, but citizens were limited only to liquid milk. The packaging and product presentation innovation of Promasidor with Cowbell offered convenience and choice to consumers.
Promasidor today boasts a rich portfolio of brands in dairy, seasoning, and teas. On its part, the Ekiti state government established the Ikun Dairy in the 1980s under the civilian leadership of Adekunle Ajasin.
Collaboration between Ekiti state and Promasidor should lead to the effective utilisation of a wasting asset of one of our states. Promasidor would establish and run a standard ranch. It would apply best practice in farm management.
Backward integration was a clarion call for many of Nigeria’s manufacturing entities in the 1980s. The country’s manufacturing sector took up the challenge and delivered very many positive outcomes. We remember many success stories.
Nigerian Breweries worked with researchers in Nigerian universities to develop and introduce a beer brand made from sorghum. Sorghum was also the wonder crop with Cadbury Nigeria Plc as its research and development team developed a process for malting sorghum. Indeed, so successful was the research that Cadbury developed a patented process for its Cereal Conversion Plant that then-President Ibrahim Babangida launched in 1990 as part of that company’s 25th anniversary celebration. Many other firms recorded significant successes in their backward integration efforts.
It is a measure of Nigeria’s inconsistency with policies that a number of those efforts were rolled back. Businesses set up to take advantage of the seeming dynamism in policy and the opportunities the emphasis on backward integration created lost out as major manufacturers reverted to their foreign suppliers of raw materials. The policy summersault was a disincentive to enterprise.
BusinessDay welcomes the efforts by Promasidor and Ekiti state for its inherent promise. It would boost the operations of one of our primary and committed firms in the consumer sector. It would be a boost to agriculture and support the efforts of the Central Bank of Nigeria to push for higher productivity in the livestock and dairy chain.
With backward integration, companies move backwards one or more steps in the production chain to ensure control of one aspect of the process say, raw materials or semi-processed goods. There is the expectation that backward integration would lead to cost savings, increased revenues, stability in supplies of critical components of the manufacturing process and improved efficiency in production. With proper handling, backward integration could yield a competitive advantage to a manufacturer and create barriers to new entrants if their control of the source of raw materials is significant.
What’s more, the partnership is an example of the current paradigm in the management of state-owned enterprises. Governments in developing countries are increasingly divesting their stakes in the enterprises into minority holdings while allowing private sector players to run them. The advantages include allowing the state a stake in an enterprise run according to best practices while ensuring full utilisation of otherwise wasting state assets and resources.
In the interest of accountability and transparency Citizens of the state must have full knowledge the partnership with Promasidor, including equity structure, tenure, rights and obligations of parties, dividends and profit-sharing as well as the composition of board and management.
Its our hope the Ikun Dairy Farms yields a positive narrative.
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