At a time when many companies in Nigeria are looking inwards to source for raw materials locally amid foreign exchange crisis resulting from falling crude oil prices, the advanced backward integration projects of Flour Mills of Nigeria (FMN) puts the company at an advantage for growth and economic support.
While there is a clear need for greater diversification of the Nigerian economy to promote quality growth, economic transformation and employment, a company like FMN, one of Nigeria’s leading food and agro-allied companies has been able to position itself at the forefront of backward integration through investments in local production.
Borrowing from international best practice the Nigerian government enacted a number of policy instruments, designed to attract new investments in various sectors of the economy. One of which was, the fiscal and tariff incentives and a mandatory Backward Integration Programme (BIP).
With a broad basket of food products and robust pan-nigerian production, distribution, and supply chain network, FMN has been able to facilitate higher value-added in processing and manufacturing activities in Nigeria by boosting backward linkages.
Following the volatile commodity prices arising from unpredictable changes in global supply and demand, exchange rate fluctuations and punitive tariffs and import barriers, which has made reliance on imported raw materials risky, expensive and unsustainable, FMN invested more than N150 billion over the past ten years to execute its core business strategy of local production to aid the agricultural sector.
According to FMN, its need to create value further back in the supply chain and reduce dependence on imported raw material has been identified as a strategic imperative for the company in the years ahead. It said on its website that the investment of the next N150 billion will, therefore, focus on a strategy of backward integration to maintain growth and sustained profitability.
FMN also explained that it will continue to produce its raw materials locally wherever possible to ensure that good quality fair value products are developed through the full supply chain from growing to final consumer consumption – from farm to fork.
With a remarkable growth in all three key segments of Food, Agro-allied and Sugar, FMN finished the year ended March 31, 2020, strong with a record N7.4 billion or 184 percent increase in Profit After Tax (PAT)). The performance recorded in 2020, the highest profit growth rate in six years was on the back of the benefits from its investment as its Agro-allied business reached profitability.
In 2016 alone, FMN injected about 45 billion in its Sunti Golden, one of only two sugar mills in the country capable of producing crystallised sugar from locally grown sugar cane. This was an addition to the already invested N50 billion in a state-of-the-art sugar refinery in Apapa capable of refining up 2000mt of sugar per day.
While the strategy of the business expansion model of FMN, which has over the years diversified into fast- moving consumer goods, is not only organic growth but acquisitions and partnerships, the company through its Golden Sugar Company has made the largest investment (N64bn) on a sugar BIP under the Nigeria Sugar Masterplan Plan (NSMP).
Meanwhile, FMN’S Sunti Golden Sugar Estates is the first and only Greenfield investment under the NSMP currently producing raw sugar. Sunti Sugar Estates which was commissioned by President Muhammadu Buhari in March 2018 is 17,000-hectares of irrigable farmland and a Sugar mill that process 4,500 metric tons of sugarcane per day. Sunti Golden Sugar Estates is the most state of the art operational sugar production facility in Nigeria.
In the 2017 midterm review by the National Sugar Development Council, Sunti Golden Sugar Estates was rated the best performing Sugar BIP under the NSMP with a score of 58 percent.
Sunti Golden Sugar Estates has made considerable impact benefitting 28 communities around its production area since commissioning some of its projects.
Other investments by FMN include more than N8billion investment in a state-of-the-art irrigation system that will ensure the efficient cultivation of sugar cane, with infrastructure that includes drain pumps, and pump stations.
With over 3,000 hectares already under cultivation, FMN expects to have 10,000 hectares under cultivation after the completion of Phase 1 of the Sunti Sugar Estates with plans to expand its mill by another 5,000 tonnes per day to 9,500 tonnes per day capacity.
Approaching optimal capacity, the Sunti investment is expected to provide employment for about 10,000 people yearly and provide 50,000 indirect jobs.
Also, the 398-kilometre road network around Sunti Sugar Estates and communities in Mokwa LGA is fully- funded with operational schools. This is coupled with the water aid for six communities through the provision of clean potable water. FMN also made provision for 35-kilometre dyke to protect farms and the communities from flooding while health facilities and 30-Kilometre electricity network producing 6 MW of power were also provided by the company.
Apart from its projects in sugar, FMN has oil palm plantations at Ugbogui and Iguiye near Benin City in Edo State. It 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.
Known for its flagship food brand, ‘Golden Penny’, wheat milling forms the financial backbone of FMN’S diversified company. The 60 years old company pioneered flour milling in Nigeria when its first mill was commissioned at Apapa in 1962 with a grinding capacity of 500 metric tonnes of wheat per day. Today, the Apapa milling complex has a rated capacity of over 8,000 metric tons per day making it one of the largest single-site mills in the world.
Apart from FMN’S initiatives and investments to transform Nigeria’s agricultural prowess, boost output and generate much needed foreign exchange, its contribution in the agriculture and manufacturing sectors is also helping the company to achieve one of the cardinal drivers of its backward integration programmes, creation of employment opportunities for millions of Nigerians.
According to FMN, the company will continue to feed the nation every day through investment in the food value chain by making an impact on the grassroots level through its business activities. In doing this, the company said it will ensure customer brand loyalty is the top priority through the maintenance of the quality of its products and the introduction of new products.
While FMN is a key driving force behind some of the achievements of the Flour Milling Association of Nigeria (FMAN), Paul Gbededo, Group Managing Director, FMN, said during one of the presentations where FMAN donated 50 units of AMAR multi-crop threshers worth N70 million to wheat farmers to boost wheat production that their support for the grass-root players is a demonstration of the association’s commitment to continuously back wheat farmers and the Federal Government’s Agriculture Promotion Policy.
“There is no gainsaying that self-sufficiency in the production of wheat in Nigeria will have an unprecedented impact on the Nigerian economy through the attainment of food security, poverty reduction and of course, save much needed foreign exchange,” Gbededo said.
Through an MOU that was signed by both FMAN and Wheat Farmers Association of Nigeria in 2016 for FMN to purchase all available wheat grain produced by farmers in line with agreed quality parameters and prevailing market prices, FMAN provided about 10 million Jobs.
With an average of N2.3 trillion yearly spend on foodstuffs processed from wheat in Nigeria; FMAN is contributing its quota to Nigeria’s economy. Meanwhile, FMAN’S annual investment on capacity building; funding training programmes for Nigerian Bakers is estimated by FMN to be around N50 million.
