Sumit Jain is the Group CEO of Valency Group, a big player in agro-business. He describes Nigeria as a land of opportunity. With over 1,700 employees, Valency which has multi-billion naira investments in Nigeria and is present in over 20 states is commissioning its Supply Chain Complex in Ibadan this week. In this interview, Sumit speaks on the importance of the complex to Nigeria’s economy. He speaks on a number of issues including how to boost the agro business. Daniel Obi brings the excerpts:
Valency Group has been in Nigeria since 2007; kindly tell us more about the company?
We have operated for 17 years in Nigeria growing our business, through going deep in the value chain. We are mostly known for our agric commodity and agric- input businesses. Having established an extensive global reach, the company has developed excellent sourcing networks directly with farm-gate suppliers and manufacturing processors and nurtured strong local and international relationships worldwide. We are among the leading exporters of non-oil commodity products from Nigeria and among the major suppliers of quality agrochemicals in the country. We are present in 20 states in Nigeria. Our aspiration is to go closer to the farmer when it comes to buying the commodity and go closer to the customer when it comes to selling our end products.
What are the commodities you are involved in and where do you export to?
Some of the products we are involved are Raw cashew nuts, Cashew kernel, Cocoa, Sesame, Soybean, Ginger and pulses. We are operating one of the largest cashew processing plants in the country and we are among the major suppliers of quality Agrochemicals to farmers and servicing champion custard and Milk through our FMCG segment to people in Nigeria. Our exportation depends on the commodity itself. If it is raw cashew, it goes to Vietnam, India, while Sesame goes to China, Korea, Japan, and spices goes to Middle East and India. We try to get the best quality of product by going closer to the farmer.
When you compare Nigeria with other markets you operate, what do you see when it comes to agro-business?
Nigeria is a land of opportunity with big population and availability of land. But we are still scratching the surface in terms of the yields and crops we produce in Nigeria. When we compare the food losses, there is still a lot of possibility of resolving the food insecurity challenges of the country. Nigeria can be a net exporter of every crop that is produced in Nigeria. Personally, as an industry player, I see a lot of potential. However, there is slowly but steadily progress. For instance there is progress in soya bean and those ones not adding value like cotton have reduced. We are seeing a tradition of what is more profitable for the farmers been produced more.
What are the limitations of transforming these seen potentials in the agric business into reality?
One of the greatest limitations of any business is inconsistency and lack of resilience. If you are consistently applying the policies around the agric business, there will be an impact for a long time for any country. Cote D’Ivoire has been able to make its cashew and cocoa business the biggest in the world and it started with a similar crop size as Nigeria. It is about applying the policies on a more consistent basis across the farmers without making much intervention. For instance, there is a policy for export grants but the implementation is not done consistently and therefore there is not much impact of that policy for export. Secondly, the processing industry needs some kind of industry protection like duties on raw exports and some kind of industry protection on processed cargo. These have been suggested multiple times but not implemented at the same pace as what other countries in Africa have done. Another way to boost exports is by making loans available perhaps through the Bank of Industry at the right interest rate.
General challenges of infrastructure like roads, electricity and high cost of transport are common to every industry. High interest rates and high inflation and a continued deprecating currency are other challenges which are facing the industry currently. Valency through its business model has built a strong balance of trade between import and export business to manage its currency exposure . Some part of the infrastructure challenge Valency handles through its own warehouses across the country and starting its own fleet
However, we surely believe ease of doing business can be improved with the right action taken by both the public and private sectors.
How does insecurity, especially attacks on farmers affect the kind of business you do?
It affects the entire supply chain and if there is insecurity it leads to some disturbance. If we move truck from Kano to Lagos, the truck may be attacked, the cost of insurance has gone up and cost for other logistics has gone up. The kind of products we deal on, we need the cargo to arrive fast but with kind of insecurity and stoppages on the way, it leads to increase in cost and loss of food. Insecurity must be tackled and I believe that government is doing its best in this regard. Tackling insecurity can improve the ease of doing business in Nigeria.
Next week you will commission your Supply Chain Complex in Ibadan, what is the significance of this project to you and to Nigeria’s economy?
We at Valency are quite happy to see Supply chain complex coming for the final commissioning this week. We did our groundbreaking in May 2022 and with over 45,000 MT storage capacity of agri produce, over 150+ own fleet and one of the biggest drying yards in the country this facility is aligned to our commitment to double up our agri-produce business, increase the speed of operation and continue to provide quality produce to our long term trusted customers. As we grow, we hope to open about 150 warehouses around the country in the next four years. These warehouses will be closer to farmers and food security can be resolved.
Can you estimate the contribution of agro business sector in forex earning in Nigeria annually if certain things are done right?
Let me give you an insight. The realization from Cashew can be increased for Nigeria just by doing value addition locally at the source. By doing the cocoa processing in the country instead of doing cocoa processing in Europe, the value addition can be heavy. If 60% of the cargo for export is processed, we will create employment, create value addition and at the same time, will increase our export revenue significantly. Another thing that can increase export revenue is by increasing the crop produced and increasing acreage for the production of crops. More so, farmers need to be protected over their products. Nigeria needs to ensure that the farmers are wealthy and if they are losing their products and lives because of the weather, then the industry will not thrive. They need to have access to loans and inputs, and technology. There should be collaboration between the government, farmers and the operators in the agro-aligned sector to move the sector forward.
What advice can you give to companies to further increase their local input to up to 80% in their operation?
Increasing local input upto 100% is possible because Nigeria is rich in minerals. For instance, we produce over 8 -10 million tons of corn in this country still we import corn starch. We produce much of cocoa and we import cocoa chocolate. We produce a lot of tomato and import tomato paste. That is a problem and how to solve this problem is where the solution lies. The raw material is available. The problem lies in the way we execute our strategies and in the way we make those crops available to factories for them to process at the right time. It is about applying policies consistently and have well worked tripartite arrangement between the government, the agro–aligned operators and consumers.
The establishment of your Supply Chain Complex is a huge boost to supply chain business. How does the sector leverage the African Continental Free Trade Area, AfCFTA
The AFCTA came in 2018 and this is the biggest association of 53 out of 54 nations in Africa. This is an association that indicates that the trade in the entire of Africa will be boosted to grow the continent economy. Today, the crop in W/Africa is opposite cycle of the crops in E/Africa. If you set up a plant in Nigeria, after the W/Africa season, then crops like cashew can come from E/Africa for processing. But this is not happening instead, countries like Nigeria and Tanzania are sending their crops to Europe for processing. The ability to do intra-Africa trade is important, if we need to keep our resources within Africa. If we make intra Africa trade zero duty, it will work out.
You entered into a partnership with British International Investment, BII in supply chain in Nigeria, kindly explain this partnership?
BII is one of the premier Development Finance institutions in the world with a clear mandate to invest in Africa. And as I have explained Africa in general and Nigeria in particular is particularly exciting. Its expected to become a top ten economy by 2050 and be the third most populous country, probably beating America.
The BII Valency partnership is highly strategic and part of the bigger strategic partnership between the UK and Singapore. This investment opens up numerous opportunities for us. Apart from external opportunities the partnership sets the stage for us strengthen corporate governance and bring a sharper focus to ESG initiatives.
BII has a non-binding option to invest more in Valency and we are confident that the partnership will continue to grow. Post the investment we welcomed BII representative Roman Frankel to our board and this will be hugely positive from a corporate governance point of view.
