• Friday, March 29, 2024
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FMN: Boosting food security with backward integration investments  

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Nigeria has 200 million people with growing needs for food and other necessities. With a growth rate of 2.6 percent, this demography is expected to hit 410 million by 2050.

As population rises, more Nigerians increasingly fall into the hunger trap.  According to the United Nations 2019 Global Report on Food Crises (GRFC), 5.3 million Nigerians suffered acute hunger in 2018. More than that number is in desperate need for food this year, especially in the crisis-ravaged north-east Nigeria.

Rather than depress, the statistics provides an opportunity and encourages innovative firms to feed a country in dire need of food.

Flour Mills of Nigeria Plc (FMN) understands this opportunity and has leveraged it to feed the nation every day.

While it is a well-known fact that bread is a staple food for Nigerian households, many people are perhaps unaware that much of the flour that is used by bakers in the country today is produced by FMN. Other than producing whole wheat, pastry, bread and general purpose flour, the FMN Group boasts of the largest food basket offering of any Nigerian FMCG and has, over the years, greatly impacted the lives of many of its partners—from small-scale farmers who cultivate some of its raw materials to  suppliers, distributors, bakers and retailers who are all part of its unique ecosystem in the food value chain.

Judging by the extent of its investments in the food value chain, it is safe to say that the company has developed the right infrastructure to support its operations in the rather challenging business environment of Nigeria. The Group’s Golden Penny Food brand is perhaps best known as the leading name for all kinds of wheat-based products, including semolina, spaghetti, couscous, and noodles. Golden Penny Noodles, in particular, is a favourite among many of Nigeria’s urban population who want a quick meal, as it takes a little over five minutes to prepare.

One of FMN’s subsidiaries, Premier Feed Mills Company Limited (PFM), is a leading manufacturer of animal feed in Nigeria. It has a complete range of products covering all aspects of animal feed requirements in Nigeria and neighbouring countries and provides these to the market at competitive prices.

PFM commissioned an extrusion line in 2018 with a capacity of 5,000 metric tons (MT) of aquafeed per month.

As part of its backward integration strategy, which interestingly dates as far back as 1978 when the company first acquired a 10, 000-hectare farm in Kaboji, Niger State, FMN has continued to make significant investments in the agriculture sector. Several of its businesses in the agro-allied space contribute immensely to the provision of an overall solution to the development of raw materials that are locally cultivated to meet both the demand in the Nigerian market and progressively for exports.

Through the activities of Golden Agric Inputs limited (GAIL), a subsidiary of the FMN Group, FMN makes significant investments in agro-inputs, including fertilizer, seeds and agro sacks. The company also actively promotes farmer linkages, provides support and helps farmers by boosting their overall yields and productivity. Similarly, in the Oils and Fats Value chain, FMN’s Premium Edible Oil Products Ltd (formerly ROM Oil Mills Ltd), satisfies local oils (including palm oil, soya oils, margarine, ad spread) needs and exports to West African countries.

PEOPL increased its production capacity in 2018 by 13 percent to 134,082.58 MT, according to FMN’s financial statement.

Within the sugar value chain, FMN’s subsidiary, Golden Sugar Company Limited (Sunti Sugar), has been at the forefront of ensuring the country produces 1.7 million metric tons of its sugar needs. According to the National Sugar Development Council, Nigeria’s sugar production in 2018 was mere 30,000 MT. Raw sugar import at the same period was put at 1.216 million MT.

Clearly, there is a huge gap between what is required by the market and what is currently being produced. But FMN is one of the few companies that are making investments towards closing the gap.

FMN recently said that as part of its strategy to improve efficiency and increase internal synergies within its businesses, it had merged Golden Sugar Company Limited (its sugar refinery arm in Apapa, Lagos) with the Sunti Sugar. It has invested over N50 billion in Sunti Sugar in a bid to improve the local production of sugar.

President Buhari commissioned the Sunti Sugar during the early part of 2018. Sunti Sugar comprises of 17,000 hectares of irrigable farmland and a sugar mill processing 4,500 metric tons (MT) of sugarcane per day. At full capacity, the estate can produce one million tons of sugarcane, which roughly translates into 100,000 MT of sugar yearly. This facility has already created thousands of jobs directly and indirectly for Nigerians.

John G. Coumantaros, chairman of FMN, while speaking at the company’s recent annual general meeting disclosed that Sunti Sugar achieved its first development target of reaching 2,836 hectares of land under cane in July 2018.

FMN also focuses great efforts around local input sourcing.

In an exclusive interview in Abuja, during the just concluded Nigerian Economic Summit, Paul Gbededo, group managing director/CEO of FMN, stressed this point, saying that the company focuses on import-substitution and backward integration.

“Local content is an integral part of our strategy at FMN. We are doing that in so many ways. Through innovation, our agro-allied businesses are helping to grow our local content,” he said.

During the immediate past administration of Goodluck Jonathan, efforts were made to encourage the use of cassava flour. In the last four to five years, the idea seems to have died. But Gbededo does not think so. For him, FMN has not let off High Quality Cassava Flour (HQCF). “Gradually, we are building capacity in that space so that we can get the volumes we need  to ensure we have the quality; to ensure that we blend when we produce so that there won’t be separation,” he explained.

“That takes time and we have been working on that. Like I said, our goal is to focus on local content and reduce our dependence on foreign exchange. We are looking inwardly,” he stated.

Gbededo further revealed why FMN has succeeded in being Nigeria’s food giant.

“You have to ensure you have your supply chain working effortlessly, your storage facilities are good, and that your production processes are efficient and competitive. You must further ensure that your route to market is seamless,your products are visible to the consumer, and that they  areavailable at the right quality and the right price. That basically is the food value chain,” he explained.

However, he said the government has a role to play in supporting food companies like FMN to effectively feed the growing population of Nigeria.

“In order for you to have that in place, you need to have the right infrastructure. One of the basic challenges is infrastructure. You can deal with certain infrastructure on your own, but it is often better if the environment is enabled so that your business can run and be oiled efficiently. For example, one of the biggest challenges facing the food value chain is power infrastructure. Energy cost, which is bloated today, puts a lot of strain on the slim resources available for production. This effectively increases the cost of production and unfortunately translates to higher cost of food across the country,” he said.

“Road and rail infrastructure are also important because we need route to market. If your roads are bad, and there is no rail infrastructure, then your turnaround time with your logistics will be higher.

Any discerning observer would agree that Apapa and Tin Can ports are congested and have exceeded their capacities. While  government efforts at decongesting the ports are appreciated, it is important to note,  that the sheer volume of imports makes the urgent development of other ports inevitable.

There are two critical issues in the food value chain: quality and price.

“We need to ensure that the input quality is right, and that the quality of the final products is right for the people. So, we need the support of NAFDAC, the support of SON and other government agencies to deepen quality and ensure we are producing products that are acceptable locally and internationally.”

As the globe celebrates the World Food Day on October 16, it is important to remember companies like FMN that have been in the forefront of reducing hunger and food insecurity while creating opportunities for Nigerians to work and earn a living.

ODINAKA ANUDU