BusinessDay 28 Feb 2018

4 BUSINESS DAY
C002D5556
Wednesday 28 February 2018
NEWS
Flour Mills completes N50bn sugar production facility
... largest agric investment in Nigeria
CALEB OJEWALE
Flour Mills of Nigeria
has increased its
investments in the
country’s agricultural
sector with a N50 billion
sugar production facility in
Niger state, as a way of improving
the company’s capacity for
backward integration and to
gradually eliminate the need for
importation.
Data provided by the National
Sugar Development Council
(NSDC) on its website suggests
sugar importation cost Nigeria
$516 million in 2016, as the
country continues to grapple
with inability to scale up local
production.
The Nigerian Sugar Master
Plan (NSMP) noted that while
Nigeria belongs to the International
Sugar Organization whose
member countries numbering
92 (at the time) represent 80
percent of total world sugar production,
81 percent of total world
consumption, 64 percent of total
sugar exports and 55 percent
of sugar imports, the country
however, only belongs to the category
of sugar importers, where
Non-oil economy...
Continued from page 1
quarter with support stemming
mainly from Agriculture. The
growth reflects the main harvest
season which was above average.
For us, we perceive favorable
weather, increased cultivated land
and sustained focus of the FG on
the sector via various support programs
as key drivers for increased
output during the quarter. Another
support to the positive non-oil
growth was trade, following five
consecutive quarters of negative
growth. The rebound in trade was
on the back of increased dollar
availability, with sector overall
contribution increasing to 16.8%
(Q3 17: 15.9%),” ARM Research
analysts said.
Accelerated growth in Agriculture
of 4.2 percent YOY versus 3.1
percent in Q3 2017, recovery in
trade 2.1 percent YOY versus -1.7
percent in Q3 2017, and slower
contraction in services of -0.8
percent YOY versus -3.1 percent
in Q3 2017 largely drove the overall
economic growth in Q4 2017.
But analysts have noted that
the country’s GDP growth of 0.83
percent in 2017 remains low.
“The growth rate still lags far
behind where Nigeria should be,”
said Razia Khan, chief economist
for Africa at Standard Chartered,
although she noted that the fullyear
growth was higher than the
0.7 percent forecast by her bank.
Elsewhere, the services sector
also saw a slower contraction of
-0.3 percent (Q3 17: -1.1%) during
the review period which stemmed
from the ICT sector (Q4 17: -1.5%;
Q3 17: -4.5%). Though data from
the Nigerian Communications
Commission revealed a downturn
in industry voice calls (-7% YoY to
142 million active subscribers),
mild growth in data services (YoY:
3% to 95 million subscribers) was
able to tame its effect on the industry’s
total output. Oil refining
remained in negative territory,
losing -46.2% YoY.
it ranked 4 in 2009. When compared
to African neighbours,
Nigeria is the least food - secure
in terms of sugar as most of them
produce substantial proportions
of their sugar requirements.
A pre-commissioning fact
sheet made available to BusinessDay,
revealed that Sunti
Golden Sugar Estate (SGSE)
Limited is a wholly owned subsidiary
of Flour Mills of Nigeria
(FMN) Plc, and comprises of a
cane production area and sugar
factory.
“More than N50 billion has
been invested in Sunti so far,
making it the largest Agro Allied
investment in Nigeria so far,” said
the company in its fact sheet.
It added that “SGSE is FMN’s
single biggest investment since
inception in 1960; its vision for
agro-industrial transformation
(in Nigeria).”
Designed to have an output
of 100,000 tons of sugar annually
at full capacity, the facility
occupies 15,100 hectares of
land with a potential cane area
of 5,000 ha out of which 3,000
hectares is currently under cultivation.
Majority of the area is
enclosed within a 35-kilometer
The Nigerian National Petroleum
Corporation (NNPC) says it
wants to raise the country’s refining
capacity from the current nameplate
capacity of 445,000 barrels
per day (bpd) to 662,000 bpd, but
this data indicates such plans are
the blueprint for a pipedream.
According to data from its operations
and financial report for
November, the three refineries
produced 55,187 metric tonnes
(MT) of finished petroleum products
and 39,562 MT of intermediate
products out of 107,748 MT of
crude processed at a combined
capacity utilization of 5.92 percent
compared to 17.63 percent combined
capacity utilization achieved
in the month of October 2017.
“A problem the NNPC will be
confronted with is speed in getting
approvals for funding to do
repairs to increase efficiency of
the assets, and if it can manage
the repairs,” said Chuks Nwani, an
dyke offering flood protection
from the River Niger where the
Sugar cane is cultivated under
irrigation, making it an annual
crop, and available for processing
year round.
Sadiq Usman, a director in
FMN’s Agro-allied division, told
BusinessDay by phone, that the
project started about eight years
ago with the acquisition of land,
while actual development commenced
five years ago.
The Estate comprising the
plantation and the mill is described
in the factsheet as
FMN’s Backward Integration
programme under the National
Sugar Master Plan (NSMP), towards
the attainment of locally
produced and refined sugar. According
to FMN, the facility’s official
commissioning is a pivotal
event in propagating not only the
significant investment in the Mill
but the company’s growth and
backward integration story to all
stakeholders.
In 2013, implementation of
the Nigerian Sugar Master Plan
(NSMP) was started with a goal
to effectively end sugar importation
within 10 years, when
Nigeria should have achieved
energy lawyer.
Faster growth in food, beverage
and tobacco and Textile, Apparel
and Footwear erved as pillars in
pushing the manufacturing sector
back to a positive growth of +0.1
percent (Q3 17: -2.9%).
“Consistent with the above-50
readings in PMI releases over H2
2017, the manufacturing sector
expanded 1% y/y driven by gains
in the key sub-sectors: food, beverage
and tobacco (up 2.2% y/y)
and textiles, apparel and footwear
(up 1.6% y/y) alongside a return
to growth across most industries
which helped offset continued
weakness in refining (down 47%
y/y) and cement (down 1.6% y/y).
The improvements reflect an improved
FX liquidity profile and a
recovery in consumer demand as
PMI readings in Q4 2017 showed
higher new orders, growing inventory
and rising employment,” said
Ecobank research analysts in a Feb.
self-sufficiency. As at last year,
however, it was reported that
Nigeria has achieved only 40.3
per cent of the target set for attainment
by the first half of the
10-year lifespan of the sugar
master plan.
It appears many companies
are yet to fully take advantage of
the opportunities in producing
more sugar locally, retaining
more of the foreign exchange
used for importation, and putting
the country in a position to
be more elf-sufficient.
The sugar production facility
in Mokwa, Niger state, currently
employs 3,000 people mainly
sourced from the surrounding
communities. Once development
is completed 10,000 people
will be employed. CSR projects
have been done installing drains,
culverts and roads around host
communities, including the
30-kilometer road from Mokwa.
In addition to the Sugar value
chain, FMN says it has also
embarked on significant backward
integration investments in
the Cassava/Sorghum/Wheat
value chain as well as the Edible
Oil (Palm and Soybean) value
chains.
Sitting from
Left: Jin Tao,
director-general,
Global
Cooperation
Department–
Americas and
Africa, China
Development
Bank (CDB),
with Kennedy
Uzoka, GMD/
CEO, UBA
plc, signing a
$100 million
loan facility
agreement to
fund SMEs in
Africa. Standing
behind are
Zheng Zhijie,
president of
CDB, and
Tony Elumelu,
chairman
of UBA plc,
at the UBA
House in
Lagos, yesterday.
27 note to clients.
“Looking ahead, the stronger
non-oil growth reading lifts our
optimism regarding Nigeria’s economic
growth prospects over 2018.
We now see telecommunications
GDP exiting recession in Q1 2018
given the strength of the quarterly
recovery over Q4 17 even as a more
accommodative monetary policy
stance and improved FX liquidity
buoys activity in the manufacturing
and trade sectors. In addition,
improvements in fiscal revenue
at both federal and state level are
likely to allow for further gains
in the construction and cement
sectors. For oil GDP, we expect oil
production to average 2.11mbpd
(2017e: 1.88mbpd) helped by continued
peace in the Niger Delta and
likely on-streaming of the 250kbpd
Egina oil field in Q3 2018. In all we
look for real GDP growth of 3% in
2018 up from our prior forecasts for
2.6% growth.
Nigeria’s $2.5bn
Eurobond could
trigger yield curve
normalisation
BALA AUGIE
Federal Government of Nigeria’s
decision to tap the
international debt market
with a view to refinancing domestic
debt and reducing local borrowing
costs could trigger yield curve
normalization.
Investors historically have
viewed the shape of the yield curve
as a signal of future growth.
The yield curve compares interest
rates at different maturities,
typically the spread between yields
on one- and 10-year bonds.
Ten-year yields historically have
reflected the market’s growth and
inflation outlook, while the short
end of the curve is mainly tied to
market expectations for central
bank rates.
The normal yield curve is one in
which short term debt instruments
have a lower yield than long term
debt instrument of the same credit
quality.
Fixed Income analysts have
agreed that the narrow difference
between yields on shorter term
paper of 15.40 percent and the yield
on long term dollar denominated
debt of 13.80 percent means there
is significant downward pressure
on short term interest rates.
However, they add that yields
on short term securities may not
go down further as the central bank
could mop up or stem liquidity by
intensifying on Open Market Open
(OMO) issuance with a view to attracting
foreign investors.
“Because federal government
plans to bring down borrowing
costs, they are going to reduce their
borrowing in treasury bills and that
will suppress the short term interest
rates,” said Wale Okunrinboye,
a fixed income and FX analyst at
Ecobank Group.
“More money is going to come
into the system and that will depress
yields at the segment so short
term interest rate will start declining.
Last year short term rates were
higher than long term rates,” said
Okunrinboye.
Nigeria recently sold $2.5bn
worth of Eurobond via a dual series
offering of 12 year and 20 year tenors,
priced at 7.143% and 7.696%
respectively.
Investors have flocked to Nigerian
Eurobond as improved oil
production and a flexible exchange
rate helped the country exist its first
recession in 25 years.
Inflation which is a bonds worst
enemy because it moves in inverse
proportion to price, fell to 15.10
percent for a 12 consecutive month
in January 2018, according to a recent
report by the National Bureau
of Statistics (NBS).
Finance Minister Kemi Adeosun
said recently that the country
plans to redeem N762.5 billion
worth of treasury bills and that it
would save government N64 billion
each year after the refinancing
is completed.
Eurobonds make up more than
a fifth of Nigeria’s $15.35 billion foreign
debt portfolio as of September
and more than half of interest paid
in the third quarter, according to
data from the Debt Management
Office (DMO).
Nigeria’s Eurobond portfolio
now stands at $8.5bn (or $8.8bn if
the $300 million diaspora bond is
included), and the total external
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