Nigeria’s Dangote joins the backward-integration race, invests $4.6 billion in rice, sugar and dairy production
The company is on the move to reduce its import-dependency for needed inputs and ram-materials which is currently a difficult task.
This disclosure was made by the Executive Director of the company, Mr Edwin Devakumar during an interview with Bloomberg in Lagos.
Devakumar noted that the group would be investing $3.8 billion in sugar and rice production, $800m in dairy production in the next three years.
The move became necessary as getting forex to imports goods is becoming a nightmare for most manufacturers in Nigeria, a situation caused by the Forex shortages due to the fall in oil price.
Devakumar said, “all raw sugar has to be imported today, the same thing for flour milling.”
'With the current forex crisis in the country, making payments for huge import inputs needed is difficult for the company.'
The conglomerate also hinted that it is expanding its sugar production from current 100,000 metric tonnes to 1.5 million metric tonnes by 2020.
Currently, most Fast Moving Consumers Goods (FMCG) companies in Nigeria are now adopting the backwards integration towards meeting their inputs needs. This is as sourcing Forex to import is becoming more difficult.
Backwards integration means having a business unit which produces inputs/raw materials needs of the company.
Flour Mills of Nigeria (FMN) and PZ Cusson declared huge profits in the 2016 fiscal year, stressing that local sourcing and development of a substitute for some of their inputs made this financial performance possible.
Dangote is one of the leading manufacturing conglomerates in Nigeria. Its cement business is the most capitalised stocks on the Nigerian Stock Exchange (NSE).
The company has been on a driver to diversify into other sectors of the economy, especially the agriculture sector. Earlier in the year, Dangote established its rice subsidiary and planed to cultivate about 200,000 hectares (494, 200 acres) of land for the business.
With another 350,000 hectares being planned for the planting of sugar cane, the company hopes to significantly reduce importation of raw sugar.
The director further revealed that the company has ordered five sugar and ten rice milling plants from Switzerland, which would be located in the northern part of the country.
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