Focus on Nigeria

by Chris Lyddon
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Nigeria is a spacious country with a large population, but its wheat production is small. Rising consumption of bread, in particular, has made it one of the world’s biggest importers. The milling sector is dominated by a few big companies.

According to the International Grains Council (IGC), total Nigerian grain production in 2010-11 will be 27.3 million tonnes, down from 28 million the year before. That includes 8.7 million tonnes of maize, down from 8.8 million, and an unchanged 11.5 million tonnes of sorghum.

According to the IGC, Nigerian rice production is put at 3.7 million tonnes, up from 3.4 million.

Wheat production is too small to be recorded by the IGC. The U.S. Department of Agriculture (USDA) put it at 100,000 tonnes.

The IGC predicts Nigerian grain imports for 2010-11 at 4.1 million tonnes, up from 4 million. Nearly 4 million tonnes of that grain import total is wheat.

The U.S. remains the main beneficiary of Nigerian import demand for wheat. According to the USDA attaché in Lagos, sales in 2010-11 had reached a record 3.5 million tonnes by April 1, up from 3.3 million tonnes last year.

“Although Nigeria dropped from the number one export destination in the world for U.S. wheat in MY2010-11 to third position this year, it remains the most consistent and loyal customer,” the attaché’s annual report on the grains sector said. “Consumption continues to expand due to increased demand for wheat flour for bread, noodles, pasta and biscuit production. Nigeria’s rice imports from the U.S. are also trending upwards, largely based on quality.”

Imports have increased steadily since the lifting of a ban on wheat in 1992. According to the attaché, during the same period consumption of wheat per capita has risen from six to 20 kilograms a year.

“Nigeria is a huge growth market for wheat,” the report noted. “The combination of a steady increase in domestic demand for flour-based products and high prices for local substitutes is encouraging millers to bring more of the existing excess milling capacity into use.”

The attaché put Nigerian milling capacity at 6.5 million tonnes, noting that it had risen, which is “an indication of investor confidence in the future growth of the milling industry.”

Utilization in 2010-11 is about 60%. Olumuyiwa Talabi, marketing consultant for U.S. Wheat Associates in Lagos, explained that there are 21 milling operations in Nigeria, some of which have mills around the country.

“Mills like Dangote, BUA, Crown Flour Mills and Flour Mills of Nigeria have operations outside Lagos,” he told World Grain.

The industry was successful despite a slowdown in the economy. He put capacity at around 8 million tonnes and reckoned that imports of approximately 3.8 million tonnes plus maybe 400,000 tonnes from other destinations put utilization at around 50%.

According to a report published by financial institution Lead Capital in 2008, six firms have a collective market share of about 80%. The biggest, Flour Mills of Nigeria, has 38% of the market. The report listed the six major players as Flour Mills of Nigeria Plc, Dangote Flour Mills Plc, Ideal Flour Mills Ltd, Honeywell Flour Mills Ltd, Standard Flour Mills Ltd and Crown Flour Mills Ltd. Another company with a growing market share is BUA Flour Mills.

There’s enthusiasm for expansion. In December the Punch newspaper carried a report quoting the management of Honeywell Flour Mills as having said that the “huge market opportunities inherent in the country‘s economy, alongside its increasing population, would prevent the company from establishing factories or plants outside the country.”

It quoted the executive vice-chairman of Honeywell Flour Mills, Babatunde Odunayo, as saying that “since Nigeria remained the hub of economic activities within the Africa sub-region, it would not make any economic sense to establish plants in neighboring African countries.”

In April of this year, the Daily Independent newspaper carried a report quoting the management of Dangote Flour Mills as saying that the company had invested in its mills to raise capacity from 4,500 tonnes to 7,300 tonnes a day. It quoted Group Managing Director Rohit Chaudhry as saying that the company had ambitions to become Nigeria’s biggest miller.

“We have got more than double-digit growth this year,” he said. He put Dangote Flour’s market share at 32%.

The paper also quoted the Dangote managing director as complaining that per capita consumption of bread in Nigeria is below that of Argentina. But, according to the attaché, bread is “a standard item in the breakfast diet and it is a convenience food for many Nigerians.”

The attaché also noted strong growth in demand for noodles, and virtually all the mills in the country have established noodle production facilities. The lifting of a ban on the import of crude vegetable oil and increased imports of palm oil have cut the cost of noodle production.

The market is highly price sensitive, which means that high global wheat prices have affected profitability.

“Millers have not passed onto consumers the full price increase because of market resistance,” the attaché said.

Maize a staple

Maize (corn) is a staple of the Nigerian diet. High prices have encouraged farmers to bring land back into production and the attaché predicted an increased production of 9.2 million tonnes in 2010-11.

“Also, the introduction of early maturing varieties has allowed corn area to continue to expand into drier Northern growing areas,” the report said. “A modest increase in yield is also expected because of reported early arrival of rain in the grain belt and improved availability of fertilizer.”

Most of it is used for human consumption, although a forecast 1.5 million tonnes will go for feed in 2011-12, according to the attaché report which says that 95% of feed is for poultry.

A ban on importing maize has been lifted and poultry producers are looking to import because of tight supplies of domestic maize.

Sorghum is a staple in much of northern Nigeria.

“Crop yield has increased because of the growing acceptance by farmers of improved varieties developed by local research institutes,” the attaché said. “These include two sorghum varieties bred by the International Crops Research Institute for Semi-Arid Tropics (INCRISAT) which are higher yielding and earlier maturing.”

“The earlier maturing trait is especially attractive to farmers due to the erratic nature of the late-season rains in the main northern growing areas,” the report said.

The government is promoting rice production “aggressively” according to the attaché, under a presidential initiative to increase rice production to 6 million tonnes in three years.

“This initiative involves the promotion of the New Rice for Africa (NERICA) variety,” the report said. “This variety is resistant to the African Rice Gaul Midge disease and is higher yielding than currently used varieties.”

Storage problem

There is a lack of adequate grain storage facilities, something the attaché identified as a major problem with production in Nigeria.

“On average, 30% of Nigeria’s grain output is lost due to spoilage, contamination, attack by insects and rodents, and physiological deterioration in storage (post-harvest losses),” the report said. “This high loss translates to loss of revenue to Nigeria’s peasant farmers.”

The USDA has extended technical assistance to Nigeria in grain silo management under the Global Food Security Initiative Program, and the government is boosting its strategic storage capacity. The USDA post in Lagos used the department’s Cochran Fellowship Program to provide training for staff of the National Strategic Grain Reserve and the National Stored Products Research Institute.
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