Mr. Mukul Mathur, Country Head, Olam Nigeria in this interview with Jimoh Babatunde,Â traces the companyâ€™s journey into Nigeriaâ€™s agricultural sector with a verdict that the countryâ€™s potential in agriculture still untapped and that agriculture remains the key to Nigeria development.
Here is an excerpt
WhyÂ did Olam decide to venture into the Nigerian market and what was the vision ?
Olam started its operations in 1989, so it is not a new player, it has been there for quite some time. The starting point was at the- time when the country was seen as beingÂ dependent on imports. What Olam wanted to actually do was to help in terms of generating exports. So, it was a campaign that was part of the Kelwaram Group of Companies. They started with the textile business, they were looking at setting up world class facilities to meet with the domestic requirements of the country. But that company was forced to bring in imported machineries. In order to be able to pay for those imports, it was also very important for them to also generate export. That was what led to the thinking behind Olam,So, right from time, you people zeroed in on agriculture?
Why did you zero in on agriculture?
The company has a long term vision. What we have seen across economies and what we are thought in the business school is that if you want to maximize the development, you have to balance the growth in the industrial sector with the growth in agriculture. Since this company was born in Nigeria, the vision the company has is that yes, this is a country which has wealth in terms of oil, but it has its large population base actually in agriculture.
But the income from agriculture is very low. So, if you want to be a part of the countryâ€™s development and to help the countryâ€™s development, what would help is a long-term vision in agriculture. So, that was what kind of sparked off this venture in agriculture.
The company never thought that it will be a kind of one off, we said it may be that this will be much tougher, it may be that we have to take a much longer view in terms of revenues, profitability, et cetera, itÂ may be a much harder road than the industrial or oil industry. We said look, the population is largely in agriculture, actually the countryâ€™s agricultural resource is very rich, but people are not in it. The view was that let us look at agriculture and focus on that. Slowly, we started with cashew, then we looked at cotton from the North. We were not focusing on anyone particular geographical area. We looked at the country as a whole and said can we look at the different parts of the country and what each particular part is good at. So, we diversified.
We looked at aÂ host of products and we looked at the- different parts, because that would lead to a more balanced approach and balanced development.
Which were the produce you finally zeroed in onÂ and whetherÂ the decision was based on profitability in the world market?
We lookedÂ at the three â€˜Câ€™ that is cashew, cotton, cocoa. These were products that we thought Nigeria had a certain base, we thought with efforts, we could actually improve the quality of yield, productivity. These were also products which had a global market for export. Also, by encouraging these products, we would not interfere with the main requirements of the country.
Was it in terms of agricultural produce for domestic consumption?
We did not want to convert the domestic requirements in to something that money could be made out of. What we looked at, we said yes there are yarn, sorghum, maize and rice. But all these are required for domestic consumption. So, there is something called sustenance crop that the local people and the farmers need. You should not upset this equation for basic sustenance of the local populace.
However, what we could do was to also look at providing the farmers with some additional income through cash crops. We will not occupy too much of land, but if we could assist the farmers by helping them improve their productivity, it could generate export and income because we have global market for it, and it could help the farmersâ€™ income. It will also help the country to be able to generate non-oil export which should be the long-term vision. So, that was the approach we took.
How successful have you been on this?
See, it has taken us a long time to improve quality of products weâ€™ve been supplying. As you know, the global market talk about the long stable cotton, now the locally grown cotton is not long stable. So, it is not regarded as the best or the finest. So, it has taken a while for us to find a market for it.
Over time we have been successful in takingÂ up the production of cotton. We are now finding it more and more difficult with the advent of competition to cotton like polyester and other chemicals that serve as competition to natural products. The problem we are facing is that since it is not the finest variety, it does not find the best market prices.
Let talk about what the company is doing in the area of cocoa farming, could you talk about that?
The initial development stage was from probably from 1989 to 1996. The first stage was spent towards learning about the product, and also learning about the marketing side of it. From 1996 to probably 2002/ 2003, was actually when we had an accelerated growth stage from being a marginal small player, we went to the leading stage in buying and exporting. By and large we were still agricultural produce exporters but we made real incursion in cocoa, cashew and sesame, in all these products we became the number one player because we have developed a strong operational module. We have invested in our people, we have learnt about the products. Putting those investment, time andÂ knowledge, we managed to get the market leadership position.
But beyond 2001/2202, we saw that if we really wanted to take the business to the next level, we really need to into valuation in terms of the up stream and down stream. So also in cocoa we started entering into theÂ recessing side of the business, before 2002 we were making some small experiments, but from 2002 onward we took the lease of a factory in Akure and we started processing cocoa for ourselves. From 2002 to 2209 we have been able to grow that business taking more and more investment in the processing side of the business. We increased the value added component of the cocoa so thai we are able to export the butter and the powder to international market.