Paul Gbededo, is the Group Managing Director / Chief Executive Officer of Flour Mills of Nigeria Plc. In this interview, he enumerated the challenges facing flour millers and need for government intervention. He said Government needs to encourage inclusive, sustainable and enforceable policies to encourage local investors. Excerpt.
The year is ending in a few months, what is your general assessment of the flour milling industry?
There is no denying the fact that Wheat remains one of the most important agricultural commodities in Nigeria today.And with the increasing numbers in our population, and the growing mouths to feed, it has perhaps become even more significant as a cash crop and deserving of the interest that it has garnered lately. 2018 has no doubt been an interesting year. We have seen a lot of changes, in not just the flour milling industry but, in the manufacturing sector, and the Nigerian economy as a whole. Nigeria is witnessing an increase in the growth patterns for the non-oil sectors and its contribution to the GDP, for the first time in many years, and we are only hopeful that this trend will continue well into 2019 as focus shifts to the agriculture and manufacturing sectors.
Predictably, in 2018, we saw a drop in the demand for wheat, and other wheat-based products. This can be attributed to the low disposable income and purchasing power in the market, with direct impact on the margins and profitability in the industry. As the economy improves, we envisage that we will see some appreciation here. For a country with about 180 million people, the official statistic record of 69gramme per capita for wheat consumption is comparatively still very low. In South Africa, wheat consumption is at 318 gramme per capita. So, there is plenty room for improvement.
One of our biggest challenges in the industry, today, is perhaps the concerns for the amount of wheat that is imported. In 2017, Nigeria’s wheat import was at 4.6 million tons, but this figure dropped by 15percent in 2018. This can be attributed in the most part to the effort of companies like Flour Mills, and of course, the Flour Millers Association of Nigeria (FMAN), who have invested heavily in the rapid improvement of locally grown wheat while gradually moving Nigeria closer to the vision of attaining self-sufficiency in Wheat production in Nigeria.
To what extent has government policies, benefited the industrial sector?
Nigeria has just emerged from what can be described as one its most challenging periods. 2015 and 2016 were particularly challenging years for businesses in Nigeria. That been said, a lot of the stability that we are witnessing today in the non-oil and productive sectors can very easily be attributed to policy interventions by the government.
The CBN and Bank of Industry for example have been very visible in the progress that has been recorded so far. From 2016 to date, the CBN had introduced several intervention initiatives like the N40 billion. Anchor borrowers Programme (ABP), and the introduction of the importers & Exporters, and Small and Medium Enterprises (SMEs) Forex windows. These are but a few of these examples. The Presidential Enabling Business Environment Council (PEBEC) is also worth mentioning. The improvement in the ease of registration of companies within a short time has had a positive impact on the sector as well.
There are still all manners of imported flour in the market. How is this affecting the flour millers?
Other than the obvious danger to investments in the sector, and likely threat to jobs, and the loss of local capacity utilization; perhaps most worrisome is impact some these imported flour brands will have on consumers. For starters, local flour is fortified with vitamins A & C, unlike the imported flours that lack fortification.
Port congestion has remained a major challenge in Nigeria. How is this affecting the Flour Millers?
As at today, Nigeria controls about 70 percent of the cargo traffic of the entire West and Central Africa, with a majority of that traffic routed through Apapa port. As expected, the inefficiencies at the ports coupled with the traffic congestion on Apapa road has been a major cause of worry for manufacturers. The port congestion is quite simply a major symptom of the large scale infrastructural decay and deficit at the ports. The impact that this has on the logistics for import and export activities is better left imagined. Thankfully, we have witnessed an improved interest by the government to resolving some of these challenges. And the organized private sector is only happy to help. As you must be aware, FMN and other partners have already committed about N4.3 billion into the complete overhaul of the Apapa wharf road.
Four years after privatization of the power sector, Nigeria is still far from enjoying regular electricity supply. How is your company managing the situation?
The privatization of the power sector is a policy in the right direction. A private sector driven market is the best approach to ensuring the provision of efficient and quality service in the power sector. While it is true that a lot of the challenges in that sector persists, I imagine that with time and a little more resources, we should start to see some improvements.
Judging by the mode of our business and operations, we require 24 hours uninterrupted power supply, and have over the years developed our capacity to meet our power needs. We now have about 20 to 40 percent redundancy rate for power generated from diesel and gas. We are now in a position to generate and distribute power to our neighbors and have applied for a license to facilitate this.
How would you rate consumer purchasing power in the present economic situation?
In the past 10 years we have witnessed a steady decline of disposable income in the country, a rise in poverty rates and the near death of the middle class. The devaluation of the Naira for a country that is largely import dependent, coupled with challenges faced by several public workers who have been owed salaries for months have put a major strain on economic activities in the country.
What further steps need to be taken to establish a viable food and beverage sector?
The size and growth rate of Nigeria’s populations is a clear indication of the growth potentials of agro-processing and manufacturing sectors. Nigeria must continue to focus on growing its local content by encouraging, innovation, implementing backward integration policies and creating an enabling environment that will encourage and stimulate investments in the real sectors. We need to focus on increasing capacity, especially in areas or comparative advantage and continue to actively encourage, the development and purchase of ‘Made in Nigeria,’ products.
In your opinion, what do you think government should do to ameliorate the challenges in sector?
Government needs to encourage inclusive, sustainable and enforceable policies to encourage local investors. There must be conscious effort to address not just the issues of dilapidating infrastructure like road, rail, and power, but also to build capacity in the real sector.