Flour Mills of Nigeria Plc, the country’s biggest miller by market value, has said a shortage of dollars in Africa’s most populous nation is boosting sales as buyers starved of the United States currency buy more food products locally.
“Everyone is trying to see how to source locally and that is good’’ for Nigerian farmers and processors, Managing Director Paul Gbededo, told Bloomberg in an interview.
“We have almost tripled production in refinery of palm oil, palm kernel and soya bean,’’ he said.
Prices have risen alongside demand, Gbededo said. “Fifteen months ago, one ton of corn was sold for 60,000 naira ($190). Today it is N125,000,’’ he said.
The Central Bank of Nigeria had banned importers of 41 items, including palm-oil and rice, from accessing official foreign-exchange markets in June 2015. Although authorities allowed the naira to float in June in a bid to attract inflows, the U.S. currency remains scarce as most foreign investors that exited the country are yet to return. The economy shrunk in the first three quarters this year and is forecast by the International Monetary Fund to contract by 1.7 percent in 2016. Inflation accelerated to 18.5 percent in November, the highest rate in 11 years, according to the statistics agency.
Flour Mills’ sales jumped 44 percent to N255 billion for the six months through September, according to an October 31 filing to the Nigerian Stock Exchange. Profit after tax dropped to N6.5 billion from N24 billion due to foreign exchange losses, it said.
The shares have declined 11 percent this year, compared with a 7.3 percent fall on the Nigerian Stock Exchange Main-Board Index. That values the company at N49 billion.
The company, which has a milling capacity of 12,000 tons per day, also faces challenges from the lack of dollars as it imports about 1.7 million tons of wheat a year, which is processed into flour and sold to makers of bread, cookies, pasta, noodles and confectionery, according to Gbededo. Flour Mills plans to mitigate against that by growing more of the crop locally and starting a sorghum plant next year that will mill 75,000 tons of sorghum flour annually, Gbededo said.
“Our goal is to depend less on the import of food into the country,” he said. “I want imports to end today, but it will take time.’’
Flour Mills is expanding in the cultivation and processing of “six key crops” including sugarcane, cassava and maize to sell locally and export to markets in Africa and Europe, according to Gbededo. It has invested 40 billion naira in a sugar mill plant in the country’s Niger State and is developing 5,000 hectares of cassava farm and 10,000 hectares of maize farm, he said.
“We are talking with equity and technical partners for expansion in those crops,’’ he said, without disclosing the partners.
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