Backward integration: Nigeria looks to Dangote, others

Backward integration, a practice where companies are encouraged to cultivate their own raw materials by purchasing their suppliers or establishing farms to grow produce for their factories, gained momentum in Nigeria following the crash in crude oil prices which started in the fourth quarter of 2014.

The yearning of the government was made known by the Minister of Solid Minerals Development, Dr. Kayode Fayemi  who declared  during the groundbreaking ceremony of Dangote Cement plant in Okpella, Edo State, that  the greatest desire of the government  was  seeing Nigerian entrepreneurs working together with the government  through backward integration to unlock the potential of the solid minerals sector.

Also, while commending Dangote for producing cement locally by using the abundant raw materials that were available in Nigeria, the Edo State governor, Adams Oshiomole, noted that the practice where manufacturers obtained land from government only to use the land as a base for importation was the most destructive practice for an economy.

He said, “Dangote has set an example by manufacturing locally, using Nigeria’s abundant natural resources.  It is a wicked practice for investors to get government land and use it as a base for importation. If Nigerian investors invest in the economy, the economy will grow from strength to strength and young men will have jobs.

“By investing $1bn in a cement plant in Okpella community,  Dangote has established a factory that will feed 24,000 mouths directly every day while 100,000 people will benefit from education and health facilities that will come from the investment.”

Apart from Oshiomole, the youths of the community were equally excited by the investment. To them, it was a sign of good times with prospect of employment, urbanisation and better living standards.

The Chairman, Etsako East Local Government Area, Suleiman Afegbua, noted  this in a statement when he said that Dangote  was reputed  to  provide social amenities in host communities where his projects were located.

He said, “We are also expecting that various social amenities that Dangote provides for host communities in Africa where he has his cement factories will be replicated in Okpella community.

“People are expecting job opportunities, water, schools, rural roads and more. This way, our dependence will no longer be on oil but on natural resources.”

Dangote had given the assurance that the two power plants that would provide electricity for the factory would depend on locally sourced coal. He also assured members of the community that they would benefit from the Corporate Social Responsibility tradition of his company.

A statement quoted him as saying, “At Dangote Cement, we have a robust CSR profile, and here in Okpella we look forward to meeting the needs of the community in the area of provision of social services, education, health etc., just like we did at our Obajana, Ibese and Gboko cement plants in Nigeria.

“It is our hope that all these projects will give the community a sense of ownership. Depending on need and priorities, we have given scholarships, dug boreholes, constructed concrete roads, and built classrooms and health centres, at various locations in Nigeria where we operate.”

With other sectors of the economy lagging behind in the backward integration drive; it is no wonder the government has placed so much hope on the cement sector where Dangote operates.

Once a net importer of cement, the backward integration policy and government support in the sector had resulted in a huge success, changing Nigeria from a net importer to an exporter of the product.

It is hoped that other sectors, whose practitioners can make success of backward integration by utilising the abundant natural resources, will also rise to the occasion and turn inwards.

Manufacturers in the flour milling sector have been taking steps to increase their tempo of backward integration in recent times. Flour Mills of Nigeria Plc has invested in Thai Farms and other agricultural projects to cultivate raw materials for most of its processes.

Although, there are still challenges with meeting factory demand thereby necessitating importation, the company has been able to reduce importation of raw materials by over 50 per cent according to the Group Managing Director, FMN, Mr. Paul Gbededo.

In contrast, the tomato sector and a few others still depend on imported raw materials.

With an abundance of tomato fruits all year round, technology has proved a great hindrance in producing concentrates locally and manufacturers groan as scarcity of forex inhibits importation of tomato concentrates.

But the Managing Director of Sonia Foods, Mr. Nnamdi Nnodebe, believes backward integration in the tomato sector is possible because Nigeria is blessed with the raw materials. According to him, although it is possible, it will take a longer time to accomplish.

He said, “Our appeal to the government is that those of us who have already invested in infrastructure should be given time to produce while we work at completing our backward integration process.

“Backward integration is already ongoing in the sector, but the process cannot be completed in a short time. Meanwhile, people should be given time to import concentrates needed for production so that the factories can stay open and people can remain in employment.”

[Punch]

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