Nigeria Food and Drink Report Q2 2008

The local food and drink production industry in Nigeria continues to develop as international operators are slowly increasing local investments, as discussed in BMI's recently published Nigeria Food & Drink Report for Q208. In March America's Corn Production International announced that it will construct a sweetener factory in the country at a cost of US$3.4bn. The company specialises in the production of sweeteners for the Coca-Cola Company and will use cassava as a raw material for the production of sweeteners, which will be used in the production of soft drinks and various other food products. Nigeria is the world's largest cassava producer, with the most advanced cassava transformation facilities in Africa.

Throughout the African continent, cassava is gradually being transformed from a famine-reserve commodity and rural food staple to a cash crop for urban consumption. General Manager Michael Frieseman said that the establishment of a local production plant will reduce the cost of importing their products from the US and would facilitate the boosting of local production of cassava, going on to say that local farmers would also benefit, for the company will introduce new technology in the processing and storage of cassava.

Cassava is not the only local Nigerian crop receiving attention from international investors. Due to rising global barley costs (which is used in the production of beer), the expense of importing this to Africa, and a Nigerian government ban on the import of malt barley in the early 1990s, both Heineken and Guinness began experimenting with locally grown sorghum for their beers, which benefits from being a hardy grain that can survive in poor soil conditions. More recently, Diageo and Heineken have begun to co-operate, alongside the European Co-operative for Rural Development, on a five-year project to encourage farmers to grow sorghum in Ghana and Sierra Leone and show them that there are long-term growth opportunities for this crop. Both companies saw this as an opportunity to develop local sources for agricultural products, make local sourcing more reliable, and help communities to develop. As shipping and commodity costs have continued to rise, what started off as an act of corporate social responsibility has actually turned out to make very good business sense as well.

Such investments into the local industry are desperately needed, not only to support farmers, but also to improve Nigeria's operating environment as a whole. However, many companies are hesitant to invest, and rightly so, given the country's reputation for rampant corruption. Although the government has supposedly made fighting corruption and improving the business environment a priority, for every two steps forward, there appears to be one step back, and going forward we are cautious regarding the reporting process. However, on a more positive note, physical infrastructure should see improvement over the years ahead as the government's development strategy, which places a significant emphasis on national infrastructure investment, goes forward, which will certainly benefit the food and drink sector.