Farm Ireland

Saturday 24 February 2018

'This could be more exciting than China'

Irish companies signed deals worth millions on last week's trade mission to Nigeria

Typical Nigerian beef cattle
Typical Nigerian beef cattle
Darragh McCullough

Darragh McCullough

'I think this might be even more exciting than China right now."

These were the words of Agriculture Minister, Simon Coveney, following a series of meetings in Lagos last week that saw Irish firms sign up business worth E50m in a single day.

Granted, much of that total was not food sales, but Irish food companies are positioning themselves to take advantage of the massive potential in Africa's largest economy.

Not only is Nigeria growing fast, it is also relatively close, with shipping times almost half the eight to 10 weeks required to get product to China.

Ornua is leading the charge, with phenomenal growth projected for its little 20g sachets of full cream milk powder.

From sales of just 90t two years ago, volumes have grown more than 16-fold, and are projected to quadruple again in the next five years.

Remarkably, if Irish powder sales do reach 6,000t, it will still only represent 6pc of the total market. In addition, this is just one west African country, albeit the biggest, but it gives a sense of the scale of the potential demand out there.

However, there are serious drawbacks, not least the fact that Nigeria has a ban on all imported beef at the moment.

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Even with fish, of which they imported E2bn worth last year, Nigerian banks will not supply local businessmen with foreign currency to purchase product.

But most businesses are taking a long-term view, and that the immediate currency difficulties are largely linked to the very low oil prices that Nigeria is currently receiving for one of its key exports (see panel below).

"Everybody knows that Nigeria can't keep the foreign currency restrictions going indefinitely," said Agra Kepak's managing director, Kevin Ruane.

But the oil slump has resulted in a fall off in demand for premium branded products such as the Kerrygold sachets that trade at a 30pc premium over cheaper vegetable fat-filled alternatives.

"Premium products sales on average fell by 20pc over the last 12 months. Baby-food fell by 35pc, but the Kerrygold sachets only fell by 5pc," said the co-owner of Ornua's new packing plant in Lagos, Sumil Gubte.

He knows the market as well as any having built up manufacturing and distribution businesses in Nigeria over the last 25 years that now employ 2,000 people. That local know-how is vital for anyone looking to shift real volumes to the estimated one million retailers in Nigeria.

"We have about 700 staff and 150 vehicles delivering to stall-holders, who may need to be topped up several times a day because they simply don't have the cash flow to be able to afford to buy more than a strip [of 10] of sachets," he said. One sachet costs about €0.05.

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