Nigerian billionaire Aliko Dangote gestures during an interview with Reuters in his office in Lagos June 13, 2012. Dangote is targeting a market capitalisation of $35-40 billion for his cement company when he lists it in London next year, and the money will be used to pay off investors including himself, he told Reuters on Wednesday. Africa's richest man with a cement empire stretching from Senegal to South Africa, Dangote said in an interview at his office in Lagos that Dangote Cement had raised its capacity target to 60 million tonnes a year by 2015 from a previous 50 million tonne target. To match Interview NIGERIA-DANGOTE/      REUTERS/Akintunde Akinleye (NIGERIA - Tags: PROFILE SOCIETY WEALTH BUSINESS)
Nigerian billionaire Aliko Dangote gestures during an interview with Reuters in his office in Lagos June 13, 2012. Dangote is targeting a market capitalisation of $35-40 billion for his cement company when he lists it in London next year, and the money will be used to pay off investors including himself, he told Reuters on Wednesday. Africa's richest man with a cement empire stretching from Senegal to South Africa, Dangote said in an interview at his office in Lagos that Dangote Cement had raised its capacity target to 60 million tonnes a year by 2015 from a previous 50 million tonne target. To match Interview NIGERIA-DANGOTE/ REUTERS/Akintunde Akinleye (NIGERIA - Tags: PROFILE SOCIETY WEALTH BUSINESS)

Nigerian tomato paste plant to uplift farmers, cut costs

By Bloomberg Time of article published Jul 2, 2013

Share this article:

Dulue Mbachu and Edwin Olofu

Shittu Ibrahim ekes out a living for his two wives and 11 children by selling tomatoes he grows to passersby along a highway that runs through the Kadawa Valley near Kano, the biggest city in northern Nigeria. With no way to find new customers, about two-thirds of his crop rots.

Now the country’s central bank and Africa’s richest man, Aliko Dangote, have teamed up to establish a $25 million (R246.7m) tomato paste factory that could boost income for Ibrahim and the 8 000 farmers who live in the valley.

“We are doing this only to feed, as you can see, I can’t afford the luxuries of life,” the stocky 56-year-old said as he sat on a stool on June 6 outside his mud-walled house, which is surrounded by tomato fields as far as the eye can see.

“There are better prospects in supplying Dangote because people will buy from them from all over the country. We hope that things will improve.”

The intervention by the Central Bank of Nigeria, which commissioned a study to show that processing local tomatoes is cheaper than importing paste from China, is part of the government’s drive to cut annual food imports of more than $10 billion.

It also plans to boost agriculture in a country that was food self-sufficient in the 1960s, and create jobs in the north where poverty and unemployment have fuelled an Islamist insurgency.

“We want to take Kadawa as a model and prove that with the right application of government policy we could get finance to the sector, improve productivity, create jobs and raise income,” Central Bank of Nigeria governor Lamido Sanusi said last month.

Home grown

The 2011 study showed that Nigeria paid $360m a year to import more than 300 000 tons of tomato paste from companies including Hebei, China-based Baoding Sanyuan Food Packing and Singapore’s Olam International.

The country produced 1.5 million tons of tomatoes a year, of which about 900 000 tons rot, Agriculture Minister Akinwunmi Adesina said at a presentation in the capital, Abuja, last month.

Annual consumption is about 900 000 tons. Tomatoes feature in Nigerian dishes such as Suya, a spicy northern delicacy of meat kebabs with raw tomatoes, as well as a tomato stew eaten with rice, beans, yams and cassava dough.

Dansa, a unit of Dangote Group, the company that accounts for the bulk of Aliko Dangote’s $19.9bn wealth, took up the project after a failed attempt to get importers including Olam, Conserveria Africana and Chi Group to form a venture.

The plant is expected to start by November and will produce more than 400 000 tons of tomato paste annually. Most of its tomatoes will come from farmers in Kadawa Valley.

Farmers would receive a guaranteed price of about $700 a ton, compared with an average of less than $350 now, the central bank said.

Dangote, the world’s 32nd richest man according to the Bloomberg billionaires index, owns businesses including flour mills, fruit canning plants and palm oil refineries.

“It’s a win-win situation. We have a price we can compete with and the farmer has a price that makes the tomato a good value,” said Sani Dangote, vice-president of Dangote Group and Aliko Dangote’s brother.

“It’s only agriculture that can take poverty away overnight because it doesn’t take long for the farmer to see the results and reap the rewards.”

While agriculture accounts for more than 40 percent of the economy of Africa’s biggest oil producer, most output is by subsistence farmers who eat much of what they grow.

Gross domestic product per capita is $1 436 in the south and $718 in the north, according to Financial Derivatives.

Nigeria is now the world’s second-largest importer of rice and sub-Saharan Africa’s biggest wheat and sugar buyer.

Farmers in northern Nigeria once grew cotton, peanuts, cowpeas and rice for export. Half of Nigeria’s 160 million people dwell in rural areas and 80 percent of those live on less than $1 a day, according to the UN International Fund for Agricultural Development.

Investment

Nigeria attracted agricultural investment worth more than $8bn in the past 18 months, Adesina said. Still, only 40 percent of its 21 million hectares of arable land is cultivated.

“Our strategy is to change the face of the north,” Adesina said. “We’re using agriculture for poverty reduction; our intention is to create wealth.”

Key to the government’s plan to end rice imports, now costing 1 billion naira (R60m) a day, by 2015 and expand crop exports, is a central bank plan to channel credit to agriculture.

The Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending, or Nirsal, a unit of the Central Bank of Nigeria, which carried out the tomato study, also provided credit guarantees to enable banks to lend to farmers, said Jude Uzonwanne, Nirsal’s head and a former consultant at Monitor Group.

At Kadawa, Nirsal determined that “about 8 000 farmers producing in about 5 000ha needed roughly 4 billion naira in working capital”, he said.

It also established a farm office of agronomists and managers “to run all the middle mechanics between growing crops and delivering to the Dangote factory”.

Nirsal has the mandate to guarantee as much as 75 percent of loans to agriculture. Since giving its first cover for a loan by Sterling Bank in July last year, it has gone on to work with most lenders in Nigeria, according to Uzonwanne.

By April, it had issued guarantees for loans worth 25 billion naira, covering an average of 57 percent of lending, he said.

Apart from tomatoes, Nirsal has provided similar guarantees for producers of cassava chips, rice, soya beans, cocoa and leather. Loans to agriculture as a share of total credit rose to 3.8 percent in February from 1.5 percent in December 2009, according to figures released by the Bankers’ Committee. The central bank has set a target of 10 percent of all loans to agriculture by 2016.

Dansa expected to produce enough tomato paste for both the local market and export, Sani Dangote said. – Bloomberg

Share this article: