7 September 2017

Nigeria: Bua's $600m Cement Plant As Economic Booster

Raheem Akingbolu writes on the economic significance of the newly inaugurated cement plant in Edo State by the BUA Group and how it has affirmed the company's brand promise

Close to three decades after entering the Nigerian market as a commodity trader, the BUA brand seems to have fought and won the greatest battle of its life, following the successful inauguration of the newly established three million tons OBU cement plant at Okpella, Edo State.

The new plant was a confirmation of the promise made by the company when it first started production of cement from its three million metric tons per annum cement plant at the location that it would follow up with an expansion. According to the company, the new plant is worth over $600 million.

Vice President Yemi Osinbajo, who was a special guest of honour at the event, admitted that Nigeria's economic emancipation and growth must be private sector-led and driven, for the country to get the desired result. He also stated that there is no public sector resource that can match the resources, drive and commitment of the private sector.

He emphasised that provision of enabling environment for industrial investment is the cornerstone of the Buhari administration's economic policy.

While commending the project and its economic benefits for the state and the country, Osinbajo pointed out that its construction would boost the Nigerian economy.

He said: This enterprise typifies our expectations as a government. In the Economic Recovery and Growth plan which was launched by Mr. President on the 5th of April, 2017, he made it clear that Nigeria's economic emancipation and growth must be private sector-led and driven. I'm also happy to note that in the construction of the power production facility for this plant, the BUA group has used the most modern and efficient gas turbines which combines low and economical running cost with a very high degree of reliability,"

The vice president expressed his satisfaction that the plant is a wholly Nigerian enterprise, especially as the planning, the execution and successful establishment of the industrial complex were done by a Nigerian and by a Nigerian team.

He commended the Edo Governor, Godwin Obaseki, and the immediate past governor, Adams Oshiomhole, stating that their business friendly policies and preparedness to back private sector initiatives is an excellent demonstration of how to grow the economy and create jobs in the process.

According to him, nation building is never judged by the number of new projects or fresh ideas, but by what will complete and sustain well years after.

Earlier, the Executive Chairman of the company, Abdulsamad Rabiu had stated that if things work out as projected by the players in the cement sub-sector of the manufacturing sector, Nigeria would be able to save $2billion by the year 2018.

The BUA Boss said the company delved into cement production in 2008 with highest stake in Cement Company of Northern Nigeria, (CCNN) and the acquisition of Edo Cement.

He also announced the construction of another three million metric tonnes capacity plant close to Obu by SINOMA and will be commissioned next year.

He said: "Today marks an important milestone for us. It is not only for us as BUA but the Nigeria cement industry and Nigeria economy in general. As we witness the official commissioning of the 3million metric tonnes Obu cement plant as well as the groundbreaking of the second line of our 3mt plant.

"The journey of the Nigeria integrated cement manufacturing has seen Nigeria move from a nation of 3million metric tonnes of production capacity to a country that will have 45 million tonnes of cement manufacturing capacity by next year. We are planning about a 24 increase in capacity,"

According to Samad, the recent achievement in the sector has not only made Nigeria self sufficient but a self exporter of cement. He added that the cement sub sector represents over 90 percent of the Nigeria mining sector and employs some 40,000 people directly and over 2million people indirectly.

"The success and impressive efficiency of the first line which in its first year of operation was over 90 percent returns of capacity utilisation made made BUA to commence the construction of the second line of 3million tonnes. We are completing another Greenfield project in Sokoto which is 1.5mtpa which cost over $300 million. By the time we are done the combined capacity of our cement plant both in Sokoto and in Edo will be about 8million tones," he added.

How it all started

Like few Nigerian brands that have become household names in the market, BUA Group entered the market about three decades ago, as a trading company but with the ambition of becoming a solid brand that would command respect in many sectors. From day one, its handlers were able to know early enough that branding was much more than just a cool logo or well-placed advertisement.

Promoters of the BUA Group followed a simple rule of branding: they started small with their branding and didn't forget to focus on their target niche and audience first. They also crafted a clear expression of what their company was most passionate about.

This obviously explains why they entered the market as a trading company, majorly dealing in steel, rice, cement and flour importation.

Within a short time, the group turned to a major integrated manufacturer of these products locally and started creating thousands of jobs for Nigerians. Since consumers are always quick to identify with brands they can trust, BUA became a respected brand in many sectors. Today, the brand can be defined by many positive attributes.

Apart from taking BUA from strength-to-strength by contributing enormously to the growth of the Nigerian economy, the management of the company has worked very well in line with government's specifications to promote global practice in the country.

Expansion

BUA Group has, over the past few years, embarked on a series of strategic acquisitions as well as organic expansion, which has seen its business portfolio expand to include the Cement Company of Northern Nigeria (CCNN), Edo/OBU Cement, Lafiagi Sugar Company, BUA Flour Mills, BUA Sugar Refinery, BUA Pasta, BUA Ports and Terminals and BUA Estates amongst other agribusiness holdings.

As at the time the company entered, trading was quiet different in the country as compared to now. It was very difficult because access to funding and foreign exchange were both very challenging. However, it was also quite lucrative as not many companies were able to compete. This is where BUA got it right. The fact that it chose to participate early is believed to have assisted the company in starting its manufacturing concerns.

The first of these business initiatives was to set up a flour plant in Lagos, driven by huge demand for flour. At the moment, the company has the flour mills, the pasta plants, a sugar refinery in Lagos and the vegetable oil processing mills and the cement and sugar projects that will soon be inaugurated in Port Harcourt. Just recently, the company started production of cement from its three million metric tons per annum cement plant in Obu, Okpella, Edo State, which is currently the only operational cement plant in Edo State. It followed up with last week's 3.5million metric tons production line.

Medium Term Strategy

Having established itself as a household name, a source close to the group recently revealed to THISDAY that its strategic focus will now be to diversify to business areas with greater potential for export where the sourcing and utilisation of foreign exchange is less. This is necessary, according to the source, because most of the materials needed for production can be sourced locally, while also positioning its current line of foods, mining and infrastructure business for market leadership.

Just recently, the group announced the divestment of its flour business to Olam International in a deal worth $275m.

The agreement signed with Olam, according to the management of BUA, marked a major milestone in the group's medium-term strategy.

Over the years, the group had run one of the largest and most efficient flour milling businesses in Nigeria and the management appears to have confidence in the value it will add to the buyer's operations.

Implementing Government's Policy

Another factor that has helped the growth of the brand is the understanding of the body language of the government and consumers.

For instance, as part of strategic plan to effectively implement government's policy on backward integration in the manufacturing sector of the Nigerian economy, BUA Group has since embarked on rapid expansion of its sugar plantations in Kwara and Kogi states.

At the moment, extensive work is said to be ongoing in Lafiagi, Kwara State, with over 20,000 hectares, while it also has another 50,000 hectares of farmland in Bassa, Kogi State.

These two operations form the fulcrum of its backward integration programme for sugar and it is believed that this will further reduce the country's dependence on imported raw sugar while supporting the value chain in sugar production within Nigeria.

Cement Business

Similarly, recent developments have shown that the BUA Group is working towards replicating the successes recorded through the deep integration of its cement operations.

With most raw materials for cement currently being sourced locally, the group has been able to scale up operations significantly with minimal dependence on foreign exchange, and if information available is anything to go by, it will soon start exporting to neighbouring countries from both the Obu and Sokoto plants, which are currently undergoing 3.5million metric tons Per Annum(MTPA) and 1.5million MTPA capacity expansions respectively to bring the group's cement production capacity to around 10 million MTPA by 2018.

If this happens, then it is easy to conclude that BUA Group will be one of the top-five companies in Nigeria within the next few years.

Present Business Climate in Nigeria

At various fora, the group has consistently emphasised its support for the work being undertaken by government to involve the private sector in ensuring that all legal and regulatory frameworks are effectively in place to boost the real sector of the Nigerian economy.

Nigeria is the most populous country in Africa with around 180 million people. That means a lot of opportunities with adequate resources and a huge market. Apart from investment in the oil sector of the economy, there are other resources in Nigeria that can definitely contribute more to the economy.

Taking the cement industry as a prime example, BUA has always had a lot of limestone reserves in the country; this is evident in the way the industry has grown now that people are investing in that sector.

The various ministries are spending huge sums of money on key infrastructure to attract fresh foreign investment. Despite the progress that has been made, energy issues remain a drain on growth.

Nigeria is a challenging environment but the returns are high. A good idea will always be a good idea, no matter where you are. There are so many indigenous and foreign companies operating here in Nigeria and a number of them are highly successful.

Expectation from the Government

In a recent statement, the company said that it was certain that the current government will focus on resolving issues in the power sector to boost the real sector of the Nigerian economy. Like many Nigerians, they admitted that it won't be easy, but they are optimistic that it is going to work this time.

According to the statement, the most important thing has been achieved, which is allowing private investors to come and invest.

CSR

Until recently, the campaign by stakeholders had always centered on the need for players in the corporate world to give to societies where they operate. While the brand owners in the advanced market were seen to have fully bought into the concept, organisations in the developing nations didn't understood why it was necessary, so the campaign was persistent until now when things are changing. The next stage was the call on various organisations to give an appreciable proportion of their investment to the societies, rather than scratching on the surface. Today, the talk has gone beyond that as experts have started mounting pressure on organisations to look into the area of sustainability

Being Nigerian-owned and very proud of its indigenous roots, BUA is said to be keenly aware of its corporate social responsibility and, therefore, frequently gives back to the host communities through donations, sponsorships, various initiatives and projects related to sports and health care through the BUA Foundation.

The chairman, BUA Group, Abdulsamad Rabiu, revealed during a recent stakeholders' forum in Lagos that: "At BUA, we have a passion for what we do. We are not only helping to grow the Nigerian economy, but also touching lives. I think what is really important is to do things right, to work hard for your company and for the people around you".

Nigeria

IMF Borrowed From Nigeria in 1974 - Former Finance Minister

Minister of Finance in the Second Republic, Alhaji Abubakar Alhaji, said yesterday the International Monetary Fund, IMF,… Read more »

Copyright © 2017 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 900 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.