I would like to thank the Institute of Directors Nigeria for deeming it fit to admit me as a Fellow of this esteemed institution. It is indeed a great honour.
I remember when I was invited last year as a special guest of honour during the 2019 IOD Dinner; I announced that BUA Cement was preparing to list on the NSE. Since you all began this journey with me, please allow me to report back that BUA Cement listed afterward and is now one of the most capitalised companies on the Nigerian Stock Exchange.
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With a market capitalisation of 1.9 trillion Naira, EBITDA of N82 bn and PAT of N60 bn Naira as at FY2019, we are on course to hit EBITDA of 100 billion Naira by the end of 2020 despite the dire conditions brought about by the COVID-19 pandemic this year.
Our outcomes are very significant because BUA Cement is a manufacturing and mining outfit and is currently one of the most profitable manufacturing entities on the Nigerian Stock Exchange. Our successes are exceptional because in mining, you are expected to add a lot more value compared to many other industries due to the use of locally sourced raw materials in your operations. Regardless of the hurdles posed by this global pandemic, we continued to create jobs and sustainable wealth for our workers, investors and by extension, our customers.
I must add that with the presence of resources needed across the country, we have been able to stabilise prices irrespective of where anybody lives in Nigeria and as a result, the price of cement in Lagos is similar or the same as the price of cement in Maiduguri, Yenagoa, Sokoto or Onitsha. In addition to this, only five per cent of our revenues are used for imports in FX; this has freed up necessary funds to pursue further expansion and development across our brand portfolio, particularly in the field of innovative manufacturing.
The cement industry in Nigeria is currently producing about 28 million metric tonnes of cement per annum, which translates to about 120kg per head in terms of consumption per capita. This is lower than the consumption per head in the rest of Africa. Based on this, it is very clear that we are not even producing enough cement. Where others see low consumption figures, I see opportunity; it means Nigeria and the surrounding region is still home to huge opportunities in housing, infrastructure, and allied industries.
Demand and consumption currently outstrip supply; our population is increasing, logistics remains a huge challenge, coupled with reduced production amongst some players. This is why the price of cement in the market is currently about 20% higher than the price of cement ex-factory. Plants are aging and BUA is one of the few that have new plants. We have, therefore, taken it upon ourselves to tangibly bridge the demand gap by 2022. The potentials exist because ideally, Nigeria should be producing at least 300kg per head or about 60 million metric tonnes per annum – which is double our current production capacity.
Imagine with me for a second, if we were still importing cement. The cost of logistics alone would have made the price of cement out of the reach of many – especially those in far-flung states. As I said earlier, and many of us have experienced, the retail price of cement is currently high. However, at about $120/ton ex-factory, this is still lower than the price of cement per ton in many African countries. This equally means the market is big enough for new investments and unless we all come out to face these challenges as leaders, development will be difficult to achieve.
In view of these challenges, I am happy to announce that our 3rd cement line of 3mmt per annum in Sokoto is expected to be commissioned in the middle of 2021, and I am also pleased to inform you that we are commencing the construction of three more cement plants of three million tonnes each in Sokoto, Edo and Adamawa at the cost of $1.050 billion, which should be completed by the end of 2022. The contract signing is expected to happen this week.
However, I am also of the strong belief that it is not only in cement that these large-scale projects are possible. Nigeria hosts other huge mineral deposits waiting for us to add value, to extract maximum benefits. Iron Ore is one of them.
Our country is one of only 11 countries in the world that is sitting on iron ore, coal and even gas, and yet, we appear to be the only ones yet to take full advantage. It is estimated that we spend about three billion dollars a year importing steel, which we can produce locally using our resources thereby saving billions of dollars in foreign exchange every year.
In fact, if we can have a two-million-tonne, fully integrated steel plant at the cost of about two billion dollars, we will be saving about two billion dollars every year. By fully integrated, I mean processing from iron ore to Beneficiation, Pelletizing, DR Plant, SMS, Steel, Long products, sheets, angles – all aspects of the value chain. If we even decide to undertake beneficiation alone, this would be more lucrative than processed limestone, which is the raw material for cement. I daresay if we are able to take full advantage of this – then we can firmly place our sector and country on the road to sustainable development.
As business leaders, we are not exploring and exploiting these opportunities enough and the few of us who are doing it, definitely cannot do it alone. I say this because there are huge opportunities in mining, manufacturing, and the agricultural value chain – just as there are in the services space. Agriculture is a prime area in need of serious intervention, and we need more Nigerians to step up here.
Do you know that 60% of the world’s arable land resides in Africa? And as is often said, “if potential were edible, Africa will be the best-fed continent in the world.” The same applies here to Nigeria. I flew last week from Lagos to Sokoto and could see the fertile plains from Kwara, Niger, all the way to Sokoto, waiting for us to take advantage of. How long will we continue to rely on importing food? Our continued inability to grow what we eat exposes us to various shocks, the most debilitating being the 2020 pandemic. This is one of the reasons why at BUA we are renewing our focus on the agricultural and food space.
Just like I said last year, for cement, BUA is also looking to combine our food businesses – from sugar, flour, pasta to list as BUA FOODS on the NSE by the end of 2021. In sugar, we have our integrated plantation in Kwara State set to produce 200,000 tonnes of refined sugar, 20 million litres of ethanol annually and 35MW of power – all utilising the by-products of cane sugar. We also have a refinery in Lagos and Port Harcourt. In flour and pasta, we have also started looking at backward integration for Nigerian-grown wheat to reduce our dependence on imported wheat and revive production in the sector. Nigeria currently imports over five million tonnes of wheat and this places a huge strain on our scarce FX as a country.
The opportunities in agriculture and agribusiness space are endless. How are we, as leaders looking to take advantage of this space? How can we work together, and what examples – or opportunities are on the horizon?
In terms of our plans, we recently announced that BUA will be building a Refinery and Petrochemicals complex. Why? Because we saw an opportunity even though there is another big project in that space, coming on stream. Local consumption is quite huge and estimated at 800,000 barrels per day. This is in addition to the huge regional market that exists for petroleum products. Alongside the refinery, we are building a polypropylene plant, which will answer the demand for polypropylene in the region. It is common knowledge that about a third of our country’s FX earnings go towards the importation of petrol and petroleum products. More strange is the fact that the cost of logistics for transporting these products to Nigeria could instead be deployed to significantly revamp the refining space and therefore, at BUA, we couldn’t just sit back – we knew we had to take action and I am certain we have made the right call yet again.
On a final note, I want to say again that we NEED MORE PEOPLE TO COME AND INVEST in various sectors of the Nigerian economy. We have the Climate, People, Land, Water, Mineral Resources – we have almost everything. The final piece is we must begin to produce what we consume and consume what we produce. Where we cannot do either, we must become a regional powerhouse in value-addition – if not for anything, but to take advantage of the benefits of the AfCFTA. The African Continental Free Trade Area presents a massive opportunity for us as a country and unless we take full advantage, we may become a dumping ground due to Nigeria’s unique position of being Africa’s largest economy, and our huge population. We must begin to look at a cross-pollination of our industries amid economic integration and finally, as Nigerian business leaders, we need to be less shy and more bullish in taking advantage of opportunities. This is my charge to us all, and I humbly expect to cheer on, and learn from your successes in the coming financial year.
Rabiu, Founder and Chairman of BUA Group, delivered this speech on Sunday when he was admitted as a Fellow of the Institute of Directors (Nigeria)
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