Download Nigeria 110526 Table of Contents Political context (pp. 1) Zoning

Nigeria 110526
Table of Contents
1. Political context (pp. 1)
a. Zoning (pp. 2-3)
2. Government agenda (pp. 3-4)
3. Business practices in Nigeria, especially of Flour Mills of Nigeria PLC (pp. 4-6)
4. Respective roles of the central and local governments in Nigeria regarding foreign
investors and business (pp. 6-7)
5. Protected industries (pp. 7- 9)
a. Prohibited imports (pp. 8-9)
b. Prohibited exports (pp. 9)
6. The sugar, vegetable oil, and grain industries (pp. 9-12)
a. The sugar industry (pp. 9-10)
b. The vegetable oil industry (pp. 10-11)
c. The grain industry (pp. 11-12)
7. Overall assessment of the future of Nigeria (pp. 12-13)
Nigeria Executive Summary
The administration of President Goodluck Jonathan is very receptive to foreign and
domestic investment, especially in non-oil and gas industries that can help the
government achieve its goal of becoming a top 20 global economy by 2020. While oil
and gas is Nigeria’s single most significant economic sector, these industries have a
limited ability to achieve the socio-economic transformations Jonathan has campaigned
on. As such, the diversification of the non-oil and gas sector is only one aim of the
Jonathan administration; achieving self-sufficiency in food production and expanding
electricity generation capacity are other high-profile initiatives that are receiving
presidential-level attention.
Political reforms and infrastructure reconstruction are other areas the Jonathan
government has promoted. These initiatives include improving existing and constructing
new road and rail infrastructure throughout the country to link up different areas of
economic activity. Jonathan’s administration is focusing on these areas as means to
overcome the legacy from Nigeria’s military dictatorship era that contributed to the
country’s underperforming governance.
Amid Nigeria’s overall yet ongoing transition to an entrenched and merit-based civilian
system of governance are just a handful of powerful business conglomerates. Nigerians
embrace a robust system of capitalism, and have arguably Africa’s liveliest media sector,
but many enterprises see their market share limited to a small geographic area. Nigerians
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from all walks of life and ethnic background are pragmatic and competitive in politics
and business, leaving ideology aside to achieve advancement in their careers and
pocketbooks.
A few Nigerians have been able to combine political connections, hard work, and access
to deep capital in order to establish groups of companies that would be considered
national champions -- business conglomerates that have achieved a magnitude size and
scope that the government is forced to treat them as legitimate actors in their own right,
and even promote or protect these businesses as a way of promoting national interests.
Flour Mills of Nigeria PLC (FMN) is one conglomerate arguably on its way to becoming
a national champion, but it is not yet there.
Conversely, The Dangote Group (FMN’s chief competitor) is an established national
champion with diverse businesses throughout Nigeria, and Africa for that matter.
Dangote’s advantages are the combination of decades-long business experience and
access to deep capital that can shelter it from the vagaries of the incumbent government
at any given time. FMN, while it certainly enjoys political connections across many
political generations, does not have the same depth of market penetration that could put it
beyond the reach of a particular government if the latter chooses to become intrusive.
This means FMN stakeholders must be more politically sensitive than its top business
rival.
However, FMN stakeholders can use this as an advantage and be rewarded by embracing
and participating in key sectors that the incumbent government is strongly encouraging
the development of -- such as agriculture. But FMN stakeholders must be mindful that
Nigerian politicians and businesspeople across the land are pragmatic, and thus be
prepared for local commitments that shift or fall short of expectations.
Political Context
Nigeria is divided into six regions called geopolitical zones, plus the Federal Capital
Territory (FCT) that encompasses the capital city of Abuja. The six regions are the
South-West, South-South, South-East, North-West, North-Central and North-East. These
zones are not entities with defined legal or constitutional obligations, unlike states or
Local Government Areas (LGAs) but rather organizational means to distribute political
and patronage offices around the country. These regions are useful tools to avoid a
situation where all the country’s resources are consolidated by a single interest group or
region, which could provoke reactionary violence by perceived “have-nots” and risk civil
conflict and possible fragmentation of the country.
The re-election of President Goodluck Jonathan is the focal point of Nigeria’s current
political context. Jonathan, a member of the Ijaw ethnic group located in the country’s
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oil-producing Niger Delta region, won the April 16 presidential election and will serve
another four-year term after being inaugurated May 29. Nigeria’s newly-elected
parliament, comprising a lower House of Representatives and an upper house Senate, will
be inaugurated June 6.
Aside from the current elections, there are two broad themes that continue to shape the
behavior of Nigerian politics since its reform process began in 1999. The first broad
theme is the role of the geopolitical zones in distributing power and patronage. The
second is the state-centric and security-oriented behavior of the Nigerian governments
during the military dictatorships era in 1999, and certainly in the 1990s during the Sani
Abacha-led junta. Nigeria was once a heavily restricted state fearful of external and
internal threats but is now trying to liberalize and democratize. Combined, these issues
directly affect the behavior of contemporary Nigerian governments, including the newly
inaugurated Jonathan administration.
Zoning
As mentioned, zoning exists in Nigeria to ensure the distribution of political offices and
patronage among the country’s six regions. It does not eliminate tensions but reduces
them between the regions as they compete over scarce resources.
The zoning agreement became the means to facilitate Nigeria’s transition from military to
civilian rule. The military juntas that ruled Nigeria until 1999 needed political, economic
and security guarantees amid the broader domestic and international push for
liberalization and democratization. Nigeria was going to have to reform, and power
would rest in the hands of a civilian administration.
Zoning is not a constitutional mechanism, however, but rather a framework adopted by
the ruling People’s Democratic Party (PDP). The PDP was and is the main national
political party that the outgoing military junta elite in 1999 and the incoming civilian elite
ever since could agree on to manage the transition and share power. In other words, the
PDP did not emerge out of inspired ideological debate, but rather because what was
needed was a consensus platform to manage diverse interests. As a result, the PDP does
not embrace any particular political or economic ideology.
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Olusegun Obasanjo oversaw the initial transitional era from junta to civilian rule. Both
camps agreed upon Obasanjo in 1999 to run for president because of his diverse
background that encompassed mutual interests. Obasanjo was a retired army general and
former military junta leader (he governed the junta from 1976 to 1979), while he was also
a southerner, a member of the Yoruba tribe from the South-West region and a Christian.
Most in the military juntas, and most top elite in the armed forces were Muslim
northerners from the Hausa Fulani tribe; Obasanjo was a unique and critical combination
that both sides could secure confidence in.
Obasanjo and his vice president, Atiku Abubakar (a Muslim from Adamawa state in the
North-East region) served from 1999-2003 and from 2003-2007 after winning reelection. Obasanjo had considerable influence on the selection of his successor, and
encouraged PDP delegates in late 2006 to choose Umaru Yaradua, a Muslim governor
from Katsina state and a member of an aristocratic and influential family from northern
Nigeria. Obasanjo also sought to win friends in the Niger Delta region by ensuring that
Goodluck Jonathan, until then the governor of Bayelsa state, ran as the vice presidential
candidate. Yaradua and Jonathan went on to win the 2007 national elections.
Jonathan officially became president in May 2010, succeeding Yaradua after he died of
heart-related complications. Jonathan had been serving as acting president since January
2010 while Yaradua was receiving medical care in Saudi Arabia. Jonathan had been the
vice president since the 2007 national election until his appointment as Acting President.
Initially, Jonathan’s presidency was controversial because it disrupted the current zoning
distribution, which dictated that a northerner should hold the presidency for the 20072011 term (and with an unspoken expectation for the 2011-2015 term). Jonathan
overcame these controversies by labeling himself as a reformer, a merit-based leader and
one who represents Nigeria’s new generation of leaders (having perks of the incumbency
also helped). Jonathan has tried to promote improvements in some fundamental areas
touching the lives of everyday Nigerians, like infrastructure improvements and
rehabilitating and expanding the country’s electricity power production grid.
Jonathan has made some notable gains, especially in bringing peace and stability to the
chronically violent Niger Delta region. Throughout most of the 2000s, particularly from
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2005-2009, militants throughout the Niger Delta acted with impunity attacking energy
infrastructure (pipelines and flow stations) and kidnapping foreign oil workers, causing
disruptions to oil production. Jonathan’s patronage network in the Niger Delta has led to
a significant reduction of the militant threat for the time being, at least.
Government Agenda
The Jonathan administration’s objective is to rehabilitate Nigeria after decades of poor
governance, bad management, and unfulfilled reforms. It aims to achieve its stated
objective of becoming a top 20 global economy by 2020 by rebranding Nigeria
domestically and internationally through good governance and the delivery of public
services, and expanding and diversifying the country’s economic sectors.
The Jonathan administration has emphasized reforms in areas that can improve Nigeria’s
local industry and social well-being. This includes the energy sector and supporting
legislation like the Petroleum Industry Bill (PIB), which aims to reform the Nigerian
National Petroleum Corporation (NNPC). Proposed reforms would deregulate the supply
and distribution of refined crude products such as gasoline, and raise taxes on
international oil companies working in Nigeria. Jonathan also oversees the power
ministry (electricity generation), pushing to expand the country’s electricity output from
its current output of 3,000 MW to 10,000 MW.
Other reform initiatives identified by the Jonathan administration include rehabilitating
road and rail infrastructure, and facilitating financial incentives for domestic and foreign
business to develop local industry as well as the agro-economic sector.
Reforms in the agricultural sector have two primary benefits. The first is raising the
country’s self-sufficiency in food production. The second is promoting development,
which could significantly boost employment levels. Agriculture had been the backbone of
the Nigerian economy prior to the discovery of oil on a commercially recoverable basis in
1956. Another advantage of agriculture is that it is located in regions throughout the
country, unlike the oil and gas sector that is largely confined to the Niger Delta. Boosting
agriculture production also increases products available for export to traditional trading
partners in West and Central Africa.
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Reforms within the agricultural sector have included the privatization of state-owned
industries, whose production was awful; it had very little reinvestment, little professional
management, little commercial know-how, all this combined to see once-lauded projects
come to a grinding halt. In the sugar sector, the two government owned sugar companies,
Savannah Sugar Company Ltd and The Nigerian Sugar Company Ltd were sold to
private investors. Until privatization, domestic production levels essentially collapsed,
with the result that to meet domestic sugar demand, a vast majority needed to be
imported.
STRATFOR sources in Nigeria indicate that the government is very supportive of efforts
to invest in areas it believes are critical such as agriculture, power and road and rail
infrastructure. These are high priority areas that a foreign investor will receive fast-track
assistance from all levels of the Nigerian government.
Business Practices, Especially of Flour Mills of Nigeria
It is reported from previous due diligence that FMN was careful to develop good relations
with the Yaradua administration (2007-2010). As well as its connections to the Yaradua
administration, Alhaji Ahmed Joda, the Vice Chair of FMN is reportedly a part of former
president Obasanjo’s inner circle. Obasanjo, who served as president from 1999 to 2007,
and from 1976 to 1979 as military junta leader, remains a top member of the ruling PDP.
Obasanjo is chairman of the PDP’s Board of Trustees, a member of Nigeria’s advisory
Council of State (due to his position as a former president) and within political circles is
still seen as a kingmaker.
Due diligence also stated that Joda’s sympathies would likely lie with incumbent
President Jonathan. Nigerian presidents command significant perks of patronage, and
most Nigerians are very practical when it comes to their political and economic
allegiances. As such, Jonathan has not been different from his predecessors in winning
over the allegiance of various constituencies, including business and bureaucratic interest
groups who were previously supportive of Yaradua. Joda, as with many other politicians
and businesspeople, will likely support Jonathan. This does not mean they have to
campaign for Jonathan or make contributions to his party, but they will not be seen as a
hindrance or act in opposition to Jonathan. If they have political preferences other than
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with the incumbent and the ruling party, most business and bureaucratic constituents will
keep this quiet.
Joda got involved in a recent political situation that could position himself favorable to
Jonathan. Joda, in the capacity of an eminent statesman elder, was part of a delegation to
the National Assembly in early 2010 to petition the government to grant Jonathan acting
president authority. This happened when Jonathan was still vice president when President
Yaradua was medically incapacitated in Saudi Arabia. Jonathan ultimately became
Acting President, before formally becoming President in May 2010, even though he faced
stiff opposition from Yaradua loyalists within the Federal Executive Council (the
government’s cabinet) and Parliament. This is not to say that Joda’s role was singularly
critical but he went against rival entrenched political interests, a move Jonathan is not
likely to forget.
Joda also has relations with both Obasanjo’s and Jonathan’s rivals. Joda chairs the board
of directors of the American University of Nigeria (AUN), an institution started by
former Vice President and presidential aspirant Atiku Abubakar (who fell out of favor
with his boss, former President Obasanjo, in 2005). Atiku also ran against Jonathan in
PDP presidential primaries in 2010. Also on the board of directors of AUN is Aminu
Dantata, a relative of top FMN rival Alhaji Aliko Dangote of The Dangote Group (see
below). Joda thus can operate within the diverse business and political network that
straddles the highest levels of political and business kingmakers.
The due diligence also stated that FMN Managing Director Emmanuel Akwari Ukpabi
does not appear to enjoy any significant personal connections in Nigeria. This lack of
personal connections could actually be perceived as an advantage, especially as it would
align with a stated value of the Jonathan administration, that it was merit and not
cronyism that gave Ukpabi his position.
FMN’s main business rival is Dangote Flour Mills (DFM). DFM is part of The Dangote
Group, whose President, CEO and founder is Alhaji Aliko Dangote. Dangote Group is
one of Nigeria’s largest companies, with involvement in a wide-ranging set of industries
found not only in the country but also across Africa. Aliko Dangote is from arguably
Nigeria’s richest family, the Dantata family, which is akin to the Rockefeller or
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Vanderbilt families in the United States. It is possible that Dangote doesn’t use his family
ancestral name because he wants to achieve his business on his own based on merit.
Dangote is careful to stay out of the political limelight, though he is certainly aware of
the political impact from projects and initiative he is involved in, such as the $3.9 billion
cement factory initiative for Nigeria and several African countries. This initiative is
significant for several reasons: the magnitude of the investment, it is an African success
story, it should lower the price of an everyday commodity and it will generate good jobs.
Because of the decades-long Dantata family business success, Dangote does not have the
same need to cultivate crucial political relations, though he needs to maintain cordial
relations with the Nigerian government.
A STRATFOR Nigerian source says that Dangote Group is seen as the market leader in
the areas it is involved in, whereas FMN, and its other rival BUA, are seen as followers.
This means that FMN, more so than Dangote Group, would benefit from having a
network of well-connected political supporters. Dangote, because of his family’s business
history that pre-dates civilian and even independent government in Nigeria, can achieve
success and economies of scale beyond that of FMN without needing to cultivate friendly
interlocutors in any given administration.
Interestingly, there are a couple of industries where both FMN and the Dangote Group or
its relations (with the Dantata branch of Dangote’s ancestral family) share ownership
stakes. FMN owns a 52.61% stake in Northern Nigeria Flour Mills (NNFM), and Dantata
Investment and Securities Ltd., owned by Dangote’s relative Aminu Dantata, owns a
6.45% stake. Despite the smaller stake, Dantata is the chairman of NNFM, while George
Stavros Coumantaros (chairman of the FMN) is the Vice Chairman of NNFM.
A second industry of joint-ownership interest is cement. FMN owns a 22% stake in the
United Cement Company of Nigeria Ltd (UNICEM). The Dangote Cement Company
also owns a 22% stake in UNICEM; France’s Lafarge (28%) and Spain’s Holcim Trading
(28%) hold the majority ownership stakes. Cement is an industry the Jonathan, Yaradua,
and Obasanjo administrations have encouraged local development of.
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As with Joda’s role as chairman of the board of directors of AUN, FMN has personal
connections across a range of business interests that put them in direct contact with
principals from their top rival, Dangote Group. Business on the scope and scale of FMN
and Dangote Group in Nigeria involves a small number of peers, and it is advantageous
to have available high-level lines of communication between these dominant
conglomerates.
Respective Role of the Central and Local Governments Regarding Foreign Investors
and Companies
There are three tiers of government in Nigeria: the federal government, the state
governments, and the local government areas (LGAs). The federal government is seated
in Abuja, also called the Federal Capital Territory (FCT). There are 36 states in the
Nigerian federation. There are 749 LGAs; the number of LGAs varies by state, according
to each state’s population and pressures at the state level to create new LGAs as a means
of distributing patronage at the grassroots level.
The federal government is the primary tier of government that interacts with foreign
investors and companies. Federal government ministries, such as the Ministry of
Commerce and Industry, regulate the political and economic environment for foreign
investors and companies.
At the micro level, the state governments are an important aspect of doing business in
Nigeria. The state governments have a role in promoting investment and trade in their
respective states, and can work in a close cooperative relationship with the federal
government to achieve these promotions. State governments are relatively powerful
actors in their own right, overseeing budgets and services that are larger than some
African countries. They derive their revenues from a variety of sources, one of which is a
distribution from the Federation Account, the mechanism that receives revenues owed to
the federal government, and then disburses those revenues to the federal government, the
state governments and the LGAs. Of revenues collected in the Federation Account, 56%
are disbursed to the federal government, 24% are disbursed to the 36 states, and 20% are
disbursed to the 749 LGAs.
The disbursement amounts vary by state and LGA and depend on a series of variables
including population, social development level (which in turn is defined by levels of
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education, health and water services achieved), landmass and terrain, and efforts at
generating its own revenues. There is an initial portion each unit receives equally before
the additional variables are calculated to determine the final disbursement amount each
state and LGA unit will receive.
The LGAs are not critical government actors in terms of decision making that impacts
foreign investors and companies. LGAs can play both a supportive role and an
obstructive role. LGAs play a role in assisting the federal and state governments in
managing issues at the grassroots level, and are essentially political bodies aimed at
managing the populations spread out around the country. This is not an insignificant
exercise, as Nigeria is Africa’s most populous country and managing the expectations
and needs of 150 million people is no small task. One federal government comprised of
some forty ministries will struggle to deliver government goods and services down to the
street level.
A foreign investor and business in the agricultural sector would need to develop an
approach that combines elements and inputs from all three levels of the Nigerian
government. It would need to work with the federal government on a macro level,
particularly the Ministry of Commerce and Industry that oversees agriculture, to negotiate
terms of investment to include incentives and subsidies. The state governments will be
important partners in the selection and improvements to estate-sized plantations, if that is
the interest of a foreign investor. Working with LGAs would be appropriate to negotiate
supplies of the raw product from small-scale farmers.
Are There any “Protected” Industries?
The only legally protected industries that are off-limits to foreign investment are
businesses involved in producing military or paramilitary equipment or attire, or
businesses involved in the production of narcotic drugs or psychotropic substances.
Separately, there are restrictions imposed by the Nigerian government on a number of
imported and exported goods. Of noteworthy interest are finished or refined products
such as refined vegetable oils (bulk quantities of oils are not prohibited) and bagged
cement (bulk quantities of cement are not prohibited).
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These restrictions are aimed to aid the development of local, value-added industries.
Tariffs are typically highest on finished as opposed to unfinished products (for example,
refined versus raw sugar). The Nigerian government encourages the import of baseline
inputs or unfinished goods that in turn can be used to enable local value-added
production, and the government will provide incentives and subsidies in these areas.
Despite legal prohibitions, there is extensive smuggling in Nigeria, across land borders
and through its seaports. Practically any item can be smuggled, whether to take advantage
of a tariff regime differential between Nigeria and a neighboring country or to take
advantage of supply distortions in Nigeria or another country.
Prohibited Imports Include:
-live or dead birds including frozen poultry
-pork and beef
-bird eggs
-refined vegetable oils and fats excluding linseed, castor, olive oils and crude vegetable
oils
-cocoa butter, powder and cakes
-spaghetti noodles
-fruit juice in retail packs
-waters, including mineral waters and aerated waters containing sugar or sweetening
matter, excluding energy or health drinks
-bagged cement
-a variety of medicaments
-waste pharmaceuticals
-soaps and detergents
-mosquito repellent coils
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-plastics sanitary wares excluding baby feeding bottles
-rethreaded and used vehicle tires (except certain large sized tires for used trucks)
-corrugated paper and paper boards
-telephone recharge cards and vouchers
-textile fabrics except lace, Georges and embroidered fabrics
-shoes and bags except safety shoes, sports shoes, canvass shoes
-hollow glass bottles exceeding 150ml capacity
-used compressors
-used vehicles older than 15 years from the year of manufacture
-furniture except baby walkers, scientific and manufacturing equipment
-ball point pens
-air pistols
-airmail photographic printing paper
-counterfeit and pirated materials including coin
-beans of an inflammable celluloid or similar substance
-blank invoices
-coupons for foreign football pools or other betting
-cowries
-exhausted (used) tea
-implements to reload cartridges
-indecent or obscene materials
-manilas
-white phosphorous matches
-materials of any sort likely to create a breach of peace or to offend religious views in
Nigeria
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-meat, vegetables unfit for human consumption
-goods or textiles bearing descriptions of the Koran
-pistols in any form
-second hand clothing
-coins of not legal tender in Nigeria
-nuclear waste
-alcoholic spirits with exceptions
-weapons that can discharge noxious liquids or gas or similar
Prohibited Exports Include:
-maize
-timber (rough or sawn)
-raw hides and skin
-scrap metal
-unprocessed rubber latex and rubber lumps
-artifacts and antiques
-endangered wildlife
-all goods imported
The Sugar, Vegetable Oil, and Grain Industries
The Sugar Industry
The Nigerian government has a goal of becoming 70% self-sufficient in the supply of
refined sugar. It is trying to achieve this by several means including adopting a national
sugar policy, which led to the creation of the National Sugar Development Council,
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falling under the authority of the Ministry for Commerce and Industry, and implementing
a 20% tariff (in addition to other duties and taxies) on imported refined sugar and a 5%
tariff on imported raw sugar. An estimated 1.4 million tons of unrefined (raw) sugar is
imported yearly, mostly from Brazil. Household consumption of sugar in Nigeria is
estimated at 1.3 million tons per year and is growing due to population growth and
industrial demand growth.
The government is encouraging investment in the domestic sugar industry in general as
well as its refining component. Sugar industry incentives available from the Nigerian
government include infrastructure support such as roads, electricity and water supply; no
foreign ownership restrictions; low to zero duties in equipment and chemicals used in the
industry, and credit support to sugarcane farmers.
There are four main sugar companies in Nigeria. These include the Dangote Sugar
Refinery (which includes the Savannah Sugar Company it initially bought and operated
separately, then later absorbed), the Josepdam Sugar Company (which bought the
previous Nigeria Sugar Company) and BUA Sugar Refinery (which bought the defunct
Lafiaji Sugar Company). The fourth, FMN, bought the Sunti Sugar Company in Niger
state in 2009. It now operates as the Golden Sugar Company Ltd.
Domestic sugarcane production is limited but the federal government is encouraging its
development. Estimates of raw sugar production are 60,000 tonnes per year, all of which
is operated by Dangote Group. Dangote-owned plantation fields operated by its unit
Savannah Sugar Ltd. comprise an estimated 6,700 hectares. Another FMN rival, BUA
Group, aims to establish domestic sugarcane production by rehabilitating plantations it
acquired when it bought the former state-owned Lafiaji Sugar Company Ltd. States
conducive to sugarcane farming include Taraba, Niger, Kogi and Kwara states.
Estimates of domestic sugar milling capacity range are 1.2 million metric tons (MT) per
year. Dangote has an existing mill factory capacity of 100,000 MT and is adding a new
factory with a projected capacity of 800,000 MT. Small-scale operators fulfill the rest of
milling capacity.
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Dangote has a sugar refinery complex at the Apapa port in Lagos with a capacity
estimated at 1.44 million MT per year. Dangote aims to expand its refining capacity at
Apapa to 2.5 million MT. BUA Sugar Refinery has a capacity of approximately 650,000
MT per year, and it aims to boost this to 1 million MT per year.
FMN proposed plans in November 2010 to build a sugar refinery in Lagos with a
capacity of 750,000 MT. At the same time it would develop a 37,000-acre (15,000
hectare) sugar plantation in the country.
The Vegetable Oil Industry
A variety of vegetable oils are produced in Nigeria: cotton seed, soya bean, groundnut,
palm and palm kernel oils. Palm oil dominates the market. It is the largest locally
produced vegetable oil, with approximately half of the overall oils market, followed by
groundnut oil. Oil palm cultivation is especially conducive in the country’s South-South
and South-East regions.
Demand for vegetable oils is estimated at approximately 1.6 million metric tons (MT) per
year. Local production is estimated to total approximately 1.3 million MT per year, of
which palm oil contributes about 750,000 MT.
Vegetable oils are imported from a small number of foreign countries, particularly from
East Asia (notably Indonesia and Malaysia) and South America. There is also a robust
black market in smuggled vegetable oils from neighboring African countries.
Palm oil is the largest vegetable oil import, worth approximately 250,000 MT per year.
There is a government ban on the import of refined vegetable cooking oil, but enforcing
this ban is a challenge for the government.
Production of oil palms in Nigeria is largely done at the small holder and grown-in-thewild basis. Farming on small plots ranging in size from one to five hectares, and when
added to oil palms cultivated from wild groves, these farmers generate output from about
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96% of the hectarage under oil palm in Nigeria. Large-scale plantation estates farm
approximately 100,000 hectares in Nigeria. A STRATFOR source states that oil palm
industry development especially in the South-East states of Akwa Ibom and Cross Rivers
would receive prominent government attention.
The Grain Industry
Wheat, rice, sorghum, and corn are produced in Nigeria, and the goal of the Nigerian
government is to promote self-sufficiency in food production and are encouraging foreign
investment. Grains in Nigeria are mostly grown in northern states of the country, contrary
to oil palms.
Nigeria is a significant market for wheat flour to fulfill demand for bread, cookies,
noodles and pasta. The U.S. is Nigeria’s top supplier of wheat, supplying 3.5 million
tons, almost 90% of the import market in the country. Total imports are estimated at
around 4 million tons per year.
Local production of wheat in Nigeria is estimated at 100,000 tons, and is grown
commercially under irrigation schemes in a handful of states in northern Nigeria.
Milling capacity in Nigeria is estimated at 6.5 million tons, while capacity utilization is
estimated at about 60%. FMN is reported to be the market leader by capacity, but, like in
the other agriculture sectors, its rivals are Dangote Group, BUA, and Honeywell.
Nigeria also exports some wheat flour to neighboring African countries. An estimated
400,000 MT of wheat flour is exported to neighboring countries from production
facilities in Nigeria.
Most Nigerian flour mills are located in Lagos or Port Harcourt. Wheat flour (finished
product) and cookie imports are not banned but face sizeable tariffs.
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Nigerian corn output is approximately 9 million tons per year. Nigerians are significant
consumers of corn as a basic food staple, and poultry producers also use corn for feed
purposes (demand for poultry feed is approximately 1.2 million tons per year, with the
balance of domestic production for human consumption purposes). Nigerian corn imports
are relatively small at about 100,000 tons per year, and these supplies are mostly
imported from neighboring African countries.
Sorghum is produced in northern Nigeria and is used in the brewery industry. Production
is estimated at approximately 6.7 million tons per year and practically all is domestically
produced.
Nigeria is a significant importer of rice. Domestic rice production is estimated at
approximately 2.6 million tons, out of a total demand of an estimated 4.5 million tons per
year. Government initiatives are encouraging the expansion of the rice sector to 6 million
tons per year.
Rice imports are estimated at 1.9 million tons per year. U.S. rice exports to Nigeria are
relatively small, at some 52,000 tons per year. There is a higher tariff (30%) regime for
milled rice than there is for seed, paddy and brown rice (5%). The lower tariff on
unmilled rice is to encourage local milling industry.
There are several millers in Nigeria who obtain rice inputs from growers in the country as
well as from import supplies.
Overall Assessment of the Future of Nigeria
Jonathan will serve as president of Nigeria until 2015. During his campaign he promised
to serve just one term, motivated to reduce tensions and hostilities to his campaign be
because of the controversy it generated when he succeeded Yaradua as president and
disrupted the zone (power rotation) agreement.
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Political calculations are already being made in Nigeria as to who will succeed Jonathan
in 2015. The frontrunner at this point will be Jonathan’s vice president, Namadi Sambo, a
Muslim from Kaduna state in the North-West region. Sambo will look to serve as
president for the terms in 2015-2019 and 2019-2023. While the northerner elite might
have been cut short during the 2007-2011 term in their control of the presidency, with the
death of Yaradua, in the medium term northerner elite will have more years in the
presidency. Had Yaradua served the remainder of the 2007-2011 and 2011-2015 terms,
the presidency in 2015 would have been expected to be zoned to the South-East region.
For whatever concerns the North had with Jonathan’s ascendancy into the presidency,
this region of Nigeria can look forward to recovering Nigeria’s top political prize for the
2015-2023 terms.
To compensate the South-East region for the likely loss of the 2015 presidential term, the
Jonathan government and ruling PDP party have already reached out to the elite from this
region. The top government and party positions are the presidency, the vice presidency,
the Senate president, the Speaker of the House, the PDP National Chairman, the
Secretary to the Government of the Federation (SGF), and the Deputy Senate president.
There is a proposal that the South-East will be zoned for three of these positions, the
National Chairman, the SGF, and the Deputy Senate president.
Jonathan will oversee a couple of significant ministries during his presidency, as a way to
try to ensure reforms are actually carried out. Jonathan will oversee the power (electricity
generation) ministry, and Jonathan will also chair the government’s National Economic
Council. Jonathan is staking his name on being able to bring about necessary reforms,
and he is aided by a new generation of leaders and politicians who did not come from the
old guard of military elite.
The Jonathan government hopes that these reforms will help propel Nigeria into
becoming a top 20 global economy by 2020. The oil sector will likely see fresh
investment and thanks to stability among the militants, production could rise from a
current output level of some 2.3 million barrels per day to closer to its installed capacity
of some 3.5 million bpd. It will need to hit this target as well as its local industry targets
and reforms to achieve that political goal of being a top 20 global economy.
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Internationally, Nigeria is always interested to boost its presence. It is currently serving a
two-year term as a non-permanent member of the U.N. Security Council (UNSC). It
would likely aim to win a permanent seat on the UNSC if the permanent membership on
the council ever expands although it would have to compete with South Africa, Nigeria’s
top rival for influence in Sub Saharan Africa.
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