The Nigerian food sector is moving more and more into the focus of investors and suppliers in view of a market that now has around 200 million citizens. Foreign companies are also showing sustained interest, have branches on-site, primarily supply machines and intermediate raw materials, and are active in the training sector. But the big unanswered question remains, “will the Nigerian factor allow for the much-needed growth?”
Promotion of food production is intensified
The government is increasing its focus on promoting agricultural development. And this is in pursuance of its economic diversification agenda. With the support of the World Bank and the African Development Bank and with the involvement of the private sector, a large number of funding programs like the West Africa Agricultural Productivity Program (WAAPP) and have been launched, which, in addition to increasing the productivity of small and medium-sized farmers, are primarily aimed at creating greater local value.
For several years now, Nigeria has not only wanted to get away from mass imports of food, but also wanted to break away from its high dependency on the oil and gas sector and at the same time make the economy more resilient.
Billions of dollars in food are imported every year
Despite its restrictive foreign exchange policy and high tariffs, Nigeria is still one of the world’s largest rice importers and the fourth largest importer of wheat and sugar in sub-Saharan Africa. The oil price, which has recently fallen sharply again, and the outbreak of the Covid 19 pandemic are increasing the pressure to reduce purchases abroad.
Retail in supermarkets is not really taking off
The share of supermarkets in total retail is still low. Traditional commerce such as open-air markets, street kiosks and neighborhood shops dominate the grocery trade. Most supermarkets are limited to the urban areas of Lagos, Abuja and Port Harcourt. The biggest players are the South African Shoprite and the Dutch Spar, while the local chains Prince Ebeano and FoodCo are up and coming. The French Carrefour has plans to offer its products via the Jumia e-commerce platform in Nigeria in the future.
However, the market environment is increasingly difficult. Market leader Shoprite, which has expanded its presence by 14 to currently 25 stores in five years, has pulled out of Nigeria due to fluctuating exchange rates, dwindling economic prosperity and the looming recession caused by the corona pandemic, according to press reports. Shoprite had announced in August 2020, that it would sell the majority stake in the Nigerian branch to an investor.
Large-scale rice, sugar cane and tomato paste projects are underway
The import of rice is not prohibited, but is subject to high customs duties. In order to curb the smuggling of rice, imports by land were also banned. However, the domestic demand can only be met by local production to 40 percent, so that the cultivation and processing of rice attract a large part of the investments in Nigeria’s food processing.
The Nigerian Dangote Group has invested approximately $ 1 billion (US $) in this area. The first projects are being implemented. Dangote plans to build ten plants across the country by 2022. Around 1 million tons of rice are to be produced annually. The second major investor is the Dubai-based Stallion with a rice processing factory with a capacity of 430,000 tons. Another major investor is the Singaporean Olam. The company currently has a processing facility with an annual capacity of 240,000 tons and is planning a second manufacturing facility in Nassarawa State. The aim is to increase production by 120,000 tons per year.
A similar wave of investment was expected in cane sugar production through the National Sugar Master Plan (NSMP) launched in 2013. As part of the NSMP, an import ban on refined sugar was first introduced. For the period from 2020 to 2023, the ambitious plan provides for local production of 1.79 million tons. The efforts of the government have so far not led to the hoped-for significant increases in production. The three major sugar producers in Nigeria are Dangote, BUA Group and Golden Sugar Refineries, which can only meet a small part of the domestic demand. However, all three manufacturers have announced expansion plans and related investments in the millions.
Until recently, products containing tomatoes such as tomato paste or ketchup were completely imported. Tomato paste now plays a very important role in Nigerian cuisine as a flavoring agent. However, tomato paste and concentrate have now been banned from imports in order to promote the domestic processing of tomatoes. Nigeria has the largest acreage for fresh tomatoes in Africa. The demand for tomato paste is estimated at around 400,000 tons per year. In recent years there has been increasing investment in the cultivation and processing of tomatoes. However, local demand cannot yet be met, so further investments are likely to be made.
Palm oil production is increasingly being promoted
Nigeria is one of the largest importers and processors of wheat. In addition to FMN, Honeywell, BUA, Dangote Flour Mills, Crown, Olam and Tiger Brands play a role, with Olam taking over Dangote Flour Mills in 2019. The market is characterized by high competition and low margins. Wheat dominates the flour range, but local companies such as Honeywell, Golden Penny Foods and Ayoola Foods now also offer flour and semolina made from plantains, jams, cassava or rice. Since the very starchy cassava is also in great demand in the food industry, the chances for further cultivation projects are good. Nigeria is already the world’s largest producer with around 59 million tons annually.
Palm oil production has also regained momentum. Palm oil is the common edible oil in West African cuisine, but is now also used in large quantities by the food and cosmetics industries as an additive. Nigeria currently produces around 1.1 million tons, making it Africa’s largest producer of palm oil. The government wants to further promote production and increase it to around 5 million tons per year by 2027 in order to meet the domestic demand of around 1.3 million tons per year. The rest should be exported. This is to be achieved with a US $ 500 million promotion program and high-yielding varieties.
Beverage market remains dynamic
The market for non-alcoholic and alcoholic beverages is considered dynamic and competitive. Nigeria is one of the world’s largest consumers of soft drinks, although the demand for fruit juices and soft drinks such as energy drinks and sports drinks is increasing. Due to the increased health awareness on the part of consumers, more attention is paid to natural ingredients and little sugar. Although many juice manufacturers are already active in the market, Tolaram 2019 dared to enter. The South Korean World Food Services with a drink made from aloe vera is also relatively new to the market.
The demand for alcoholic beverages and also for beer is likely to continue to grow. The market is essentially dominated by three breweries and their subsidiaries. But dynamism still prevails. Anheuser Busch-InBev has increased its market share in recent years and invested heavily in a new brewery in order to launch its Budweiser brand. Heineken also recently increased its majority stake in Nigerian Breweries.
