Nigerian producers have not scratched the surface in terms of meeting the demands of Nigerian consumers, alludes Chuka Mordi, Chief Executive Officer of Ellah Lakes Plc.
In an exclusive interview with Nairametrics, Mr Mordi shared his vision for his rice production venture and some of the challenges affecting the agribusiness sector of the Nigerian economy. Excerpts:
You recently signed a pact with the Enugu State government via a joint venture for the development of the Ada Rice Company and Plantation. Can you share the details with us?
We are turning Ada Rice Plantation into a Staple Crop Processing Zone (SCPZ) in Enugu State. We will produce and process rice with the participation of hundreds of indigenous farmers in the local out-grower program. We also plan to develop a feed mill and ethanol processing plant on the site in Adani which is expected to create thousands of jobs in the next couple of months.
In the rice production business, the challenges are the inputs that have to be imported including pesticides and fertilizer and when you have an unfavourable exchange rate, these inputs are more expensive to import. Which means, in terms of competitiveness, you are competing against importers who have lower cost of production.
What is your take on the FG’s biggest rice pyramid that was recently unveiled in Abuja and of what significance is it to the rice industry and the average Nigerian?
I’m not sure what it says to the average Nigerian. Rice Pyramids are indications of rice pyramids and that’s it! I’m sure when you are growing rice, you would want to scale up production. I don’t know if it says anything specific to the average Nigerian outside the fact that we are trying to scale up the production of rice in Nigeria.
What I would say is, if it encourages people to go into agriculture, if it encourages people to understand that if done properly, agriculture can be very productive and profitable, then yes, it’s a good thing.
You seem to be doing a lot of expansion – Edo, Ondo and of course Enugu states. What is the drive behind this?
Even though 2021 was challenging because of the covid pandemic that spilled over from 2020, we emerged from its challenges and closed on a high note because strategically, we achieved our goal for the year, adding 50,000 hectares in Ondo State to our balance sheet during the Ada Rice transaction which was very helpful, contributing also to transforming the company. We are looking forward to a significant amount of growth from the company and from all the sectors we are participating in; also adding a significant number of employees to boost employment in the states we are expanding into. In all, I’m looking forward to a very pleasant 2022.
No doubt that sustaining a business in Nigeria can be very challenging. What are some challenges and roadblocks that entrepreneurs are likely to experience as they venture into businesses such as yours?
I don’t know if I’d characterise them as roadblocks. There are challenges that businesses want to surmount irrespective of their environment. Western Europe, North America, Africa, Latin America, everywhere has its peculiar challenges. Nigeria has its challenges also, but I think after a year and half of getting to understand the particular challenges here, we are dealing with them adequately. We are raising more debt, more equity; the capital market is not as we had wished for it to be so we have had to be innovative with the structures we are using to raise financing. But I think that at the end of Q2 this year, we would have completed most of the financing we want to do.
We are engaged with a number of DFIs and multilateral institutions, so I think that by Q2 we would have closed on raising all the financing that we need for our growth. The rest of it is operational. You have to learn the peculiarities of each area. For instance, if you are growing rice in Zamfara and rice in Enugu, the different local conditions and different working conditions are things you would have to adapt to, with smart people who understand how to adapt to the different circumstances.
In view of your expansion to the states earlier mentioned, what are the projections for employment?
Just from an outgrower perspective, the number of hectares we are doing, we think we should easily employ 10,000 people within the space of our operations – on casual basis, on outgrower basis, etc. We are also looking at a significant number of full-time employment in the areas of administration, operations and ancillary services.
Okomu Oil and Presco Plc have shown what is possible to achieve in the oil palm space in Nigeria. In spite of these two giants, Nigeria is still a net importer of palm oil and its derivatives. What are you doing to explore more opportunities?
I think the opportunities are pretty obvious. Nigerian consumption is growing at a pace unmatched by Nigerian production. Population growth has been significant and we have just not expanded the production that we have. So, if Okomu and Presco double production tomorrow, we would still need to import palm oil because of that significant gap between supply and demand. We just don’t have enough supply. It’s an obvious place for players to expand, and I think the size of the market means there’s space for everyone to grow. When you have a big space, it just means all players can assist one another to improve the quality of their offerings to the market.
We learned there are plans for Ellah Lakes to list on the London Exchange. How true is that?
We have received permission from our financial holders to do so. So, any further development, we will announce through the Nigerian Stock Exchange. Hopefully in the very short to medium term.
How would you rate the performance of the Nigerian stock market in the last year?
I think one has to understand the context of the different companies listed, the Exchange and the different sectors. That way, one would understand why certain sectors were depressed because of the nature of what they do. It’s not an indication of the entire economy because certain sectors also did very well.
If you were in a sector where you needed to raise your prices significantly because of inflation, things were pretty difficult. If you are in the consumer goods sector like if you are making beer, you are in a good space because people are still drinking beer. But many businesses in the service sector were depressed because their income is based on servicing people who come to their establishments.
It’s a complex analysis and there are a number of variables involved in analysing this. But I think on the whole, there is room for improvements. The key thing is to try and increase the depth of the Exchange in terms of investors. Also, we need to get more retail investors involved in buying stocks and shares at the Exchange. What they need is confidence that there are enough shares for them to buy and there’s liquidity in the market. It’s not as good as it used to be in the hay day of the Exchange, but I think we are totally getting back there.
Surprisingly in the GDP growth figures that was recently released by the NBS, the agriculture sector didn’t do as well as in the previous quarter. What, in your opinion could have been responsible for that?
Very simple. Covid. Yes, it was 2020, but it fed into 2021. There was also less consumption. People weren’t going out and eating and drinking as much as usual. Basically, that’s reduced consumption. Also, because of the restriction of 2020 and early 2021, a lot of people were not going to their farms, so there was also reduced production. I think it was inevitable that it was going to feed into the economy eventually. Also, not forgetting the insecurity in some parts of the country.
It was understandable and expected. I think we can expect growth now that the circumstances have changed, which is good.
What are the key things government can do to help agribusinesses in Nigeria?
I think they are doing some of it already. Extending credit from the CBN at single-digit rate to try and provide some kind of credit subsidy for the sector is a very important way of boosting the sector. The complementary aspect of it is how do emerging businesses find equity instead of just debt, because at double-digit interest rate, you have to grow significantly in order to expand your business. And then, you also have interest repayments that you are trying to meet up with while trying to grow a business. So, instead of reinvesting, you are paying off debt.
Nonetheless, the CBN is doing its part so the rest is maybe tax breaks on investment in the agricultural space, which would encourage people to invest in the sector. I think equity is the most important thing if you are trying to grow any sector and if you want to scale up significantly.
What’s your aggressive growth target for Ellah Lakes in 2022?
We have started to industrialise all of our processes and it’s very important to achieve economic scale as fast as we can and ultimately use it as a springboard to become one of the biggest businesses in Nigeria. We are pursuing aggressive growth and consolidating the businesses that we have in our portfolio now.