Kabiru Rabiu is the Group Executive Director of Nigeria’s leading conglomerate, BUA Group. In this interview with journalists in Lagos, he highlights BUA’s future outlook on cement, sugar and others in line with its strategic growth plan. Taiwo Hassan was there. Excerpts
What is BUA doing to boost its cement market expansion in the country?
I must commend this administration of President Muhammadu Buhari for the role it played in repositioning the Nigeria’s economy mostly; for giving people like us (investors) opportunity to contribute our quota to the development of the Nigerian cement industry. You know this laudable presidential support for the cement industry by government is a very positive and massive development for the country. So the Nigerian cement policy is going to drive demands, make a lot of impacts in the economy in terms of job creation, opening of market access and capacity utilization as well for manufacturing sector. As far as we are concern for BUA in Nigeria, if you look at our locations, we cut across the six geo-political zones of the country. We have presence in the North and we have a very strong presence in the South also. That gives us the ability to serve both the northern and the southern markets, especially the South -South and the South East regions as well as some parts of the South West. And what we are beginning to do now is to move more into the infrastructural aspects, partnering with the Federal Government and doing some commercially viable infrastructure using largely cement. If you look at our production capacity or utilization, you will understand that BUA has the highest capacity utilization in the market today for cement manufacturers and that is on the Nigerian side. On the African side, we are looking for opportunities and very soon you will see BUA going outside the country. But the future is really bright and I think there is very strong opportunity to expand capacities and also to get the products out there but we are doing very well.
Sometime last year, we took a tour to the Port Harcourt plant and we were made to understand that there were some challenges that affected your own business. We will like to find out what is the present situation. Has it been resolved and where are we now on the matter?
Actually, it’s been resolved amicably in the court of law. That one relates to the port operation of our terminal B in Port Harcourt which is a matter that is in court for now even though the process is on-going. So it is not 100 per cent resolved. But there is progress in that direction to resolve the matter amicably.
What has been happening to the price of cement since the beginning of this year? Is it that pricing has been stable than last year. Are you seeing demand as a major factor determining price movement? Secondly, on sugar, what is the situation so far in the industry because there has been some issues where it was alleged that access to foreign exchange (forex) is creating another issue?
The first question on the price of cement is a very tricky one. Honestly, it is very difficult to predict where the prices for cement will be, because there are so many factors that affect pricing not only cement, but most of commodities, like energy cost, forex and now you have Value Added Tax (VAT) and so on and so forth. So you know it will be difficult to predict whether the price of cement will go up or come down or they will stay where they are. To be honest, I don’t want to speculate but giving the capacities that we have as a nation, there could be some movement at the end of the day. But I don’t think it is really for me to speculate where the prices of cement are going to be for now.
On the sugar backward integration, which is actually one of the areas that we are really active in, which is the development of our sugar plantation we have at Lafiaji in Kwara State, which is probably the most ambitious sugar plantation in the country with 10 tons per day sugar mill covering over 20,000 hectares of land. We are putting the most advanced irrigation technology and we are spending a lot of money, and what is beautiful about that sugar project is that you have a plantation where everything is fully integrated and you are not going to be relying on any sort of importation. So we grow the sugarcane, you harvest it, you mill it, we refin it and we use the biomass to generate electricity, produce ethanol and refine sugar and all those useful things. The challenge of forex is in the importation of equipment, while you are constructing. Once it is done, we will not have any challenges. But it is coming up well, hopefully by next year, we will have the new sugar mill up and running and we are also continuing with the land development and the plantation itself. Moreover, we’ve seen what the cement industry has done to the country and we want to replicate that using sugarcane. Today, we import over 90 per cent of our sugar from outside as a country and then we refine. We want to change that narrative. Once Lafiaji sugar plantation is up and doing it will produce more than 20 per cent of our needs and that is just the first phase. The second phase obviously is to expand the capacity to be able to produce more sugar using sugarcane. So Lafiaji sugar plantation is a project that we are excited about. It is a project that we know will have great impacts in terms of employment, conservation of our scarce resources (foreign exchange). In the aspect of power generation, we are going to be generating 35,000mw of electricity using biomass. I think that the country needs to be happy that those are the areas that we are very active and we will continue to play key role so that Nigeria can be self-sufficient in producing things that we consume locally and export.
Recently, BUA cement shares were listed on the stock market to become the second biggest cement maker in the country by market capitalisation and that placed it among the five most capitalised companies. But there is one thing that has been bothering investors and operators on the NSE listing.
The regulation requires having at least 20 per cent of business as listed. But in most cases, giving the size of certain businesses when you first list, you don’t have a pool of investors on day one to be able to take up all that and is something that we have communicated with the regulators and it is something that we are going to cure going forward. The good thing about BUA investment in particular is that it has very strong interest on the stocks itself. I was telling somebody last week that our coming to the stock market has become a blessing since we got listed on the capital market it brought about lots of excitements and confidence into the stock market and you know the market has been rallying up since that time. So we are looking at things that we will do going forward to be able to cure the free flow. But subsequently, it is going to happen.
Our borders have been closed for sometime now. I don’t know whether it is the best opportunity for BUA or are you having pains on the closure?
It depends on the business. Obviously, there was a lot of smuggling coming through the land borders, so the border closure has really helped greatly to create a bigger market locally. There are other sectors that were exporting through the land borders; some of those businesses have been largely affected. But for certain commodities, you can actually export through other means. So it depends on the kind of business you are actually looking at, definitely some businesses have benefited from the land border closure.
We still have issues with gridlocks and all that. How can you describe the efficiency of the ports currently?
To be honest, our ports are not efficient at all and it’s an open secret. I mean we all know that and there is no point covering it. It is a challenge for the country. But it also presents an opportunity for investment and I think this is going to change going forward. So if you look at the size of the port in Nigeria, I don’t think we have a single deep sea port today that is operational. All our ports are river ports and their capacities have long been overstretched in terms of the volume of containers we are bringing in. Obviously, they cannot handle such volumes, in terms of their depths. So that is on the port. Also, you have dearth of infrastructure from the port leading into the hinterlands. It is good that now something is being done about Apapa and Tin-Can Island ports. But also, I believe going forward, we need bigger deep seaport that will be able to handle certain sizes of ships and also be able to export from those ports. And that is also what we are looking at, once we begin to unlock those opportunities in port construction, it leads to more consumption of cement. And really, what you are doing as a businessman is beginning to look at such opportunity because we are not only cement manufacturers, we are also infrastructure solutions company, so looking at such opportunity where we can leverage on our capacities.
Why did you leave your brand out in South West to your competitors for so long?
That is actually a good question anyway. But I will tell you a bit about that. You know we have cement operation in Obu, Okpella, Edo State, then we have the Sokoto Cement in Sokoto State. Now what has happened is that before we had a single line, we had a small line of 500,000 tonnes that was very old in Edo and then we put a new three-million-tonne plant. What was interesting is that all of our products at that time was being consumed in the South South and South East parts of Nigeria. There were so much demands that it was not enough for some of these markets because of the proximity as the entire South South and South East was consuming so much of what we produced and now that we have put more additional lines, we doubled the capacity. BUA has been the fastest growing cement company in Nigeria. We doubled the capacity from three million tonnes to six million tonnes, which started operating last year. So now with that expanded capacity, there was room for us to be able to bring the products to certain markets such as South West parts of the country. And BUA is probably the only brand in cement that goes very quickly. The consumers know the strength of the brands and like the products. So because of the speed with which it is being sold and the turnaround you don’t see so much of it in certain markets. But obviously, South West is a very strategic market to us, but it is being served by operators that are close by, mostly in Ogun State. But what we have seen recently is that some of the users, the block makers and some of the construction companies, because they insist on using BUA cement, it is coming more and more towards this market (South West). And as we are expanding and rounding up our cement operations and production, we will continue to see more of BUA cement in this part of the country.
Basically, we will like you to share with us some of your energy strategy in BUA?
Okay for Edo State, Obu Cement, we are using natural gas as our main source of energy and I think it will continue to be so. What we have done for Sokoto cement plant because we do not have a gas infrastructure that takes gas to Sokoto State we have an energy mix which comprises of coal, LPFO as well as possibility of using natural gas. But the gas that will be used in Sokoto cement plant will be LNG and re-gasified into CNG and fill into the plant. So it’s a mixture of three different energy source and then we go for mostly the energy that is available and cheaper at certain time. So oil is still the cheapest but we still have to transport it from Kogi State to Sokoto. We are testing with CNG now and also we are using LPFO. Going forward, I think we use more of coal than CNG because it is the cheapest and we have it in closer proximity that natural gas and others.
You are planning to float marketing outlet in South West, are you planning to establish cement plant?
For the time being, we will surely bring from Edo plant. Sokoto is doing so well in the North and it is the only cement in the entire North West part of the country. We are serving the whole northern region at the moment and as you know, we are putting additional three million tonnes capacity to Sokoto plant, which is coming on stream soon.