Why shifting more to agriculture is good for Nigeria’s economy – Cormat

Starting out as a trading company about four decades ago, Cormat Nigeria Limited has morphed into a mega player in Nigeria’s economy in the areas of agriculture, production and export of industrial raw materials for the paint, confectioneries, cosmetics, pharmaceuticals, food and beverage industries.

In a recent chat with select journalists on a tour to its facilities in Lagos and Ogun states the company’s General Manager, Dr. Johannes Flosbach highlights the organisation’s unequivocal positive outlook regarding Nigeria’s economic competitiveness; milestones attained so far and plans for the future. The Daily Times Correspondent, JOY OBAKEYE was in attendance. Excerpts…

What is the current worth of your investments in Nigeria?

Our facility in Km 51 is worth $25 million. In the past, a lot of our glue product has been imported. What we are trying to do is to come up with a product that matches the same quality of the glue, but at the same time, come at a cheaper price. You could say because it is difficult to import, we have benefitted greatly by producing the product locally.

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What has kept your company going especially in doing business in the last 40 years?

What has kept us going is our strong belief in the potential of this country (Nigeria); we see it in the long term we plough it back and that made us survive the constraints. We believe it and we shall continue to invest. Of course, there are some issues, but we believe.

What are you doing to increase your market share on the Vinco glue?

First of all, we are trying to export a lot, so we have a dedicated export team and we are already selling to Cameroon, Niger, Mali and Benin.

Secondly, a product like Vinco bond sells a lot, because we make it accessible. Thirdly, we are also looking into having different rates.

What were the challenges your business faced in 2019 and how did you surmount such issues?

In 2019, we had challenges mainly with port issues such as delays and deportation of our products and the availability of forex, it has improved than the year before, clearly, but if you think about how many weeks it does take to get to the location and basically our forex exposure.

We have imported a lot of product with letters of credit but we have settled them, so our risks as a company have grown.

Those are the major challenges, we have seen a lot of improvement but the other things are done internally; manpower, training, the engineer in projects, we get them sorted.

So for 2020, the greatest thing we hope to see is a 30-40 per cent growth and that will be quite large. We have a few projects in the pipeline that are coming up and I think it is preparing the projects for 2021.

The ones we have in the pipeline will almost double our business in 2021, so we have very big projects in 2021. In chi farms, we are the only farm that is really into breeding chicken.

We use genetics, technology and we invest heavily in that and we are the only ones in Nigeria who went to that level of knowledge and science to get to that level of breeding.

Those types of chicken are so expensive; they have a special feeding ratio, special egg, and special water just to safeguard those chickens because of their values.

 Looking at the facilities, what does the company plan to do going forward especially in the area of diversity?

We plan to diversify; the TGI group and Cormat have a wide range of products. The latest one that we added are construction chemicals, and when we speak about what to do with concrete hardeners, tiles adhesives; that is the latest development, so we diversify in that range.

The second part of our journey, we go into further diversification. We organise all our activities not as Cormat, but the entire TGI Group.

The slogan of TGI is diversity. The main goal of Cormat is not profit, but sustainability. The drive is that what we have planted here will still exist in 50 years.

what we will like to have is sustainability not only because of our legacy, that people who work here are sure about their jobs and in 20-30years they are here.

Moreover, the goal is to ensure that our operations still continue and go further. It will also contribute to the industrial development of other companies. We are also enablers to other companies.

If any organisation or company wants to produce something, we make it happen for them. When it comes to industrial development in Nigeria, Cormat is at the centre of development.

This is overall what we want to do. So everything that is short and mid-term, are basically steps on that way such as having more lands, additional factories and set up more plants. But those are small steps in that overall target which is industrial development.

The closure of border, how has it impacted your business?

The negative impact, I would say no. But positive impact most probably yes. I would not be able to measure the extent of the impact on our businesses.

When you grow in any business, there are different areas to focus on such as quality, marketing, promotion. For Cormat as a company, the border closure has not had so much impact.

Remember the key focus for us as a group is our business to business and raw materials. But our ranges of products are those coming from the seaport, which is including industrial raw materials with five per cent import duties.

With the recent increase in Value Added Tax (VAT) has it affected your business?

Increase in VAT is a recent development. But it will have an impact for sure. Whether it will have a long term impact I don’t think so.

The impact might be felt at the end of the first quarter, say maybe April/May. VAT is 2 ½ more basically that comes out of the pocket of any consumer.

The VAT is going from producer to distributor to final consumer. It will have an impact and the consumers will see a price increase. Within two or three months that impact is gone.

Do you express optimism about Nigeria’s economy?

Yes, we believe in Nigeria’s economy, but there is shifting a little bit. There is a shifting more to agriculture which is very good.

The government made the very right decision to stimulate the agriculture sector and to pump money into facilities available because if you are importing agro-products such as soya beans, maize and others, the impact on your forex will become only bigger and bigger.

The need for oil, we have to see that in 20years from now, we have to focus more on alternative source of energy, than electricity therefore the need for oil will be less and it will have impact on your income.

Then you will have more mouths to feed, so investing in agriculture is very important. Moreover to shift from the oil and gas industry is why there should be increased investment in agriculture.

To develop the agro-value chain, the sector has to be better protected to compete globally that is the only way it can survive. 

The yield of maize overseas in a one hectare of land, you can get eight, nine to 10 tonnes per hectare. While here in Nigeria, you get maybe two tonnes in a one hectare of land.

What are your major challenges in this business?

One of our major challenges is manpower. The second challenge is power. In this company, we invest a huge amount of money in having our own electricity.

We don’t rely on the national grid for power because the quality of the power is poor. We are lucky that in our factory in KM 51 to have pipe gas, instead of diesel which is much cheaper.

We are also lucky that the private sector invested in that and this makes production cheaper. The third constraint we have is finance.

We are lucky because of the interest on loans (finance cost) is between 11-14 per cent depending on the bank. But we went through periods of 25-30 per cent.

There is no place in the world where a business establishment whether in the area of food, industry, agriculture and chemicals that anything can survive at finance cost. The fourth challenge is the availability of forex.

The focus here is on availability of crude oil which the price raised to $52 per barrel. So how sure are we that the government will be able to hold the value of the naira, and devaluation means inflation, Inflation is purchasing power and purchasing power means buying from production and distribution.

In 2019, we had stability and the economy is better, the interest rate dropped from 20-12 per cent and in terms of power supply, we had pipe gas which is better.

But in all, the government did extremely well, what I meant here is that we had devaluation of 50 per cent. But when you look at similar countries such as Venezuela, the country is completely bankrupt and also lives on oil. But the Nigeria government did well in comparison to other countries.