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“There is a chance to make a lot of money in agriculture”

Interview - April 8, 2013
Akin Laoye, Executive Director of FTN Cocoa Processors Plc, speaks with World Report about the huge potential Nigerian agriculture holds, and discusses the role his company plays in boosting the sector
As we know, in the 1960s Nigeria was an agricultural powerhouse, not only in Africa, but throughout the world. It produced 42% of the groundnut market, 27% of palm oil and 18% of the cocoa industry. What happened to Nigerian agriculture in the intermittent period, and what steps are being taken to restore Nigerian agriculture to its rightful place?
One single thing: oil. Oil was a problem, although it was supposed to be a blessing. It was easier to make money from crude oil than go into agriculture. A lot of people abandoned the farms, and the government was not ready to work with the farmers. We were too distracted. The reality of the global economy and the challenges of the Nigerian economy show us that Nigeria needs to diversify. 
This is an economy where the population is growing at a very fast rate, and if you want to look at it critically, even if government were to follow its spending in the oil sector, there is a need to find an avenue where you can create jobs. We believe that agriculture is the way to go. Also, why should Nigeria not take advantage of cocoa production for international markets? Côte d’Ivoire basically depends on cocoa, and Ghana is trying to develop cocoa. We can develop cocoa and palm oil, and Malaysia and Indonesia have developed their economy based on this. Everybody is looking at organic products, which are good for people’s health.
Nigeria has good weather to support agricultural production, like sesame seeds, pineapples and mangos. We can also develop industries, because in addition to planting crops, you can process them. If you do this, you will expand the industrial base of the country. I believe we are taking a step in the right direction, and if we are serious enough, I am sure that over the next ten to fifteen years Nigeria will have something to offer the world.
We have been here for ten months, and we have met some of the most qualified politicians we’ve ever met, with degrees from everywhere. You are very lucky to have Dr Adesina, who is a recognised agricultural figure. How successful have the reforms in the agriculture sector been, and what changes have you seen on the ground?
Dr Adesina has shown a different approach in government. He is easily accessible, and he is working around the clock. We have seen what he is trying to do even in our industry. He has visited us and asked us questions, and he has a very ambitious plan to double capacity in Nigeria. Productivity can increase by improving seedlings and cutting down the old trees and growing new ones. I believe we will go far, and Dr Adesina will be able to finish what he has started. That is a good thing that this administration has offered Nigeria.
In terms of the cocoa supply chain, you said he wants to double the amount of tonnage produced. What role does technology play in increasing yields per hectare? 
I think he is trying to establish direct relationships with farmers, and create an enabling environment, ensuring that people will be able to access land without bottlenecks, like there were in the past. He also wants cocoa farmers to be paid at a reasonable rate, and have access to basic farming. We saw members of the Nigerian team at the World Cocoa Conference, and they were also working with countries like Côte d’Ivoire to see how seedlings can come to Nigeria and be more accessible. I think he is doing the very best he can. 
Co-operatives are being encouraged and developed. Nigeria actually has the required landmass to be able to achieve this growth. It is a question of the government creating an enabling environment. Once it does this, I am sure that the goal can be attained. I understand that the new seed starts fruiting after two years at the most, so people can wait for two years, and then make money from cocoa farming.
Can you tell us a little about FTN – how it has grown, your relationship with front-line farmers and how you operate?
FTN started 17 years ago with cocoa processing. When we started, we took advantage of the under-utilised operating capacities in some of the cocoa operating factories. Before 1999, most of the factories were government-owned. There were pseudo-private ones, but they were mostly like government agencies. We saw a business opportunity, so we decided to get involved as third party processors. After a few years, we realised it would be important to take ownership of our own business model by establishing a factory in 2007. We started off with a 10,000-ton capacity, which we have doubled to 20,000 at present. Going forward, our plans are to work with the farmers and the co-operatives. We want to make sure that we develop a proper model, where we can support them and take it from there. 
We are also planning to take land from the government. Our factory is located in Oyo State, and the government has agreed to give us some hectares of land, which we plan to work on. In Oyo State, there is a huge empowerment scheme, and we want to work in collaboration with the government, so that once the firm is established, those young people will go and work at the farms. Once the crop is ready, we will be off takers on a purely commercial basis. We want to encourage people to go back to learn.
One of the key components of the transformation agenda is creating jobs. You are involved in processing and you are generally the leader in the industry at the moment. How are you creating jobs and value for your employees and the Nigerian economy?
Apart from basic employment, we have partnered with support industries. For example, cocoa processing is an industry that requires a lot of spare parts. Cocoa is acidic, so the machines wear out really easily. So we are encouraging local manufacturers that have bought drilling machines to look at the spare parts, and we patronise them. Sometimes we provide them with funding for generators or machinery, and then they pay us back with the spare parts that are delivered to us. We are also interested in the kind of chemicals they use, and we are trying to support them. You will find that sometimes when people prepare cocoa in Nigeria, they just put it on the road, so we are trying to ensure that we build an elevation for them, so they will not have impurities. But it has come at a huge cost. 
I think the major obstacle is financing. Everything is possible if you have a little bit of money. How has FTN managed to grow, and how has it overcome the challenge of access to finance?
Access to finance is a big problem. To be honest with you, the Nigerian banks are not very supportive to agriculture. They are not interested in value creation; they are just looking at how to make money. FTN Cocoa, we have therefore decided to look elsewhere. We have a relationship with Afrexim Bank in Cairo, and they are willing to support us. A programme called the African Cocoa Initiative has also been started, where they try to link up processors and off takers in Europe and America. FTN Cocoa and another company are the pioneers for this project. We have chosen to look offshore to generate forex.
And local NEXIM?
They are there, but we have not gone through them because it can sometimes be easier to get something offshore. We spoke to them some years ago, but since we started this factory, we have not had a serious relationship with them. 
What opportunities exist for investors to come and partner here with FTN?
I believe that there are a lot of investment opportunities, especially for countries in Europe and America. We produce a major raw material that is required for industries over there. That can also boost the company’s earnings, and make it a very profitable one. One of the challenges in the industry is the market. Cocoa products are traded on a commodity exchange, and they follow market forces. As such, there is a lot of volatility, and if you do not have the required skills, you may run into trouble. So for investors coming in, there is going to be a huge opportunity to make profit, because it will be easy to have some strategic alliances with manufacturers in Europe. We are already working on something with a company in the US, which is already participating in our country. They are basically going to start with a commercial off take agreement, which makes it easy for us to overcome the volatility. I see FTN doing very well, and it is a good company to invest in right now. The market is no longer a problem. 
The only problem is the cocoa. 20,000 tons of cocoa per annum should not be a problem once there is funding.
How long have you worked here and what would you like to see happen within the company over the next five years?
I will have been working with cocoa for 14 years this year. We started out as third party processors, more like trading. We had the funds and the factory was owned by someone else, so we just provided funding for them. But in 2005 we felt like it was important for us to become entrenched in the business, so together with the pioneering managing director, we decided to go into manufacturing. I am almost an engineer when it comes to how to run a factory. I think I have sufficient knowledge, because I try to pay attention to what is done there. 
Over the next five years, we intend to double the capacity we have right now, either via expansion or acquisition. There are also plans to diversify into palm kernel, which has the same structure as cocoa. I see us refining palm kernel into vegetable oil over the next five years. Nigeria’s population is pretty high, and if you look at the food we eat in Nigeria, there is hardly any individual over the age of one who has not come into contact with vegetable oil. That is a lot of oil. Vegetable oil can be used for food, and sometimes for industrial use. We think we should seriously look into that business. 
How would you describe the culture and management style of FTN? 
Right now it is managed by the owners, the MD and me. He has about 25% and I have 7.5%. We have the factory manager, the finance person and the HR. We have a proper structure on ground. We are the pioneers here, so we want to make sure that we can coach people so they can take over. I have 14 years behind me, and the MD has over 17 years behind him. At some point, we are going to leave, and we want to make sure that when the baby is bathed, it is well-cared for. That is why we are paying so much attention to our human capital, to ensure that people who share the same vision with us come in and follow things through.
What is your final message to the readers about FTN and the agriculture sector in Nigeria?
Any investor should get into agriculture – there is a huge opportunity in that area, and there is a chance to make a lot of money in agriculture. I think that is the kind of company you should look into. I know there is cheap money to be made in oil and gas, and they have their risks, but with food, I do not think there is an alternative to food. I have not seen anyone who does not eat! I think agriculture is the way to go.