The agribusiness group said, in total, it has invested around US$150m in its new animal feed and protein business in that West African country.
With a combined capacity of 720,000 metric tons of poultry feed annually, Olam said its new facilities directly address a significant supply gap for poultry meat in Nigeria, giving farmers and distributors access to high-quality feed and day old chicks at competitive prices.
Sharad Gupta, senior vice president of Olam Grains and head of Olam Animal Feeds & Protein, told FeedNavigator about the size of the opportunity that the West African country represents.
“If we want to change the trajectory of the poultry industry in Nigeria, we have to believe in its potential down the road, and we had to build two mills with optimum scale and size to cover the entire country.”
“Nigeria has a lot going for it. It has a large and growing population. By any number of estimates, it will have the third largest population globally by 2050, if not by 2040, so the market is very attractive from a demographic perspective.
“Moreover, the consumption of eggs, poultry and fish is below average levels when comparing Nigeria to countries of a similar development and income level. Much of the reason for [that low consumption rate] is historical. For the past three decades, Nigeria had an oil dependent economy, largely reliant on food imports, with little domestic production. The resulting high level of income disparity led to a lower per capita consumption of many food categories."
Feed structure
Poultry consumption in Nigeria has also been constrained by the inconsistent supply of affordable, high quality feeds and healthy day-old-chicks (DOC) to farmers, said the company.
The new Olam mills will provide heat-treated mash and pelleted feeds for high microbial safety, along with mineral and vitamin and amino acid fortified standard and premium lines. Cutting edge feed laboratories assure quality at the inspection, sampling and analysis of raw material and finished product stages, before dispatch, said the group.
The Kaduna hatchery and farm will produce day old chicks for both layer and broiler production.
Low operational efficiencies and poor productivity, due to limited awareness among farmers of scientific poultry production methods, particularly bio security, and accessibility to veterinary support are said to have caused high bird mortality rates in the Nigerian poultry sector. Therefore, Olam said its team of field veterinarians will roll out training for up to 10,000 farmers a year in best poultry farming practices.
“Each technician will work closely with around 150 to 200 farms. They will also run community training sessions involving 50 to 100 smallholder farmers,” said Gupta.
Olam estimates that poultry meat consumption among Nigerians could increase up to 10-fold by 2040, provided domestic supply can meet increased demand and based on prices becoming more affordable for Nigerians. This would require the poultry feed and DOC supply in Nigeria to grow at over 10% CAGR per year.
It forecasts its investment will enhance domestic poultry production by 8 billion eggs and 100 million kilograms of poultry meat – the equivalent of 40 eggs and 0.5 kg of chicken per Nigerian per year.
Rapid build
Olam has the advantage of having around 30 years’ experience of working in the West African country so it was able to get the construction of the milling and hatchery project completed from start to finish in nine months, despite it representing the group’s first venture into feed production, said Gupta.
“We understand Nigeria, the agronomy landscape there better than most international companies.
“Our delivery time was ambitious, but we had detailed project timelines.
“And we are used to managing such manufacturing projects. We know the challenges of such large projects, and where the likely bottlenecks are; we figured out what would be needed stage by stage. We knew what kind of contractors were required, so we were able to execute the project quite quickly.”
Olam, he said, used a host of equipment suppliers and companies that are expert in the construction and fitting out of state of the art feed facilities.
In terms of security in the area, he said there were minimal concerns, if anything just local law and order issues to deal with. “The perception of risk in Nigeria in the foreign press can often be overblown.”
Fish feed
In Kwara State, Olam’s advanced new fish feed manufacturing facility aims to boost feed supply to help meet rising demand in Nigeria for fish. The new mill has an initial capacity of 75,000 metric tons of fish feed per annum but can be further scaled up, said the group.
Nigerians consume 10kg of fish per person per year, an annual demand of around 2m Mt. Of this, around 40% comes from marine fish and coastal waters, ocean catch and freshwater fish from lakes and rivers, while 20 to 25% comes from land based aquaculture and the balance – 35 to 40% - through imports, according to data from Olam.
With the population predicted to grow substantially by 2040, even marginal increase in per capita consumption requires the total supply of fish increases above 4m MT, said the group.
It said future fish consumption in Nigeria faces supply challenges of overfishing, water pollution and global warming, while production from natural habitats is expected to stagnate or even come down.
The solution, said Olam, lies in scaling up domestic aquaculture to 2.5 to 3m Mt by 2040, a 6-7 fold increase from current levels. However, the availability and affordability of good quality, floating fish feed has been a significant challenge, up to now, along with other issues such as an over reliance on catfish, the quality of fingerlings and limited farmer expertise.
Soybean cultivation
Olam estimates that its local sourcing of raw materials such as soybeans, corn and cassava for its animal feed operations will positively affect more than 300,000 smallholder crop farmers in Nigeria. The company is specifically focusing on boosting the productivity of soybeans there, with yields there currently at below 1.0 metric tons per hectare, versus 3.0 to 3.5 metric tons per hectare in Brazil and US.
To achieve output of 2.5 tons per hectare in Nigeria, Olam is collaborating with the International Institute of Tropical Agriculture. The alliance is aimed at supplying farmers with high-yielding soy seeds.
“Nigeria was always a small producer of soybeans. Without a steady demand for soybean meal, there has been little incentive for farmers to grow them. However, it is a great crop to cultivate in that country in terms of farmer income and soybeans require less fertilizer than other crops.
“We need to work on seed variety development with the Institute and create a market for farmers whereby they have an outlet for their beans.
“We haven’t put a time frame on when we hope to achieve yields of 2.5 tons per hectare, but we have started the process,” explained Gupta.
Olam said that in the same way its grains division has a wheat milling footprint across Africa, the company will also be looking to scale its animal feed operations, both in and beyond Nigeria.