NIGERIA: FLOUR INDUSTRY GROWING

UNCLAS SECTION 01 OF 02 ABUJA 002077

SENSITIVE
SIPDIS

DEPARTMENT PASS TO USTR (AGAMA)
DEPT OF TREASURY FOR RHALL, DPETERS
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/DHARRIS
USDA/FAS/OFSO RON VERDONK

E.O. 12598: N/A
TAGS: ECON EINV ENRG ETRD PGOV PREL NI
SUBJECT: NIGERIA: FLOUR INDUSTRY GROWING

REF: 07 ABUJA 2191

SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY


1. (SBU) Summary. In an October 15 meeting with Aminu Abdulqadir
Imam, Chief Administrative Officer of Bua Flour Mills, Imam reported
that the flour milling business is very lucrative in Nigeria because
domestic flour demand has grown. Despite profits production
hurdles, such as epileptic power, limit growth and increasing
employment. The electricity supply to Kano has not improved since
2007 and may have gotten worse. Bua Flour Mills plans to export to
the U.S. woodcarvings, handicrafts and leather goods instead of food
products because infrastructure issues make it impossible to export
Nigerian food products to the U.S. and European markets. End
Summary.


2. (SBU) On October 15, EconDep met with Aminu Abdulqadir Imam,
Chief Administrative Officer of Bua Flour Mills Ltd based in Kano.
Bua Flour Mills is part of the Bua conglomerate, which is headed by
CEO Abdussamado Rabiu. Rabiu is the son of famous muslim scholar
and businessman Isyaku Rabiu. The Rabiu family is one of the oldest
and largest northern industrialist families. (Note: Imam is the
son-in-law of Abdussamado Rabiu. End Note). Bua imports large
quantities of U.S. wheat for local processing into bread products,
and pasta. The company processes flour, sugar and edible oils. The
meeting was in follow up to meetings in 2007 regarding business
conditions in Kano (reftel).
.
Kano Business Environment Still Difficult
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.

3. (SBU) In response to a question on the business environment for
his company and others in the Kano area, Imam noted that the flour
industry has limited capacity and can not meet domestic demand.
(Comment: Despite Imam's claim, Nigeria's milling capacity is nearly
double the supply of wheat - 6 million mt of milling capacity versus
3.5 million mt of consumption per year. End Comment). Production
is constrained by the need for generators to operate 24 hours a day
- seven days a week to run the production facilities. When asked
whether the reliability and supply of electricity had improved since
September 2007, Imam responded that it had not and the frequent
power surges damaged equipment. Imam reported that despite the
power issues Bua Flour's profits were high and the company planned
to expand production from 500 metric tons (mt) per day to
1,000-1,500 a day.


4. (SBU) When asked whether local officials had been useful to the
company's growth, he said that the Kano Chamber of Commerce was a
"joke" and no help. Imam explained that the Chamber had done
nothing since EconDep met with them in September 2007, despite their
promises at that time.
.
USG Support Appreciated
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.

5. (SBU) Imam thanked the U.S. Mission for providing a list of AGOA
eligible products for importation to the U.S. and added that his
team had studied them and planned to export to the U.S. handicrafts,
woodcarvings, leather products including shoes and bags. He also
thanked USAID for its technical assistance programs that have been
useful in better understanding the cowpeas and rice industries.
.
Exports to U.S. and European Markets Not Viable
-------------- --
.

6. (SBU) He hoped that the Nigerian Export Promotion Council (NEPC)
could provide assistance, despite past lukewarm experiences with
them. He lamented that the poor state of Nigeria's infrastructure
makes it impossible for Bua to export food products to compete in
the U.S. and European markets. Currently, Bua is exporting flour
and other food products to Niger, but this is done via informal
middlemen. Imam said that Bua hopes to make this a formal trade via
NEPC assistance.
.
Other Bua Holdings
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.

7. (SBU) Regarding other Bua businesses, Imam reported that CEO
Rabiu had "special" connections to the Presidency and the company
holds semi-exclusive licenses to import cement and sugar. (Note:
the prices for cement and sugar are artificially high in Nigeria
because domestic production is low and these products may only be
imported by companies with "special" licenses. End Note). He

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indicated that Bua had plans to open a rice mill in the "Sharada"
industrial area of Kano because the company had been granted a
federal government concession to import tariff free rice from
Thailand. (Note: In September 2008 the GON reduced tariffs from
109% to 30% for milled rice and 5% on brown rice. End Note).

SANDERS