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Otedola to Invest $2bn in Cement, Sugar...Plans Sugar Refinery for Lagos

Crusoe Osagie
THISDAY
23rd Sept. '08

Competition in the sugar and cement manufacturing sectors of the economy is set to heighten with the entry of billionaire businessman, Mr. Femi Otedola, into the fray. The sectors, currently dominated by Alhaji Aliko Dangote, are set to receive an investment injection of $2 billion (about N240 billion) from Otedola.

This disclosure was made by Mrs. Yewande Giwa, Otedola's legal adviser, to journalists in Lagos yesterday. Although she did not give a comprehensive breakdown of how much would go into each sector, she said cement manufacturing was especially "capital intensive" and that her boss was currently undertaking feasibility studies and accessing the logistics required for smooth and efficient take-off.

Otedola, according to her, is currently perfecting all the necessary paper work to enable him bring in bagged cement into the country temporarily "in the first instance" until he could finalise the plans for the manufacturing plant.

While not disclosing under which company name the cement and sugar venture is being undertaken, she lamented that despite the huge investments by current operators, it still falls far short of national demand which, she said, calls for worry.

"You see, foreigners are reluctant to commit major investments in these two sectors. We realise there are a lot of opportunities in there. Our diversification into these sectors is premised on our patriotic desire to help build this country and not wait on foreigners to bring in foreign investments to develop our economy for us. We are committing our monies, ideas and energies to this endeavour, first as Nigerians who believe firmly in this country, and secondly because of the opportunities in there. We also believe that this will trigger a healthy competition among current operators. The sky is wide enough for all players. Our entry is equally driven by our commitment to Nigeria," she said.

On whether Otedola would replicate his price-crashing strategy which has been very effective in the diesel and kerosene sectors, Giwa was non-committal, but stated that the utmost aim was to make the product available, and at affordable price to alleviate the sufferings of Nigerians, whose dreams of owning houses have suffered terribly because of the high cost of cement.

The foray into the cement/sugar business is taking many by surprise, since Otedola has largely concentrated on the downstream of the oil and gas, maritime and real estate sectors.

His strategy of crashing prices has largely seen him dominate competition. In the diesel market where he currently holds sway, his company, Zenon Petroleum and Gas, has consistently crashed prices. Since taking over AP, he has also adopted a similar strategy by selling kerosene at N50 per litre.

Zenon Petroleum and Gas is a major player in the downstream sector dominating the diesel and kerosene markets. Exactly eight years after it was established, Zenon made a daring acquisition of one of the oldest major oil marketing companies in Nigeria, African Petroleum, for the sum of N17 billion. Since it took over the day-to-day operation and running of the company, the company's share worth has risen 600 per cent in a few months. Some have simply described it as magical, ascribing the phenomenal rise to the Otedola personality, his business dexterity and innovativeness.

African Petroleum is now one of the most priced stocks on the Nigerian Stock Exchange. The share price is currently N293. The financial year ending December 31st 2007 saw the company pay N7 dividend after many years of drought in dividend payout. The company's half year result in 2008 was equally impressive, with an 80 per cent improvement in balance sheet.

According to its prospectus, Zenon's objective is to provide its customers with timely and cost effective service. The company tries to tailor its services to suit each individual customer's needs. In ensuring the realisation of its goal to strategically position the company as a market leader in petroleum and gas distribution by providing products and services that are consistently aligned to customers' needs and expectations, the company developed major infrastructural facilities such as the building of tank farms, such as the two depots (tank farms) located at Ibafon Jetty, Ibru yard, Tin Can Island, Apapa, Lagos.

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