Talking about a revolution

It is difficult not to get excited about the Notore project-the prospect of developing the agricultural sector in Nigeria by providing fertilisers and improved seeds, the impact that development would have on over 35 million farmers, the opportunities for "wealth creation at the grassroots"... in Notore speak, the possibility of being "the Champion of the African green revolution."

But back down from the clouds, the complexity of such a project in Nigeria, a country ridden with infrastructure challenges, becomes distinctly evident-which is why the first question for Onajite Okoloko, the Managing Director/Chief Executive Officer of Notore Chemical Industries Limited is "Why?"

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A fortuitous story

Mr. Okoloko says that the idea to become involved in a fertiliser company first came in discussions with a friend in 2005-when the old and abandoned assets of the National Fertiliser Company (NAFCON) at Onne, near Port Harcourt, were being put up for sale by the Bureau for Public Enterprises as part of the goals of the Obasanjo administration to privatise state facilities. He recognised the opportunity and jumped at the chance.

But such a simple story belies the importance of how his work experience got him there. With a career in marketing and sales in the United States, working for AT&T Security Systems and later in financial services, Mr. Okoloko returned to Nigeria in 1994 and was one of the three founding partners at a company called Ocean and Oil.

A few mergers and acquisitions and a name change later and the company became Oando, now the largest indigenous energy company in Nigeria. Mr. Okoloko left Oando in 2006 but remains close to the company as he retained his investment and his seat on the board.

On the face of it, moving from a petroleum company to an agricultural Products Company may seem quirky but it is in the critical raw material required for both sectors-gas -that the affinity can be found. Gas is the major feedstock for fertiliser production and after 12 years at Oando, Mr. Okoloko knew a few things about gas in Nigeria.

Oando's success in terms of being able to raise finance and grow a talented crop of managers would also have stood him in good stead for the Notore journey. We may assume that raising finance would have been difficult, but Mr. Okoloko seems to dust off difficult and awkward questions.

When asked about his links with James Ibori, the former governor of Delta State, Mr. Okoloko said he was "a personal friend and an old school class mate of mine." On further questioning, he said that the two had "no business links." He did acknowledge that one of Notore's directors, Henry Imasekha, has personal links with Mr. Ibori.

Mr. Okoloko was keen to talk about the international investors in the Notore project. Notore is "20 percent owned by Orascom, a global player in the fertiliser and construction space; 19 percent owned by Emerging Capital Partners, a private equity firm headquartered in Washington DC with major infrastructure investments in Africa; 6 percent owned by the Africa Finance Corporation and the remaining 55 percent owned by prominent and seasoned businessmen in Nigeria, including myself."

Mr. Okoloko was proud of the fact that Notore successfully raised $222 million from 8 Nigerian banks to complete the rehabilitation of the existing fertiliser plant at Onne. The deal remains the largest successful syndication done by solely Nigerian banks.

Despite the credit crunch, Mr. Okoloko seemed confident that the company would be able to raise the cash it needs for future expansion, on the back of its cash flows and its projected market share and market dominance.

Notore's vision

According to Mr. Okoloko, "Notore's strategy is not just being a fertiliser business but to create value in the entire agricultural sector." In the first instance, the company aims to be the best at making and distributing fertilisers and improved seeds (hybrid/crossbreed seeds, not genetically modified seeds, he was quick to point out). Mr. Okoloko repeatedly spoke about the importance of "using the right types of inputs" to achieve higher yield growth.

He referred to the "green revolution in Southern Asia when yields went from about 300 million tonnes to 1.3 billion tonnes in less than 15 years beginning in the 1970s, with 80 percent of that growth as a result of fertiliser application."

Mr. Okoloko sees Notore as championing a similar "revolution" in Africa and made this reference to a precedent: "Malawi 5 years ago was starving. Today Malawi is a net exporter of food. It was possible because an enabling environment was put in place to allow business maximise shareholder value and create wealth at the grassroots level." Notore Fertilisers is therefore at the forefront of the Group's vision.

If the vision of the company is achieved, there is the potential to have an impact in the agricultural sector which employs 60 percent of the labour force in Nigeria, mainly at the subsistence level. Mr. Okoloko believes that two components of President Yar'Adua's "7-point Agenda" will be addressed as Notore achieves its vision-wealth creation and employment, and agriculture and food security.

Notore's vision also involves "going into businesses that maximise our assets. If we're not number one in the business area, then we won't go into it." Most recently, the company announced that it had signed memorandum of understanding with Taraba and Cross River States to establish rice mills in those states-the first project of Notore Foods.

Also, the acquired assets of the old NAFCON at Onne included two gas turbines and 560 hectares of property including its own jetty for easy import and export of raw materials. With its own access to gas, Mr. Okoloko says that Notore produces its own power and also provides power for other customers in the Eleme area.

A challenging operating environment

Mr. Okoloko's attitude appeared characteristically upbeat about the Notore business, giving the kind of response every good sales and marketing executive has been trained to give.

When asked about the challenges Notore faces with regards to working in Niger Delta, he acknowledged that "it is highly problematic to operate in the Niger Delta" but then added the pitch, "But I think what Notore has done is to have a very aggressive community development strategy so the community automatically becomes our immediate line of defence...

" Two years ago, we negotiated an MOU with our host community in Onne and other communities impacted by our activities... we will spend half a billion naira over the next five years in these communities... they will choose the projects we spend on... we award contracts to community contractors... it's the first MOU negotiated by a company with the communities in the Eleme area."

Asked again to speak about challenges, this time specifically regarding accessing gas supply to feed the fertiliser plant, Mr. Okoloko responds positively, "Our gas comes from fields dedicated by Shell. We are linked to gas gathering system on the eastern [part] of the Niger Delta. We don't foresee any challenges, we need to continue to manage our relationship with Shell, with the Nigerian Gas Company, a Nigerian National Petroleum Company subsidiary, and the host communities where that gas is located in such a manner that we will receive uninterrupted gas supply."

The policy angle

Mr. Okoloko believes that the present federal government has set about creating an enabling environment for agriculture. He refers to the ₦200 billion fund for commercial agriculture announced two months ago as "a genuine pool of cash for businesses to access."

On the issue of government subsidies for agriculture, Mr. Okoloko says that "subsidies are touchy subject." He referred to a survey carried out by Notore which found that "30 percent of the fertilisers that come into the country go into the commercial market. 70 percent of the fertiliser that go to the government still ends up in the commercial market, so the farmer never gets the full impact of the subsidy."

In his view, direct subsidies, in the form of vouchers given to farmers and exchanged along with cash for the fertiliser, for example, are preferable to the current subsidy regime. Ultimately, Mr. Okoloko believes that "commercially, farming can make sense" and subsidies should be phased out for agricultural inputs like fertiliser, perhaps remaining only for the outputs to aid farmers in the cultivation of particular products.

As a member of the Technical Working Group of the nation's Vision 2020 project, he believes that there is already a shift in thinking in policy circles and there is an acceptance that subsidies for fertilisers will need to be phased out over time.