Ellah Lakes Plc, a Nigerian palm-oil producer, is meeting investors to raise $40 million to expand operations and meet increasing demand for the commodity after government restrictions on imports increased an existing supply gap.
The company, based in Edo State in the Southern region of Africa’s largest economy, is raising $35 million by offering shares and debt as well as another 2.1 billion naira ($5.4 million) in equity to fund oil palm plantations, seedlings and fertilizer, Chief Executive Officer Chuka Mordi said in virtual interview in Lagos, Nigeria’s commercial hub. The company is looking to cultivate 4,000 hectares of oil palm plantation by year-end from 2,300 currently, he said.
Ellah Lakes is increasing production amid intensified efforts by President Muhammadu Buhari’s government to encourage investment in agriculture and industries to help diversify the economy away from crude oil, which accounts for 90% of export earnings. Authorities imposed a 35% tariff on imported palm-oil to boost local production and the central ban has stopped the use of foreign exchange from official sources to import the commodity.
Nigeria accounts for for about 1% of global output, producing 1 million tons annually and consuming about at 1.4 million tons, according to the United States Department of Agriculture.
The capital raising started earlier this year through a private placement but was halted due to the coronavirus pandemic, Mordi said, adding that the company is expecting some foreign investors when international travels resumes.
Ellah Lakes will export some output to earn foreign exchange even though local demand is strong, according to the chief executive.
Half of the revenue will come from exports in the next three years “just to manage currency fluctuation,” he said. A slump in the price of crude oil cut revenue for the West African nation and hampered the ability of the central bank to meet the dollar requirements of companies for imports.