The Dangote Group has announced plans to invest $3.8bn in sugar and rice production, and $800m into the dairy sector in the next three years.

It will increase sugar production from 100,000 tonnes now to 1.5m tonnes by 2020 and add 1m tonnes of rice production. Edwin Devakumar, executive director at Dangote’s industries unit has also said the company plans to have 50,000 cattle producing 500m litres of milk by 2019. We note this works out at four times the global average for milk production (approximately 2,200 litres per cow).

Dangote has cited the lack of foreign exchange as driver of this investment. Nigerian companies often cannot find enough dollars to pay for imported goods, raising the risk of food insecurity. The move is fully supported by the Nigerian government, which is looking to diversify out of oil – which accounts for 9 out of every 10 export dollars and into high value agriculture.

Dangote is also “at the planning stage’’ of investment in other agricultural projects. This includes the production of corn, soybean, palm oil and palm kernel.

We anticipate that the support for investment in local agriculture may be accompanied in due course by import restrictions designed to boost local and Nigerian-owned production.