The Federal Government of Nigeria (FGN) in November 2024 announced a significant 'prospective injection of Direct Foreign Investment (DFI) funds into the local Nigerian agricultural sector through an agreement with the Saudi government over a proposed US$5 billion bilateral trade facility between the two countries. 

This line-of-sight country-to-country investment talks that took place in May 2024 encouraged a follow up visit by high-level delegation to Saudi Arabia recently.

Unfortunately, these outcomes have been mixed up with the coincidental proposed acquisition of a 100% equity stake by the Saudi Agricultural and Livestock Investment Company (“SALIC”) in OLAM Agri, something that came up as a tangential issue during the talks.

This separate and potential proposal, as represented, relates only to SALIC’s intention to raise its equity interest in OLAM from 35.43% to 100%, or an estimated US$3.5bn fresh investment, moving it from a significant individual shareholder to a sole corporate equity owner of the agricultural giant as it seeks to rebalance its global investment portfolio in 2025. This was side remark at the talks suggesting how Saudi Arabia intends to actualise its food security plans.

Apparently, the reporting of these two separate agreements have been mixed-up. Understandably, while Nigeria’s public sector mood has been excited, as should be the case; the private sector reaction has been one of mixed reaction suggesting that in the excitement, the nuances of the transaction appear to have been lost in translation, leading to a few misconceptions. In the main it relates to a misrepresentation of a global game-play, for which the country would benefit from.

The timeline and record reset we present below from Proshare’s Economic & Market Intelligence (EMI) Unit provides both context and clarity.

The News Coverage

According to news reports, Mr Olawale Edun, minister of finance and coordinating minister of the economy (CME), who spoke on Sunday, December 29, 2024 after meeting President Bola Tinubu in Ikoyi, Lagos, said “what we have brought back is investment. What we have brought back is foreign exchange. What we have brought back is jobs for Nigerians.” 

The CME’s statement comes after the high-level delegation to Saudi Arabia, to follow up on President Tinubu’s earlier engagements with His Royal Highness Prince Mohammed bin Salman Al Saud, Crown Prince and Prime Minister in Riyadh, on November 10, 2023 on the sidelines of the Saudi-African Summit and again in Riyadh, on November 12, 2024, on the sidelines of the Extraordinary Arab and Islamic Summit  where the two sides reviewed ways of cooperation between the two countries and explored ways to develop them. They also discussed several topics on the summit's agenda, including plans and thoughts on strategic agriculture investments.

Mr Edun, said more local jobs are expected in the coming year as a result of Saudi Arabia’s drive to ramp up investment in key sectors of the Nigeria economy, based on his informed insights. According to Edun, the efforts are part of the federal government’s broader strategy to attract foreign direct investment (FDI), trade partnerships, and financial collaborations. “This type of transaction reflects the success of Mr. President’s strategy. It demonstrates the confidence global investors have in the steps being taken to attract and encourage such investments,” Edun added.

In the main, it appears that the sub-plots influenced the sub-text and communication that ensued post the last visit. It is therefore important for the public to understand that the FDI drive is well intentioned, yielding opportunities and require a market-based approach which the Saudi Arabia (approach) presents.

What SALIC ‘really’ Intends

On 25th March, 2022, Olam Group, headquartered in Singapore, announced a strategic partnership with SALIC through the sale of a substantial minority stake in Olam Agri for US$1.24 billion. Specifically, the Saudi Agricultural and Livestock Investment Company (“SALIC”), a wholly owned subsidiary of Public Investment Fund of the Kingdom of Saudi Arabia (KSA) invested US$1.24 billion for an estimated 35.4% stake in Olam Agri. 

This 35.43% equity stake in OLAM Agri Pte by SALIC was part of its global agricultural and livestock investment strategy, with an underlying understanding that the equity stake could increase over time, subject to specific economic and investment triggers.  Proceeds from the transaction would go towards right-sizing Olam Group’s capital structure and reducing its leverage, while capitalising on partnership synergies to support growth. Olam Group Limited to remain majority shareholder of Olam Agri with an estimated 64.6% interest

On the part of SALIC, the investment strategy was part of the Kingdom’s plan to support its food security agenda. Thus, the US$1.24bn dollar acquisition or 35.4% of OLAM Agri Pte valued the company at around US$3.5bn as of December 2022, subject to closing adjustments; and crystallises a benchmark valuation ahead of a potential future IPO and demerger. 

SALIC's interest in owning a further equity interest in OLAM Agri Pte signifies a bolder approach to global food security and sustainability investment. However, the indications and arrangements required to complete a 100% acquisition of OLAM Agri Pte have yet to be agreed upon, arranged, and finalised.

The reported US$5bn potential investment inflow into Nigeria’s agricultural sector through a country -to-country agreement goes beyond; but would also include the OLAM Agri Nigeria operations if taken together, means that investments must be channelled through accountable entities; as the SA model represents. Olam Group, founded over 30 years ago with operations on six continents, and direct presence in sixty-five (65) countries including Nigeria; and proposed to be owned by SALIC would function through its Nigerian entity. Period!

Unpacking the Reality

Analysts have noted that SALIC showed strategic interest in Nigeria’s agricultural sector within the context of OLAM group’s global agricultural strategy, which boasts of a portfolio that includes agricultural products and food ingredients such as cocoa, coffee, cashew, sesame, rice, cotton, wheat, soya and wood products.

Proshare analysts can confirm that the OLAM group received a ‘non-binding indicative offer’ (no formal legal documentation or definitive terms have been agreed upon as at the date of this article) for its remaining 64.6% equity interest in OLAM Agri Pte. However, such investment documents are mere expressions of intentions and are not legally binding instruments of firm investment commitments; in other words, they are exploratory or ‘tire-kicking’ opportunities. However given PIC’s profile, it is expected that opportunities for expansion in countries like Nigeria offers an upside; and will be consistent with the expansion FDI plans under discussion.

Some analysts have suggested that purchasing the remaining majority equity of the OLAM group in OLAM Agri Pte could cost SALIC as much as US$4bn. This would enable SALIC to fully control OLAM’s agricultural commodity portfolio, including edible oils, grains, and other food products. It would also, importantly, give the Saudi company access to Russia’s Azov Grain Terminal, which has a capacity of 1.4m tonnes of grain annually.

This will enable SALIC to gain complete control over OLAM Agri's commodity portfolio. Available public figures suggest that revenue came in at 13.457bn Rubles, compared to 13.435bn Rubles in 2022, with net profit at 142.99m Rubles as against 361.5m Rubles in 2023 (see OLAM group corporate performance Chart 1 below).

Chart 1: 

Based on SALIC's 2022 investment in OLAM Agri, the OLAM Group announced an intention to demerge the agribusiness and list it independently on the Singapore Stock Exchange (SGX) and the Saudi Exchange. This has yet to happen. The demerger and Initial Public Offerings (IPOs) were expected to occur in the first half of 2023 (see Chart 2 below).

Chart 2: 

The group subsequently announced a delay in the demerger and IPO plans as it explained that it would be exploring other strategic options. 

According to Grain Central on November 4, 2024, it was reported that “while the Olam Group is reviewing and in discussions regarding a potential sale of its stake in the Olam Agri business, the company would like to stress that no definitive terms or formal legal documentation have been agreed upon between the parties to date.”

This information was contained in a statement released to the Singaporean Exchange (SGX) on Friday, November 01, 2024 following an October 31, 2024 article published by Bloomberg which speculated that a deal between the two parties was being negotiated.

In the press release referenced, the group noted, "There is no certainty that a sale of the company’s stake in the Olam Agri business will proceed or will materialise.”

Closing Thoughts

The enthusiasm with which the FGN announced the Saudi Arabia Bilateral agreement and its comuddling with the SALIC investment interest in OLAM Agri Pte may not have been ideal but it signifies consequential benefit to the Nigerian economy. What was commendable has been the insightful response of the CME to the reactions and the push-factor it has created for Nigeria to have a whole-of-government conversation around food security from a sustainable commercial and economic perspective.

If Nigeria is able to reconfigure its own food security strategy and align such plans with Olam Agri, Nigeria; and other entities in the agricultural value-chain; this will deliver the game-changer we envisage.

In the main, it cuts a short announcement path along a lengthy investment decision journey and underscores a learning opportunity in governance – that deeds (binding agreements over intent is crucial for public communication contingent on market considerations. 

The Nigerian fiscal authorities, given their track records in the last few months, will appear to have recognised this theme and is expected to approach 2025 engagements from a more nuanced perspective and approach, and thus adopt a deliberate process for announcing deals requiring caveats; as they seek to engage the market for other securitisation transactions in the works; especially when private sector market participants work out the finer points of a mutually beneficial investment outcome. 

We encourage the Ministry of Finance and related MDA’s and SOE’s to continue the drive for FDI’s working with and through the private sector as they have found out from the Saudi’s. This episode has therefore delivered a collective learning opportunity for the country to manage its relations with sovereign-backed entities and we expect more positives therefrom.

We will continue to track developments thereon. 

For further updates on OLAM Agri and Olam Group Plc, follow the company's Proshare Investor Relations (IR) Portal.

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