Deal Summary
On October 16, 2024, the African Export-Import Bank (Afreximbank) disbursed the first tranche of a $200 million loan facility—an initial payment of $150 million—to BUA Industries Limited (BIL), the industrial arm of the larger BUA Group. While BUA Group oversees a diverse portfolio spanning food, cement, infrastructure, and manufacturing, BIL focuses on industrial development and operations for the conglomerate. The financing will enable the BUA Group to accelerate growth initiatives across its diverse portfolio, especially its plans to establish BUA Foods as a premier food producer in West Africa. The financing was facilitated by the Africa Finance Corporation (AFC), a long-term partner of the BUA Group. In 2021, AFC granted BIL a $200 million corporate loan facility to complete a vertically integrated sugar facility in Kwara State in Nigeria. The Afreximbank debt facility aligns with the multilateral lender’s strategic vision to boost intra-Africa trade under the African Continental Free Trade
Deal Rationale
Afreximbank’s $200 million facility will accelerate BUA Group’s growth initiatives, particularly its goal to establish BUA Foods as a leading food producer in West Africa. Recent partnerships with Italian firm FAVA and Turkish firm IMAS will expand pasta production to 900,000 metric tonnes and flour milling to 2.5 million metric tonnes annually, meeting rising regional demand. The consolidation of BUA’s food businesses into BUA Foods Plc between 2021 and 2024 streamlined operations and improved efficiency. This restructuring contributed to BUA Foods’ strong H1 2024 performance, with a 64% increase in gross profit to ₦218.43 billion and a 75% rise in operating profit to ₦202.2 billion despite higher logistics and interest costs. This facility also enables BUA Group to benefit from Afreximbank’s expertise in large-scale manufacturing projects and leverage trade efficiencies under the AfCFTA framework. By reducing reliance on the Nigerian market and facilitating entry into neighbouring countries, BUA Group is well-positioned to enhance its operational scale and regional competitiveness.
- Market Opportunity: West Africa presents a substantial market opportunity for BUA Group, particularly for cement, sugar, and flour. For instance, the West African cement market reached 46.3 million tonnes in 2023 and is projected to grow to 80.4 million tonnes by 2032, exhibiting a CAGR of 6.2% during 2024-2032. Nigeria's cement consumption was 26.0 million tonnes in 2020, indicating that the broader West African market offers a significantly larger demand base. The West African Economic and Monetary Union (WAEMU) also fosters regional integration through harmonised trade laws and shared payment systems, facilitating smoother expansion across member countries. Afreximbank's development of the Pan-African Payment and Settlement System (PAPSS) further enhances this integration by enabling instant cross-border payments in local currencies, thereby reducing transaction costs and complexities. Leveraging these frameworks, BUA Group can effectively tap into the growing demand for its products across West Africa, capitalising on market size and improved trade facilitation mechanisms.
- Risk/Return Analysis: BUA Industries' decision to secure a $200 million facility denominated in U.S. dollars introduces significant foreign exchange (FX) risk, particularly given Nigeria's volatile currency environment. In 2023, BUA Cement reported a net foreign exchange loss of ₦69.96 billion, a substantial increase from ₦5.5 billion in 2022, primarily due to naira depreciation. As of 9M’2024, FX losses were ₦57.44 billion. Stears projects a further decline in the naira, forecasting an exchange rate of ₦1,621/$1 by the end of 2024, worsening to ₦2,256/$1 by the end of 2027. Such depreciation would inflate the naira-equivalent value of dollar-denominated debt, escalating repayment obligations. BUA is intensifying its focus on export markets within West Africa to mitigate this currency risk. By expanding its flour, pasta, and cement production capacities, BUA aims to meet domestic and regional demand, thereby generating foreign currency revenues that can offset FX exposure. The company's strategic partnerships and planned capacity expansions are designed to enhance its competitiveness in the regional market. Additionally, leveraging tariff reductions and streamlined logistics under the AfCFTA framework could further bolster BUA's export potential, providing a natural hedge against currency fluctuations.
About the Fund Manager
Afreximbank, established in 1993 and headquartered in Cairo, Egypt, is a Pan-African multilateral financial institution promoting intra-African trade and export development. With total assets exceeding $37.3 billion as of December 2023, the bank operates under four strategic pillars: promoting intra-African trade, facilitating industrialisation, leading global trade banking, and ensuring financial sustainability. Afreximbank has earned investment-grade ratings from Moody’s (Baa1) and Fitch (BBB), underscoring its financial strength and credibility. In 2022, the bank directly financed approximately 0.6% of Africa’s total manufactured exports and facilitated $919 million, or 0.8%, of the continent’s total manufactured exports. These efforts demonstrate its commitment to driving industrialisation and improving Africa’s trade competitiveness.
