Bob Geldof and his private equity firm, 8 Miles LLP, may be unfamiliar names to the average Nigerian, even less known to the younger generation. Beloxxi and its products on the other hand are household names in the country. Beloxxi Cream Crackers are a fast selling food product in Nigeria.
The company is one of few firms in Nigeria that have successfully transitioned from importing to manufacturing. The recent investment of $80 Million will enable the firm double its production capacity from 40,000 metric tonnes to 80,000 metric tonnes. 8 Miles also invested in Blue Skies, an African firm engaged in fruit production with plans on expanding into Nigeria and West Africa. Agriculture and food production, are a growth area since Nigeria’s population has a high proportion of youths.
Food is a basic necessity of life. There has been a resurgence in agricultural activities, and the present administration in Nigeria is committed to helping the sector grow through policies such as its fertilizer scheme and various concessionary loans to farmers by the Central Bank of Nigeria (CBN).
Nigeria is also a major gateway to the West African market, because it is the most developed economy. Many firms use Nigeria as a manufacturing base and then export to other countries in West Africa.
8 Miles’ equity investment would enable Beloxxi to expand easily. Access to finance is a major stumbling block for many Nigerian firms. High inflation, infrastructure deficit and several other issues have made Nigerian banks to continue to lend at double digit rates. Most manufacturers cannot afford to take such loans and repay them without defaulting. The huge depreciation of the Naira means the private equity firm, 8 Miles LLP, got a good deal in this transaction.
Private equity firms tend to sell their stakes after a few years, so 8 Mile would very likely sell its stake at a significant premium, as the economy would have recovered from recession.
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