Nigeria Food and Drink Report Q1 2013

We continue to maintain our positive outlook for Nigeria's food and drink sector, based on thetremendous untapped potential of this emerging market. Yet, without a doubt, many challenges remain inthe short-term. We have downgraded our growth estimate for the Nigerian economy from 6.8% to 6.6%,based on new information provided by the country's statistical agency, as well as concerns about theongoing effects of widespread flooding, oil disruptions, and security challenges. We expect that as theseverity of these issues abates, growth will rebound, and we are forecasting growth of 7.1% in 2013. Yetin 2012 ongoing weakness in the agricultural sector will harm domestic food supplies, increasing inflation(lowering private consumption as price growth erodes purchasing power) and necessitating greaterimports (putting downward pressure on the trade balance). However, the long-term potential of theNigerian consumer market is so great that with the help of industry majors such as Nestlé and Unileverwho are already present and developing the market, the long-term potential is huge.

Headline Industry Data (local currency)

2013 per capita food consumption = +13.3%; forecast compound annual growth to 2017 =+9.8%.

2013 beer volume sales = +7.4%; forecast compound annual growth to 2017 = +8.3%.

2013 mass grocery retail sales = +31.2%; forecast compound annual growth to 2017 = +36.1%.

Key Industry Trends & Developments

FMON Makes Acquisition: In November, the Nigeria-based Flour Mills of Nigeria (FMON)announced the acquisition of a controlling stake in Thai Farm International, which grows and processescassava in the Nigerian state of Ososa. The takeover will enable FMON to maintain consistency inquality, availability and affordability of high quality cassava flour (HQCF) across the country. FMONwill increase Thai Farm's capacity in the next few years in a bid to meet the growing need for HQCF byflour millers in Nigeria. Moreover, Thai Farm will be provided with strong support so that the companycan diversify into the production of value adding items such as starch and sweeteners.

Nestlé Nigeria Announced Strong Profits: The Nigerian subsidiary of Swiss nutritional and consumergoods company Nestlé announced a 40.72% year-on-year (y-o-y) increase in pre-tax profit for the firstnine months of 2012. Nestlé Nigeria generated pre-tax profits of NGN18.28bn (US$116.43mn) betweenJanuary and September 2012. The company also reported a 20.5% y-o-y increase in overall revenue toNGN85.03bn (US$542.92mn) over the same period.