By Chijioke Ohuocha
LAGOS (Reuters) - Nigerian conglomerate BUA Group is in talks with China's Sinoma <600970.SS> to build a steel plant in Nigeria and two cement plants in East Africa for $1.9 billion, its chairman said.
Expansion plans by Nigerian firms have slowed as Africa's biggest economy grapples with a slump in oil prices which has dried up vital oil revenues and forced firms to lay off staff.
Abdulsamad Rabiu said the unlisted company was talking to the Chinese firm for a construction package which includes financing, building on an existing relationship. Both firms already agreed in September on a $600 million cement expansion in the West African nation.
He gave no details on the funding but Nigeria has been in talks with China's state export and import bank for a loan to spur investments of Chinese firms in Africa's top oil exporter.
The two cement plants, which will have an annual capacity of 3 million tonnes each, will cost $700 million. The steel plant, with a capacity of 1.2 million tonnes, will cost $1.2 billion.
"We have identified two countries that we believe hold great opportunities for us in terms of building integrated plants," Rabiu told Reuters on Wednesday, declining to name the countries in East Africa.
"With the (fall) in the price of commodities ... we can do them much cheaper than what it would have cost some years ago," he said. The construction of the Nigeria-based steel plant would include a 200 megawatt power plant.
Rabiu said the expansion would help BUA to tap demand to lower reliance on import-dependent businesses such as sugar as a slump in oil prices made it difficult to generate dollars.
The West African nation has its own iron supply, while the sugar industry depends on imports.
BUA is considering shutting its sugar refinery in Lagos next month because it could not get the hard currency needed to import raw materials, Rabiu said.
The central bank has imposed restrictions to halt a slide of the naira but Rabiu said it would eventually have to let the official rate fall to between 250 to 270 against the dollar by year-end.
The currency has fallen 45 percent on the secondary market below its official rate of 197 naira
BUA's main rival, Dangote Cement (LG:DANGCEM), has also been expanding with Sinoma, signing in September a $4.34 billion deal with the Chinese firm to almost double its capacity across Africa.