Analysis: Unlocking Nigeria’s Agriculture Value Chain through Innovation

By October 31, 2016 Investment News

Given agriculture’s share of the country’s GDP, revolutionalising the sector has become imperative to trigger overall economic growth, writes Nume Ekeghe

Agriculture has been projected as one of the major driving forces of Africa’s economic resurgence, complimented by a growing interest in the continent’s natural resources. Over 60 percent of the world’s available and unexploited cropland is located in sub-Saharan Africa. For Nigeria, agriculture contributes about 22 percent of its GDP and over 90 percent of employment. However, about 90 percent of the agricultural output is accounted for by small-scale farmers with less than two hectares under cropping. This situation presents huge gaps that can be exploited for good and possibly put an end to the era of treating agriculture as a development programme, rather than business.

With the economic recession, Nigeria is currently grappling with, there is consensus across the board that there is no better time to leverage the potential of the agriculture sector, not just to pull out of recession, but to diversify the economy and place it on the path of sustainable growth and development.

The ban on importation of goods which can be produced locally is one step the current government has taken in a demonstration of the renewed focus on agricultural development to ensure diversification of the country’s revenue source away from oil. Minister of Agriculture and Rural Development, Audu Ogbeh, while speaking at the inauguration of the Technical Working Group of Agricultural Roadmap, emphasised that the decline in global oil prices has made it imperative for the country to diversify the economy, with agriculture as a major anchor. “We have to diversify and that diversification holds a lot of promises through agriculture,” Ogbeh stated.

A factor bedeviling the industry is the lack of access to finance, a major impediment that prevents farmers from investing in basic inputs, such as good seeds, fertilizers and small-scale irrigation needed to raise productivity and generate sustainable income. As a result, yields have not increased significantly, leading to pervasive hunger and poverty. Similarly, with little or no commercial financing and other incentives available to entrepreneurs seeking to build businesses that could boost food production, agricultural production remains at a subsistence level.

“Regarding agriculture, the opportunity is immense,” said Jerry Gushop, Head of Agricultural Banking at Stanbic IBTC Bank. “Though much is required, and a collective inertia still remains, there are increasing signs of how agricultural transformation can change the country’s fortunes. The current economic situation, especially with strong government backing, makes agriculture an attractive prospect for the country. Note also that the demand for upstream products linked to the broader agri-business sector will blossom, creating new economic opportunities for a wide range of local and international enterprises,” he added.

Hitherto, the various governments and the Central Bank of Nigeria have introduced financing initiatives to encourage local banks to finance agriculture and also help to reduce the cost of finance for investors/ entrepreneurs in the sector. Some of these initiatives include the Nigeria Incentive-Based Risk Sharing Model for Agricultural Financing (NIRSAL), an initiative that provides a guarantee on exposure to the financing institution while also providing interest rate rebate for the borrower. The other is the Commercial Agriculture Credit Scheme (CACS), a CBN initiative that provides single digit financing through commercial banks at nine percent annually for commercial farmers. The Real Sector Support Fund (RSSF), also a CBN initiative which provides single digit financing to the real sector, including the Agric sector for periods of up to 15 years at nine percent per annum interest rate. The Anchor Borrowers Programme, another CBN initiative, provides financing at nine percent per annum interest rate. The scheme was recently established to cater for small-holder farmers via an ‘anchor’ platform, by creating markets/offtake for the smallholder farmers.

It was largely in search of ideas and strategies to unlock the sector and stimulate the growth of local production that the themes of the 22nd Nigerian Economic Summit and the 2016 Stanbic IBTC Business Leadership Series, which held in Abuja and Lagos recently, focused on agriculture. ‘Made in Nigeria,’ theme of the Summit, was derived from the need to achieve improvement in Nigeria’s local productive capacity which will find a ready market in its huge population, thus helping to unlock the country’s economic potential, according to Sola David-Borha, Vice Chairman of the Nigerian Economic Summit Group NESG).

Innovation underscored the Stanbic IBTC Business Leadership Series, which had the theme, ‘Gems in the Field.’ It was no surprise that the event had as headliner Jason Drew, South African farmer who grabbed global attention by creating a multi-million dollar business by rearing flies. Drew teamed up with Ogbeh and Kola Masha, Managing Director, Doreo Partners, an agriculture-focused investment firm, to provide critical insight on transforming Nigeria via agriculture.

Drew showcased at the event, a forum designed to inspire the next generation of Nigerian business leaders and entrepreneurs through knowledge sharing capable of optimising growth of the Nigerian economy, the significance of innovation, doggedness, and creativity to business success.

Having identified a huge and growing need – meat and protein – Drew set up an eco-venture through which he harvested soldier flies which are reared to produce millions of tons of maggots which are processed, pressed and dried into nutrient-rich fertilizer and shipped to chicken farms and aquaculture plants as food. This translates to more meat and protein for human consumption.

Drew’s quest is driven by a simple calculation. The global population is projected to hit nine billion by 2050, an addition of two billion people from the current figure. Feeding the additional mouths will trigger a rapid demand for protein in the form of beef, pork, fish and chicken, which will be further buoyed by growing global prosperity and rising income levels in Asia and Africa. According to the World Health Organisation, global production of meat will have to increase to 376 million tonnes by 2030 if hopes of meeting the demand for protein from the developing world are to be met.

So far, the rearing of animals and fish that would provide the desired protein has relied largely on the seas, but this source is being increasingly depleted by over-fishing, while the quantum of catch is steadily declining. Besides, massive fishing threatens the entire marine ecosystem. On the other hand, the industrial farming of meat has become cumbersome, and, in more advanced economies, mostly abandoned as innovation and technology opened fresh options. New approaches needed to be explored, and this Drew saw as a huge investment opportunity.

Few years into the venture, Drew’s AgriProtein Technologies has built a sprawling factory in Cape Town, South Africa, where his flies are sustaining a multi-million dollar business. The company’s growth is further fueled by the relatively cheaper rate of its animal feed which several studies have also confirmed are highly nutritious for livestock, especially chickens, fish, and pigs. A global expansion has commenced with new operations planned outside Africa. In recognition of Drew’s ingenuity, the company received the 2013 Innovation Prize for Africa, backed up by a $100,000 United Nations support.

Drew’s uncommon insights into business, the environment and its future resonated among the audience, who truly agreed that the requirements of Nigeria’s economic renaissance include the adoption of innovative strategies, appropriate policy directions, and meticulous implementation.

Deploying the clout and resources of government to bear on such initiatives and projects was the thrust of Ogbe’s submission at the event. Ogbeh, represented by the Lagos State Director, Federal Ministry of Agriculture and Rural Development, Funmilola Olusanya, said the federal government is resolutely committed to partnering the private sector to drive the growth of the agriculture sector. Agribusiness, he said, should be broadly embraced, including mentoring the youth to see the attractive prospects in practicing agriculture.

On his part, Masha harped on the need to practice agriculture as a business and to encourage private sector participation across the value chain, which will enhance the drive towards restoring Nigeria’s place as a leading agricultural economy. He used Babban Gona, an agricultural franchise developed by Doreo Partners, to illustrate the transformative power of agriculture through the adoption of the right tools, strategies, and practices. The scheme, which aims at lifting one million smallholder farmers out of poverty by 2025, provides smallholder farmers a full suite of agricultural and marketing services as well as access to investment capital, thereby boosting productivity, profitability, income levels and living standards.

Chief Executive, Stanbic IBTC Holdings Plc, Sola David-Borha, reflecting on the conference, stated: “We have recorded significant advances on our original vision for the series, which is to build business leadership in Nigeria. The enthusiastic participation witnessed so far is a positive feedback that will be instrumental in reinvigorating and expanding the initiative as we work assiduously towards achieving its stated objectives.”

With this year’s focus on agriculture, David-Borha stated that “the quest to unlock Nigeria’s agricultural sector, given its massive transformative potential, continues to gain interest and momentum from within Nigeria and abroad. Stanbic IBTC is poised to play a major role in making this happen. For us, the process commenced several years back.”

To move forward, experts say Nigeria must look inward for local financing solutions. Several local banks have become quite active in the agric space, providing both financing and other support to the industry. For instance, a few years ago, Stanbic IBTC Bank collaborated with Tata Africa Services and John Deere Financial, a division of United States-based John Deere, through which the bank is providing a range of financial services to customers of John Deere.

With better governance and policies in place, Nigeria will reap the economic benefits of having a greater proportion of the population in the economically active sector. The large share of agriculture in Nigeria’s GDP, according to experts, suggests that a strong growth in agriculture is necessary to trigger overall economic growth.

Source: ThisDay