Transcript Investment Opportunities in Local Agricultural Commodity Value

INVESTMENT OPPORTUNITIES IN
THE LOCAL AGRICULTURAL
COMMODITY VALUE CHAINS
BY
Kayode Faleti
Senior Program Manager
& Head Southern Regional Office
USAID MARKETS II Project
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OUTLINE
• Overview of the Agricultural Sector in the
Nigerian Economy
• Investment Opportunities in the Sector
• Challenges/Constraints
• Available Support
• Conclusion
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OVERVIEW OF THE AGRIC SECTOR IN
THE NIGERIAN ECONOMY
• The Nigerian economy has had a truncated history. In the
early 1960s, Nigerian Agricultural sector had glory and it
was visible for all. Nigeria accounted for 60% of the global
supply of palm oil, 30% of ground nut, 15% of cocoa,
among others, and farmers from the North to South
generated wealth. The oil boom contributed to the negative
growth of Agriculture in the 1970s.
• The over-dependence on oil and the neglect of the other
sectors of the economy, particularly agriculture, has had
negative consequences on the economic well-being of
Nigerians.
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• Oil still dominates the Nigerian economy, rising from 29%
of Gross Domestic Product (GDP) in 1980 to 52% in 2005.
Oil and gas now contribute about 99% of exports and
nearly 85% of government revenue, although their
contribution to employment is estimated to be only 4%.
• Agriculture, the second largest sector fell from 48% of
GDP in 1970 to 20.6% in 1980, and was only 23.3% of
GDP in 2005. Agricultural exports are negligible and
represent about 0.2% of total exports. Nevertheless, an
estimated 60% of Nigerians are employed in the
Agricultural sector.
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• It is therefore imperative for Nigeria to pay the necessary
attention to Agriculture if the current problem of high
unemployment and poverty are to be addressed.
• To achieve the growth potential through agriculture,
accelerated and increased investments are needed in
crop production, livestock & fisheries production, food
processing & preservation, agricultural inputs, finance,
commodity trading and transportation.
• This paper therefore looks at the various investment
opportunities in the Nigerian Agribusiness sector, the
constraints/challenges and available supports.
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INVESTMENT OPPORTUNITIES IN
THE SECTOR
• There are three major components in agribusiness,
namely, the production and distribution of farm inputs, the
actual crop/animal production (farming) and the processing
and distribution of farm produce. The industrial processing
component of agribusiness is referred to as agro-industries;
• Investment opportunities exist in each of the three
components enumerated above, as follows:
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INVESTMENT OPPORTUNITIES
CONTD.
• Investment in the production and distribution of farm
inputs such as:
• seeds/seedlings/stem-cuttings/fingerlings/chicks etc;
• agro-chemicals such as herbicides, fungicides,
insecticides and fertilizers;
• farm machineries such as tractors, ploughs, planter,
weed slashers, disc-harrow, boom sprayers, knapsack
sprayers, fertilizer applicator, harvesters, irrigation
equipment etc.;
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INVESTMENT OPPORTUNITIES
CONTD.
• Investment in actual crop/animal production
(farming);
– Establishment of small, medium or large scale crop,
fishery, poultry or other animal farms.
• Investment in the processing and distribution of
farm produce;
– Processing of cocoa, cassava, rice, oil-palm, fish,
chicken, etc into intermediate and final consumer
goods;
– Marketing and distribution of the consumer goods
produced;
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INVESTMENT OPPORTUNITIES
CONTD.
– Production and/or marketing of agro-processing
equipment.
• Other investment opportunities are:
– Finance of all the activities listed above (inputs,
farms, processing equipment, consumer goods etc.);
– Insurance of the farm and all farm assets;
– Provision of transport services;
– Provision of warehousing services;
– Provision of veterinary services;
– Provision of laboratory services;
– Provision of extension services etc.
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INVESTMENT OPPORTUNITIES
CONTD.
• All the above projects are profitable if necessary steps
are taken before investment, and the business is
efficiently managed thereafter (you cannot be an
absentee investor/manager);
• To this end, detailed and full FEASIBILITY STUDY
should be carried out before investing in any of the
projects. It is wise to speak at length with commodity
experts, and carefully plan out the activities, before
investing;
• Services of PROFESSIONALS should be engaged in all
technical areas;
• Start-up costs can be high with land clearing etc.
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CHALLENGES
• Inadequate access to;
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Land (availability, high clearing cost etc.)
Mechanization & appropriate technology
Improved varieties
Extension Services
Inputs (agro-chemicals, fertilizers etc.)
Finance
Market
Information
• Poor infrastructure (roads, storage facilities etc.)
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CHALLENGES CONTD.
• Low skill levels and high cost of labour;
• Conflicts and security risks;
• Enabling environment (policies that don’t
promote inclusive growth);
• Other barriers to doing business.
• Efforts must be made by policy makers
and other stakeholders to overcome these
challenges.
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AVAILABLE SUPPORTS
• Though the challenges as enumerated above
are enormous, the good news is that there are a
lot of supports to encourage investment in the
sector. Some of these are:
– Government Support (ATA, ADPs etc.);
– Research Institutes Support (IITA, NRCRI,
NIOMR, NIFFRI, NCAM, NCRI, CRIN etc.);
– Donors Support (USAID MARKETS II and
other Donor funded projects).
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CONCLUSION
• This paper has taken us through the various
investment opportunities in the Nigerian
Agribusiness sector, the challenges and
available supports.
• A strong and efficient Agricultural sector would
enable Nigeria to feed her growing population,
generate employment and the much-needed
foreign exchange, and raw materials for
industries. The earlier we all jump into this
saviour train, the better for all of us.
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