INVESTMENT OPPORTUNITIES IN THE LOCAL AGRICULTURAL

COMMODITY VALUE CHAINS

BY

Kayode FaletiSenior Program Manager

& Head Southern Regional OfficeUSAID 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

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• 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:

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;– 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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