NIGERIA-CANADA INVESTMENT SUMMIT De-Risking Investment in The Agricultural Sector – The Path to Economic Recovery & Independence Presentation by: MR. ALIYU A. ABDULHAMEED MD/CEO NIRSAL 5 th November 2019
Contents Opportunities and Unfolding 1 Prospects in the Nigerian Agriculture Sector NIRSAL’s Role in facilitating 2 appropriate Financing to enable Agriculture Value Chains Conclusion 3 1
Section 1 Opportunities and Unfolding Prospects in the Nigerian Agriculture Sector 2
Nigeria is blessed with four (4) major Agricultural Opportunities… MARKET WATER LAND LABOUR Predictable Huge consumer 84 million Huge supply of rainfall pattern; market with hectares of labour Billions cu. m of unsatisfied arable land with – over 90 million surface and demand less than 50% in population aged underground use 15-65 years water 3
Additional factors are in favour of Nigeria’s Agriculture Rapid urbanization Rising middle Government/ Policy Rapid population growth – local, regional, global income Focus on Agriculture Foreign trade policies High supply deficits/ AfCTA signature $5trillion global e.g. US-China Trade Wars food industry US$22bn import substitution In spite of skepticism, several factors create a compelling business case for finance and investments in Agribusiness in Nigeria Source: OECD-FAO Agricultural Outlook 2018-2027, McKinsey 2015 , NIRSAL Analysis 4
The Agricultural sector remains one of Nigeria’s greatest hopes for economic growth and development In 2018 full year By 2020 The Agriculture sector has the The Agriculture sector grew The Agriculture potential to grow to a rate of @ a rate of 2.12% in real sector: 8.37% in real terms terms NGN21 Trillion NGN17.5 Trillion (Real/ Constant Prices) (Real/ Constant Prices) * Source: NBS 2018 Reports & ERGP 5
Nigeria’s agricultural production can be increased by over 159% by 2036 Agriculture Production in Nigeria Nigerian Naira, Billions, Constant 2010 prices 38,400 5,355 7,815 +159% 10,380 14,850 Increased Increased Shift to Higher 2016 Potential 2036 Yield Acreage Value Crops Current Additional potential 1 1 Es*mate based on modelling in McKinsey’s ‘Lions on the Move: The Progress and Poten*al of African Economies ͘ For ‘increased yield’, large farms in Nigeria to reach 90% of yields of developed agricultures; smallholder farms to close 80 - 100% of gap to developing country / emerging market level (e.g. Ghana in Yams, Bangladesh in rice)͘ For ‘Increase acreage’ assumes addi*on of 14 m ha new agricultural land, approximately 38% of Nigeria’s unused arable land of 36.9m ha. For ‘Shi] to higher value crops’, assumes shi] of 20% of current cereals produc*on to hor*culture ͘ SOURCE: McKinsey Global Ins*tute; team
Examples of agricultural Commodity Value Chain Opportunities in Nigeria • 4.7million MT annual • 3.2m MT annual Fish Wheat DEMAND DEMAND • 250,000 MT local • 2.2million MT Local Wheat PRODUCTION SUPPLY DEFICIT • US$4.5bn Imports Commodity Value Chain Opportunities • Estimated Cassava Dairy import - • net worth of $8.5bn by USD1.3bn per 2020 annum • Bread flour substitution c. N254bn p.a. Source: Fishery Committee for the West Central Gulf of Guinea, 2014/2016, PIND, FAO 2017, Business Day, GAIN Report April 2018, NIRSAL Analysis 7
Examples of agribusiness opportunities along agricultural value chain segments in Nigeria Segments AVC Pre-Upstream Upstream Midstream Downstream • Fertilizer Agro-dealers • Primary Agro-processors Retailers • • • Seed, CPP & other Producers (extraction, milling, Industrial • Input Distributors of Cereals, drying, cleaning, etc.) Processors Agribusinesses • Tractor & Equipment Tubers, Tree Service Providers for: Export brokers • • Hiring Agents, Crops Haulage Export • o Operators, Aquacultur Aggregation Merchants o Mechanics, etc. e, FFV, Storage and Logistics o • Research Farmers Poultry, Transportation o • Extension Agents Ruminants, Packaging o • Geo-mapping Apiculture, Middlemen/ • agents etc. Intermediaries 13 *2013 NBS and SMEDAN Report
The sector however requires the flow of four major capitals FINANCE HUMAN TECHNOLOGY EQUIPMENT Capital Capital Capital Capital Patient capital Intellectual and Scientific and High-end equipment to power an technical capacity technological for mechanisation agricultural for agribusiness solutions for and revolution increased commercialisation productivity 9
Section 2 NIRSAL’s Role in facilitating Financing that enables Agriculture Value Chains 10
NIRSAL understands that the imperatives of Financiers, Investors and Capital Providers must be met to gain their participation in agriculture Fall back options, Project feasibility Technical capacity Visibility on fund Robust insurance cover and viability of promoters flows Agricultural/ Assurance of Agribusiness Risk Existence of high Track record of Favourable Return on Management market demand success exit plan Investments The sector, in spite of challenges, continues to present opportunities for growth 11
NIRSAL’s Raison d’étre “To forge partnerships between agriculture and finance; maximizing the potential of agriculture for food security, Title job creation and economic growth” NIRSAL Technical Risk Sharing Insurance Incentives Rating Assistance 12
NIRSAL focuses on the upgrade, development and integration of end-to-end agricultural value chains through its MAPPING TO MARKET STRATEGY NIRSAL has developed the Mapping to Markets (M2M) concept, an innovative approach focused on transforming the Upstream segment, referred to as the ’black hole’ in the value chain into the gold mine that drives the development of all the other segments. Principal Trade Relationship Strategic Trade Relationship 13
NIRSAL’s 5-4-3-2-1 + Commodities are supported in areas of ecological advantage *V.A: Value Added Rice; Potato (Sweet & Irish); and Beans Fresh Fruits and V.A Hibiscus; Based on extensive Vegetables (Tomato, research and V.A Sesame; CONSUMER Onions...); and analysis, NIRSAL has V.A Ginger; COMMODITIES Aquaculture CONTROLLED identified 5-4-3-2-1+ ENVIRONMENT T and V.A Shea R (in Fish Estates) COMMODITIES commodities with O AGRICULTURE P COMMODITIES 3 high market demand, X *Youth driven Controlled E Environment Agriculture that will be Production Systems in 37 2 supported (in the State Capitals 4 ++ medium term) under NIRSAL’s value chain Maize; Beef + Dairy integration Soya; INTEGRATED + Hides & INDUSTRIAL approach. COMMODITIES VAT COMMODITY NIRSAL’s Wheat; LIVESTOCK Skin and 5-4-3-2-1 + 5 specialis 1 Cassava; Poultry Commodities m and * In Integrated Ranch Fodder Cotton Bank, Feedlot and + Auction Systems SUGARCANE, V.A CASHEW… 14
NIRSAL’s Inclusive Private Agribusiness Investment Development (iPAID) MARKETS: (FDI, CBN, DFIs, Equity Investors, Commercial Banks) Domestic Consumer, Domestic Industrial and Export TOPLINE Investment/ VALUE ADDED PROCESSING Financing Opportunities FRESH FRUITS & LIVESTOCK***** AQUACULTURE MAIZE + SOYA (SWEET & IRISH) VEGETABLES** SUGAR CANE RICE + BEANS COTTON**** CASSAVA HIBISCUS CASHEW POTATO SHEA** * SESAME MIDLINE WHEAT Investment/ FINANCE Financing Opportunities PHP3 Primary Production, Harvesting, Primary Processing, Primary Transportation and Primary Storage LPSP Land Preparation and Seed Processing Services BASELINE Investment/ NCIS NIRSAL Climate-Smart Irrigation Program for Optimized Smallholder Agricultural Production Financing Opportunities COES Captive Off-Grid Energy Services Smallholder-based Commercial Agricultural Sites and Services SCASS* (Agricultural land development) *Land is organized in iPAID Land Banks and in GeoCoops @0.5ha per smallholder farmer (SHF) (targeting 16,000 Geo-Coops and 8 million SHFs)) **FFV (TOMATO, ONIONS,…) ***SHEA (COLLECTION + PROCESSING) ****COTTON TO THREAD (CTT) *****LIVESTOCK (POULTRY, BEEF, DAIRY)
NIRSAL’s M2M value chain integration approach provides sustainable value for Financiers, Investors and Agricultural Value Chain Actors Pre-Upstream Appropriate mix of funding Finance • mechanisms for different actors Central account domiciliation • for multiple agricultural value chain actors Downstream Upstream FINANCIER/ Demand and supply • Finance Finance transactions locked in amongst INVESTOR value chain actors Virtual financial transactions • within an integrated ecosystem for payments and settlements Near-Zero Cash Movements • Midstream Finance Financier Visibility and control • over financial flows Layered on NIRSAL CRG 16
Section 3 Conclusion 17
Systematic collaborations between agriculture and agriculture finance are required for the realization of the agricultural fortunes of Nigeria The optimization … and the … guarantee … within the Financiers and Investors of Agricultural development and maximum Framework of Value Chains implementation of Returns on should take advantage NIRSAL’s de- (AVCs),... bespoke Investment for risking tools and of the sectoral agriculture both AVC approaches… opportunities and financing solutions actors and NIRSAL’s agriculture de- by Financiers… Financiers risking value offerings. 18
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