Nigeria Country Session Presenter : Irede Ajala, Special Adviser, Investment Promotion and Agribusiness Federal Ministry of Agriculture and Rural Development of Nigeria Facilitator : Wim Plazier, Partner, A.T. Kearney
Since 2010, Nigeria has focused on restarting its quasi- commercial agriculture sector with some key successes • Levels of mechanization • Use of fertilizer rising rapidly • New commitments helped improving with banks and with Notore and Indorama drive access to finance from tractor owners working to now producing crop specific less than 1% of all formal credit to add thousands of new varieties; Dangote plant on ~6% by 2015; CBN/NIRSAL role tractors; 600,000 new track to opening has been critical in providing tractors needed credit guarantees and interest rebates • Domestic production of rice • Production of chicken and • Domestic production of cocoa paddy has risen by 1M – 2M eggs on the rise again , after growing again (at 0.5M – 0.7M tons/annum, enabling a recovery from Bird Flu episodes tons/annum) following intensive commensurate reduction in in recent years; about 165M efforts to replant with faster imports from Asia birds and 0.65M tons of eggs maturing hybrids and set up of are produced/annum Cocoa Marketing Corporation Source: FMARD, Nirsal Plc, Central Bank of Nigeria, various literature 2 2
These successes have encouraged domestic and foreign investors to intensify exploration of Nigeria’s potential LOCAL MULTI-NATIONAL Soybean Cassava Wheat West Africa Rice Fertilizer Maize Palm Investing Investing Committed to Building 100k Recently built a Invested $70m $100m in $100m in investing mt/pa starch 1m mt palm in mechanized soybean cassava $2.3b in rice factory in oil refinery in rice farm crushing in starch plant in & sugar plant Kwara State Lagos state Edo state Kogi state Source: Company websites, company financials 3
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The Top Commodity Value Chains And Global Competitiveness 52,404 30,000 9,410 Nigeria’s Top Staples 000’s Tonnes, 2012 6,900 6,200 4,833 3,900 3,070 Global Ranking 1 4 1 2 1 13 17 3 Rice Groundnuts Fresh Citrus Cassava Yams Maize Food Vegetable fruits 1 Sorghum s Note: 1 Excludes Oranges, Lemons and Grapefruit Source: FAO Stat; Index Mundi 5
The diversity of the Nigerian Diet Provide Opportunities for Investments in Primary Production, Supply Chain and Logistics and Food Processing Infrastructures Diverse Household Expenditure on Food Others Fruits 8% Meat Tubers and Plantain 2% 3% Bread 35% Non-Food Expenditure 23% 4% Oils, Fats and Nuts 4% Soft Drinks 4% 4% Fish and Other Seafood 15% 5% 65% Food Expenditure Vegetables Maize 9% Rice 10% 10% Other Cereal 2 2012 Beans and Peas 2009/2010 % % $ $ Food Alc + Tobacc Consumer E Expenditure Breakdown of Total Consumption, % Breakdown of Food Consumption, % 56.9 1.4 1,585 902 65% of household expenditure is on food products: tubers, plantains, and cereals are the staple food categories in Nigeria 6 6
Such investments will have implications for Nigeria’s food processing market e.g. downstream wheat noodles MARKET EXPECTED INDOFOOD LEADER TO BE ~330K MT IN 2019 WITH ~71% SHARE COMMENTARY • Indomie has a relatively strong market share position • Future expansion of noodle manufacturing market is unclear • Growth of ~6-8% is expected driven by affordability , changes in consumer preferences & increase in demand for convenient foods Note: Consumption data based on sales of goods by companies Source: Euromonitor 7
Nonetheless, despite such growing attention, Nigeria’s agricultural sector has not reached its full potential AGRICULTURE’S SHARE OF GDP HAS … AS REAL GROWTH HAS LARGELY REMAINED WITHIN RANGE REMAINED FLAT SINCE 2012 Source: National Bureau of Statistics (Q4 2015 GDP Report) 8 8
Nigeria’s full potential remains a challenge because of solvable problems such as infrastructure barriers… • Insufficient farm to factory infrastructure and supply chain connectivity • Insufficient productivity growth as a result of poor transfer of proven technology (seed, irrigation, crop protection, and extension knowledge) into farms) • Failure to meet regulatory and food safety requirements of key export and domestic markets • Policy missteps and delays e.g. insufficient liberalization of internal and cross- border food / agribusiness markets to allow for more competitive pricing as well as market openings Source: FMARD 9
These constraints can be tackled as they arise in the short to medium term… • Expansions of foreign/local market partnerships e.g. to close infrastructure, channel, customer insight and government relations gaps • Flexible capital that is aligned with key cropping life cycles e.g. 3 to 4 year loans to finance plantations and processing plants , and willingness to accept a purchase order from Shoprite or Dangote as a high quality receivable • Skilled labor , including a new generation of professional farm managers who can organize key production assets into productive sources of cash flow • Communities and farmer networks that take an investor’s lens , and push for better contracting terms that give them a share of processing upside , and not just volatile crop prices • Informed governments , who understand how business choices will be made , and have a clear sense of what the key constraints to growth are e.g. importance of remaining cost or value competitive versus top 3 global competitors 10
FMARD has instead grouped the challenges and potential solutions into a new 3 theme policy platform, the APP BOOST PRIVATE REALIGN A B C PRODUCTIVITY INVESTMENT FMARD’S ROLE Boost Nigeria’s Intensify focus and production of key Crowd in private investment on Policy agricultural output investment across setting and Goal from crops to tree the value chain of implementing crops to fish to agribusiness policy bees • Access to Finance • Access to land • Institutional Setting and Roles • Agribusiness • Soil Fertility Investment • Youth and Women • Access to Information Development and knowledge • Infrastructure • Access to Inputs • Climate Smart Agriculture Key • Production Focus Management • Research & Areas Innovation • Storage • Food and Nutrition • Processing Security • Marketing & Trade • Consumption & Nutrition 11 11
For example, Easing Access to Land Is a Key Driver of A Productivity Proposed Policy Supporting Lever Value Chain Constraint Policy Objective Reform Enabling Program Program Limited investment and low Policy to ensure Policy to: Programs to address: 1. Enhanced access to productivity of small-medium conducive access to Finance (Policy thrust scale producers and the private land in order to attract 1) Amend current Land Ad 1-4 10) sector/ investors due to investments by small, Use Act especially - Map, inventory and log 2. Enhanced access to medium and large facilitating the ownership / titles of all Information & 1. Absence of investment in land farmers and recognition & land in Nigeria using GSP knowledge (Policy due to insecurity of longer – processors entitlement of land and related low cost thrust 3); info on land term rights of land use for ownership by formal technologies title procedures small, medium and large scale or customary means - Support reforms to land farmers to assist titling (in States) 2. Cultural practices on land use collateralization - support farmer/ land unfavorable to women registration (identity, Access to 3. Land grabbing: communities location, landholding; Land dispossessed of large parcels of farm size) land - improve ease of access 4. Lack of access to finance since to land title information land can’t be used as a collateral e.g. via low cost web (Current Land Use Act is not databases conducive for agricultural - Provide financial activities (e.g. short-term lease institutions link to land doesn’t allow for agricultural title databases and fund loans, difficult process in collaterization initiatives acquiring title to land) 12 12
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