Last week we identified and addressed the missing links that hinder the success of the several agricultural initiatives of the Nigerian government. This week, will attempt to answer some of the gaping questions orchestrated by these missing links.
In answering them, we will identify latent opportunities hidden within the confines of these gaps, and also suggest how government should measure performance. It will be questioned whether an investment into the agricultural sector is a worthwhile venture.
It was identified that lack of players in both the midstream and downstream sub-sectors of agribusiness vitiate the progressive wheel of the industry. There abound multiple investment and business opportunities here.
We have to keep in mind that part of the focus of this series is to bridge the farm-to-fork gap within the agribusiness space. To drive in our views, we will use the plantain value chain as our paradigmatic case in point.
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Plantain, in Nigeria, is mostly consumed in its staple form. Mostly processed into chips or flour. It can be eaten as porridge, roasted, boiled, fried and so on. But more can be done with this iron, potassium and carotene rich food. It could be processed to enhance its shelve life so that we do not waste the estimated 60% post-harvest loss per annum.
Annual consumption per capita of plantain in Nigeria is as low as 8.5kg despite being the world’s 5th largest and Africa’s largest producer of plantain.
In a technical co-operation project implemented in Abia, Cross River, Delta and Oyo States, the Food and Agriculture Organization of the United Nations (FAO) trained more than 200 women on how to process plantain into more than 20 different recipes such as “flour, chips, starch, alcoholic beverage, bread, cake…”
Further, it was identified that the trunk can be used for table mats, ropes and handbags. The peel can be processed into livestock feed. We can use plantain for noodles. Wow!
Processing
There could be solid investments in processing of plantain. These investments will be better sited near the areas where we have massive plantations like the areas mentored by the FAO including Edo and Ondo States. In our last article, we identified training and empowerment of the youth to become profitable farmers.
The plantain value chain can help in monitoring this program. How? Let us assume 200 farmers are trained on organic plantain farming (let’s call this group Cluster 1) and 50 persons trained on processing into different end-products (this group we call Cluster 2).
The synergy between them helps in minimizing waste as Cluster 2 totally off-takes the produce of Cluster 1. In this case, government monitoring and assessment would be made easy because of the interconnectivity. So, government will be able to measure the KPIs of these cluster farmers who have taken government loans.
Take an instance with processing plantain into noodles. CNN’s Marketplace Africa, on January 25, 2019, gave an account on how noodles has become a staple food in Nigeria with a domestic consumption of 1.76 billion servings annually.
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To produce this, Indomie (the leading brand) needs about 500,000 tons of wheat to meet production needs. As such, Nigeria is the 12th largest producer of noodles globally. The firm produces about 80million packs daily and, at N50/pack, it rakes in about N4billion daily (about N1.3trilion annually).
So, there is huge investment opportunity here. Since wheat, at the moment, remains the major shade of recipe for noodles, other players can actually introduce the plantain option. They can cluster as MSMEs to start the production. They can partner with Indomie to agree on a pre-production alliance that will see the production done to a certain percentage before handing over to Indomie. Other partnership options abound.
Look at the cassava value chain too. There are lots to be done with cassava. Cassava can be used to produce ethanol which is the major raw material for producing hand sanitizers.
Mechanization
A public private partnership (PPP) on managing mechanization projects would not be a bad initiative. The purport here is to have these machines readily available to farmers, especially the smallholder farmers. Because of the high capital intensity of outright purchase of these machines and equipment, this partnership can arrange different lease options that would suit these farmers.
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Currently, the available machines for the farms are limited thereby orchestrating unhealthy competitions on who hires first. Most farms, therefore, either wait till tail end of the planting season or are forced to manually till the ground (in the case of tractors).
Taking our plantain paradigm, these partnerships plans how to lease the equipment per cluster. For instance, irrigation equipment can be made to go round during the dry season, especially if the suckers were planted shortly before the dry season. This goes for pesticide and organic fertilizer sprayers like knapsacks.
Farms Management Apps
These are computer-based software and smartphone apps used in tracking, monitoring and managing farms. It ranges from calculating and timing the different growth stages of the plants to when they are due for harvest. They also manage the financial aspect of the farms.
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What this implies is that it is a subtle investment calculator per se. how? One can do a scenario simulation to forecast the possible farming duration, cost, risks, profit, etc of a particular crop. Part of the bane of progress within the industry is lack of professional financial management of farms. These apps help track, manage and calculate the financial status of a farm in one fell swoop.
Investors can develop this. The EDIs can get a group of ICT-inclined youths, train them on the development of these apps so that they can be able to program, install and manage farms for profit.
Outsourcing
This is another opportunity area. Firms can train a large pool of farm labourers. The firm goes in search of farms who need these professionals, go into third party farming (3PF) agreements with them and deploy the trained personnel to manage the farms from start to finish. These will minimize the use of quacks in the farms who end up hampering full capacity yield.
This offers, invariably, massive employment opportunities. The farmer could also be able to calculate his management cost, pay a certain percentage in bulk as initial payment and completes payment at a certain stage. He does not need to disburse money per labour input and it helps keep track of expenditure. Paying once may be cheaper than paying at different labour input stages.
Crowd Funding
This is yet an investment window unexplored. Social media groups (or other groups whatsoever) could form funding partnerships and invest in agro. They could even liaise with the EDIs (Entrepreneurship Development Institute) to fund some well-trained farmers like plantain Cluster 1.
The list of opportunities in this sector never ends but most the important thing is value addition at each stage of the value chain.
Before concluding this part of the series, it is highly imperative to note that investing in agriculture is not a roller coaster. Investors and farmers should not enter the business space because of an outsider view that it is all profits.
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Learning and knowledge are very key to the business end of agriculture. It is a patience-testing investment and takes some time before it starts yielding dividends. If one plants avocado or cashew today for example, one should expect to have optimal yield from around the 11th year from planting, though it can start fruiting by the 3rd year.
Dr. Kelikume of the LBS summed it up when he said that “agribusiness is almost 70% science, 20% experiential learning and 10% art” (Webinar 2020). This is a sector you can lose your capital in one attempt. So, there is every need to thread with caution as an investor, a direct farmer or both.
Is agribusiness solely for domestic consumption? Or is it only to contribute to the GDP? why has input from this sector to total revenue remained below par? What further options are there in the international commodities market?
These and more will be discussed in our next and final part of the series.
Written by,
Edokobi Azuka Stephen
+234 803 553 5948
Wonderful. Keep on.