Nigeria Country Session Presenter : Irede Ajala, Special Adviser, - - PowerPoint PPT Presentation

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

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Since 2010, Nigeria has focused on restarting its quasi- commercial agriculture sector with some key successes

• Domestic production of rice

paddy has risen by 1M – 2M tons/annum, enabling a commensurate reduction in imports from Asia

• Production of chicken and

eggs on the rise again, after recovery from Bird Flu episodes in recent years; about 165M birds and 0.65M tons of eggs are produced/annum

• Domestic production of cocoa

growing again (at 0.5M – 0.7M tons/annum) following intensive efforts to replant with faster maturing hybrids and set up of Cocoa Marketing Corporation

• Levels of mechanization

improving with banks and tractor owners working to add thousands of new tractors; 600,000 new tractors needed

• Use of fertilizer rising rapidly

with Notore and Indorama now producing crop specific varieties; Dangote plant on track to opening

• New commitments helped

drive access to finance from less than 1% of all formal credit to ~6% by 2015; CBN/NIRSAL role has been critical in providing credit guarantees and interest rebates

Source: FMARD, Nirsal Plc, Central Bank of Nigeria, various literature

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Soybean Cassava Wheat Rice Fertilizer Maize Palm

Source: Company websites, company financials

West Africa

Investing $100m in soybean crushing in Edo state Investing $100m in cassava starch plant in Kogi state Committed to investing $2.3b in rice & sugar plant Building 100k mt/pa starch factory in Kwara State Invested $70m in mechanized rice farm Recently built a 1m mt palm

• il refinery in

Lagos state

LOCAL MULTI-NATIONAL

These successes have encouraged domestic and foreign investors to intensify exploration of Nigeria’s potential

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Note: 1Excludes Oranges, Lemons and Grapefruit Source: FAO Stat; Index Mundi

Groundnuts

3,070

Citrus fruits1

3,900

Rice

4,833

Fresh Vegetable s

6,200

Food Sorghum

6,900

Maize

9,410

Yams

30,000

Cassava

52,404

000’s Tonnes, 2012

Nigeria’s Top Staples

1 1 13 1 4 17 2 3

Global Ranking

The Top Commodity Value Chains And Global Competitiveness

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The diversity of the Nigerian Diet Provide Opportunities for Investments in Primary Production, Supply Chain and Logistics and Food Processing Infrastructures

Food Expenditure Non-Food Expenditure 2009/2010 65% 35%

8% 4% 4% 4% 4% 5% 9% 10% 15% 23% 10%

Other Cereal2 Vegetables Tubers and Plantain Others Fruits 2% Meat 3% Bread Oils, Fats and Nuts Soft Drinks Fish and Other Seafood Maize Rice Beans and Peas

65% of household expenditure is on food products: tubers, plantains, and cereals are the staple food categories in Nigeria

Diverse Household Expenditure on Food

Breakdown of Food Consumption, % Breakdown of Total Consumption, %

2012 % % $ $ Food Alc + Tobacc Consumer E Expenditure 56.9 1.4

1,585 902

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Such investments will have implications for Nigeria’s food processing market e.g. downstream wheat noodles

Note: Consumption data based on sales of goods by companies Source: Euromonitor

• 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

MARKET EXPECTED TO BE ~330K MT IN 2019 INDOFOOD LEADER WITH ~71% SHARE COMMENTARY

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Nonetheless, despite such growing attention, Nigeria’s agricultural sector has not reached its full potential

AGRICULTURE’S SHARE OF GDP HAS REMAINED WITHIN RANGE … AS REAL GROWTH HAS LARGELY REMAINED FLAT SINCE 2012

Source: National Bureau of Statistics (Q4 2015 GDP Report)

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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

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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
• rganize 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

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Crowd in private investment across the value chain of agribusiness Boost Nigeria’s production of key agricultural output from crops to tree crops to fish to bees Intensify focus and investment on setting and implementing policy

• Access to Finance
• Agribusiness

Investment Development

• Access to land
• Soil Fertility
• Access to Information

and knowledge

• Access to Inputs
• Production

Management

• Storage
• Processing
• Marketing & Trade
• Consumption &

Nutrition

FMARD has instead grouped the challenges and potential solutions into a new 3 theme policy platform, the APP

• Institutional Setting

and Roles

• Youth and Women
• Infrastructure
• Climate Smart

Agriculture

• Research &

Innovation

• Food and Nutrition

Security Policy Goal Key Focus Areas

BOOST PRODUCTIVITY PRIVATE INVESTMENT REALIGN FMARD’S ROLE

A B C

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Lever Value Chain Constraint Policy Objective Proposed Policy Reform Enabling Program Supporting Program

Access to Land

Limited investment and low productivity of small-medium scale producers and the private sector/ investors due to

• 1. Absence of investment in land

due to insecurity of longer – term rights of land use for small, medium and large scale farmers

• 2. Cultural practices on land use

unfavorable to women

• 3. Land grabbing: communities

dispossessed of large parcels of land

• 4. Lack of access to finance since

land can’t be used as a collateral (Current Land Use Act is not conducive for agricultural activities (e.g. short-term lease doesn’t allow for agricultural loans, difficult process in acquiring title to land) Policy to ensure conducive access to land in order to attract investments by small, medium and large farmers and processors Policy to: 1) Amend current Land Use Act especially facilitating the recognition & entitlement of land

• wnership by formal
• r customary means

to assist collateralization Programs to address: Ad 1-4

• Map, inventory and log
• wnership / titles of all

land in Nigeria using GSP and related low cost technologies

• Support reforms to land

titling (in States)

• support farmer/ land

registration (identity, location, landholding; farm size)

• improve ease of access

to land title information e.g. via low cost web databases

• Provide financial

institutions link to land title databases and fund collaterization initiatives

• 1. Enhanced access to

Finance (Policy thrust 10)

• 2. Enhanced access to

Information & knowledge (Policy thrust 3); info on land title procedures

For example, Easing Access to Land Is a Key Driver of Productivity

A

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Lever Value Chain Constraint Policy Objective Proposed Policy Reform Enabling Program Supporting Program

Access to Finance

This relates to access to finance for short term credit for annual inputs as well as for longer-term investment in agriculture. Constraints in this area are due to:

1.

Limited rural credit access points

1.

insufficient access to credit and loans for small-medium scale producer/ processors due to need for collateral, risk for crop failure

1.

high interest rates for agricultural lending

1.

limited budget support for agriculture (1% of budget) and therefore limited public financing of inputs Policy to enhance availability of credit at reasonable conditions for farmers and agribusiness Policy reforms to: Ad 1 to 3.

• Facilitate and legislate alternative

finance mechanisms e.g. warehouse- receipt financing, commodity-trade financing, equipment leasing, crowdsourcing, etc.

• Promote incentives for commercial and

microfinance banks to develop appropriate financial products relevant in rural areas for farmers, women and youth

• Promote inclusive agribusiness

development to facilitate small farmers access to technology, services and financing;

• Lobby to increase public sector funding

to the minimum recommended 10% of the national budget (Maputo Declaration)

• Continue reform in the agricultural

insurance sector through developing new products (e.g.. micro-insurance, weather-index insurance) and allow private insurance companies to participate to government-sponsored insurance programs. Programs to address: Ad 1. Expand rural access points: Ad 2 and 3. reduce need for collateral:

• intensify push to have lenders lend

based on purchase order from downstream user

• stimulating cooperative banking and

affordable loans through commercial banks, microfinance banks and financial NGOs;

• recognition of cooperatives and other

farming- based organizations financial institutions

• capacity development of financial

institutions to lend to the agricultural sector

• increase capacity and size of market-

driven guarantee and risk schemes (e.g. NIRSAL) targeting rural areas

• Capacity building of FMARD to

facilitate agribusiness investment Ad 4. expand targeted public financing:

• intensify push to raise public budget to

10% of spend; refocus on enabling services e.g. extension, rural infrastructure and improving access to capital Complementary measures;  Work with commercial banks and large buyers

• f feedstock to deepen

“anchor lender” supply chain based financing  Work with Central Bank

• f Nigeria (CBN) on

ensuring utilization of MSME Fund and Non- Oil Export Fund  Work with Nirsal Plc on expanding innovative use of credit guarantee and interest rebate  Work with NSE and family owned enterprises to use capital markets to go public

Improving Access to Finance will help crowd in private capital whether from banks or other sources

B

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Lever Value Chain Constraint Policy Objective Proposed Policy Reform Enabling Program Supporting Program

Infrastructure Main problems with rural infrastructure (energy, roads, railways, airport, water supply, ICT connection) are as following:

• 1. Poor state of rural

infrastructure to attract investment in rural areas.

• 1. urban-bias in

development policy

• 1. high costs of transport

due to ‘taxes’, poor road maintenance, scarcity of transport in rural areas. Policy to ensure that all stakeholders play their roles in the provision of rural infrastructures. enforce existing inter- ministerial policies Policy reform is to: Ad 1.

• Incentivize states and

private investors to expand pool of rural infrastructure Ad 2.

• Promote Economic

activities in rural areas; provide the enabling environment for investment

• pportunities
• Identify and address

conflicting policies and synergies Ad 3.

• Simplify and reduce

cost of intra-state transport; consider creating legislation to solve issue Programs to address: Ad 1, 3

• Setup a multi-stakeholder

mechanism to ensure that all stakeholders play their roles in the provision of rural infrastructure and barriers are reduced (energy, roads, railways, airport, water supply, ICT connection, banks);

• resuscitate and review the Rural

Infrastructure Survey project of FMARD, with a view of re- establishing the database for rural infrastructure planning. Ad 3

• info & KM raise awareness of

rural communities about prevalence or absence of road regulations

• provide options for enhancing

local transport

• explore legislative solution to

improve intra-state commerce

Finally, improving Infrastructure is a key focus area for FMARD to drive coordination across parties

C

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Successfully delivering the 3 themes will require a number of factors to continuing working in alignment

BOOST PRODUCTIVITY PRIVATE INVESTMENT REALIGN FMARD’S ROLE

A B C

• First, commercializing existing technologies that are on the shelf

today e.g. milling / food processing

• Third, creating new incentive systems for inventors to participate in

the upside from R&D

• Third, refocusing the current Agricultural Research network to

make it more results focused

• First, build on market confidence and continue to actively engage

banks and other investors to bet on Nigeria

• Second, reduce barriers to growth that impose additional cost e.g.

reduce taxes on agriculture, improve feeder road and railroad system, and introduce maritime transport for food

• Third, invest in building a new generation of private investor-

farmers; work with CBN, technical partners and operators to create real option

• First, refocus and motivate the Ministry to return to core policy

design, implementation and monitoring; intensify career growth options

• Second, develop clear positions on key structural reforms e.g.

climate resilient agriculture, land use and transforming rural economies

• Third, provide an opportunity for civil servants to also help shape

investment support role of the Ministry; consider formal fellowship program that allows private sector to work with Ministry

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To succeed in operationalizing the APP, FMARD also needs support from MDAs and other stakeholders…

RAPID ACCESS TO LAND SIMPLIFIED CREDIT FLOWS EFFICIENT MARKET ACCESS REBUILDING OF EXTENSION

PRELIMINARY

• Two key stakeholders

needed i.e. States and River Basin Authorities

• Process for rapid

lease of River Basin lands needs to be set up and approved by 2016 Dry Season; in parallel public-private irrigation investments can be made

• State issuances of C
• f O on land should be

further de-centralized

• States and RBAs can

also make 2 additional investments: producing soil analysis maps that are web accessible; and GPS tagging their lands by title to bring title closer to collateral

• Alignment with CBN

and MoF on easing access to credit via NIRSAL Plc, intervention funds and expansion of non-bank lenders

• NIRSAL mobilizes

financing for Nigerian agribusiness by using credit guarantees to address the risk of

• default. It is a flexible

financing tool designed to change the behavior

• f financial institutions.
• The NIRSAL Facility

covers all crops and livestock activities in Nigeria, while driving improved investment

• utcomes and job

creation

• Create templates and

forums to facilitate purchase agreements between key corporates and farmer cooperatives e.g. web based system with private sector

• Leverage PPP support

to rapidly expand network of warehouses and storage assets across Nigeria, as well as invest in key feeder roads in select crop zones

• Expansion of railway

tracks into key production zones e.g. Benue/Oyo will reduce post-harvest losses further

• Work with MDAs and

State Governments to engage and train 30,000 – 50,000 extension agents across key cropping zones

• Propose setting up joint

public-private-donor funding mechanism

• Engage technical

partners e.g. GIZ, IFAD, DFID, Sasakawa, Gates, and State ADPs to design and rollout a 90 day training course

• New staff would be paid

centrally from new Fund, assigned like NYSC, and help reduce EA to farmer ratio to 1: 200x (assumes 10M farmers)

The Federal Government Is Enabling Policies, New Institutions and Financing Innovations to Attract Private Sector Agribusiness Investments

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 Full Scale Implementation of the Seed and Fertilizer Policies, Regulations and Laws  Full Implementation

• f Staple

Crop Processing Zones (SCPZ) / Agribusiness Investment Regions (ABIR)  Full Implementation of Import Substitution Policies (Cassava/Rice)  Mechanized Farming at Scale for Cassava and Rice  Irrigation Farming at Scale for Rice, Maize and Sorghum  Innovative Financing for Agriculture – FAFIN, NIRSAL, CACS  Marketing Corporations / Agricultural Commodity Exchanges  Prioritized Value Chain Development of Specific Commodities

Master Plans have been completed for 7 of the Model SCPZ sites/corridors across five value chains, with further sites/corridors and value chains to be added

Staple Crop Processing Zones: Locations and Value Chains

Model SCPZ State Locations Anambra/Enugu Bayelsa Benue Borno Cross River Kano Kogi Kwara Lagos Nassarawa Niger Ogun Rivers Taraba Kebbi/Sokoto Bauchi Gombe SCPZ Value Chains

Niger Borno Yobe Taraba Bauchi Oyo Kogi Kebbi Kaduna Kwara Edo Benue Sokoto Zamfara Kano Adamawa Plateau Katsina Jigawa Ogun Ondo Nassarawa Delta Osun Ekiti Imo Rivers Gombe Cross River Enugu Ebonyi Abia Akwa Ibom Anambra Bayelsa FCT Lagos

Priority SCPZ State Locations with Completed Master Plans Potential Additional SCPZ State Locations for Livestock Model SCPZ State Locations Rice Cassava Fisherie s Horticulture Sorghu m Livestock (To be added)

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Unprecedented and Remarkable Partner Support for Implementation of Nigeria’s SCPZ/ABIR

US$100m SCPZ Support Project (for SCPZ institutions and infrastructure) at the Project Preparation stage Support for SCPZ infrastructure through a reorganization of the WB CADP Support for SCPZ related agricultural productions through the Fadama Project Support for SCPZ infrastructure through approved US$159m ATA Facility Pledged Budget Support Facility for SCPZ SCPZ Project/ Transaction Support SCPZ Project Development Support through GEMS SCPZ Project Development support Pledged SCPZ related agricultural production support

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Major Financial Institutions Are Backing Nigeria’s Drive Towards Value Added Staple Food Processing & Agricultural Industrialization

$500 million $80 million $1.5 billion $250 million Nigeria now Priority country $5 Million $ 100 Million £ 37 million $ 1.5 Million $250 million

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• Inter-Ministerial Coordination: FMARD intends to work closely with the FEC

team on a number of critical cross-MDA issues e.g.

• food smuggling (rice, frozen chicken, etc.)
• launch of a “Buy Nigerian Foods” program for all MDAs
• infrastructure expansion

Alongside the APP, FMARD continues to work on a set of time sensitive issues . . .

• Supply Chain Integration: Anchor Lender program and underlying supply chain

domestication will receive additional attention in 2016 – 2017

• Important that we work with large corporates to link their purchasing to farmer groups
• Goal will be to work with industry to create an online ordering system, and register suppliers
• Investment Inflows: Multiple investors continue to seek FMARD support on value

chain investments

• FMARD will be forming a small Investment Support Team (IST) drawn from Civil Service and

private sector to help close deals; team will move to proposed Nigerian ATA once set up

1 2 3

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When successful, the APP strategy will yield 4 key outcomes essential to building sustained prosperity

Improvements to Food Security Reduction in Food Imports Enabler of Job Growth Achievement

• f Economic

Diversification Metrics tracking progress against these 4 goals will be reviewed on a quarterly basis

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In practical terms, success means that Nigerian agribusiness will win a share of Africa’s $1T food market

Source: World Bank – Growing Africa report 2013

• Relatively stable GDP growth of 4.4%

in 2016

• SSA food market growth of 6% per

annum to 2030

• Net agricultural trade deficit converted

from $10B to surplus of $20B

• Agriculture value added increased from

$150B in 2010 to $500B in 2030

• Per capita value of food consumption is

25% higher in urban than rural areas

• Commercial value chains (processing,

transport, and retail networks) in place for additional urban consumption of ~$400B ESTIMATED FOOD MARKET VALUE OF $1TR BY 2030 KEY ASSUMPTIONS

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…A step that will place Nigerian brands and companies on the African and global food market map

SUPPLIERS PRODUCERS RETAILERS INVESTORS PROCESSOR

ILLUSTRATIVE

Thank You