Agribusiness: Finance challenges and opportunities

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Recently, one of the Nigerian Bar Association (NBA-SBL) Business Law Weekly Series looked at, “Financing Opportunities and Challenges for Inclusive Agribusiness” with an in-depth discussion of factors impeding the growth of agribusiness in Nigeria. The session was coordinated by NBA-SBL’s Agriculture Law Committee, which is chaired by Perenami Momodu, Partner, Aelex; moderated by Aderonke Alex-Adedipe, who is Partner, Pavestones Legal and the 2nd Vice-Chair NBA-SBL’s Agriculture Law Committee.

The session featured Solape Akinpelu; Chief Executive Officer, Hervest and Country Director, Women in Tech Global, Nigerian Chapter; as well as Kenneth Obiajulu, Co-Founder and Chief Executive Officer, Agricorp Holdings Limited, United Kingdom. The outcome of the discussion have been summarised into five key lessons. Firstly, Kenneth Obiajulu believes that the agricultural sector does not just constitute a large part of the Nigerian economy, but also the labour force of the African society for 78% of these population engage in unsophisticated and under-structured subsistence farming system by cultivating on about one hectare or less of the land mass.

This negates the value-based approach to commercial farming, which strives only where there is food security. Food security means that the food must be available, accessible and fit for use while maintaining sustainability. For every one hectare, the maximum food output must be produced to ensure full optimisation of land resources and financial input. However, it is a known fact that inaccessibility to funding has plagued the Small and Medium Entreprises (SMEs) and Micro, Small and Medium Enterprises (MSMEs) that constitute the larger statistics of the Nigerian agriculture sector. Secondly, factors that encourage the continued existence of this cancer are numerous.

Akinpelu opines that the major factor is the existence of a non-business orientation amongst these farmers, especially the women, leading to low adoption of financial services. This is as a result of lack of social permission to actively participate in commercial farming. These social issues include limitations on land acquisition/inheritance by women, inaccessibility of production equipment and innovations, inadequate agribusiness education and awareness and lastly a misinformed belief that the utilisation of financial and banking services is a sign an unsuccessful business.

Obiajulu added that a poor understanding of agribusiness, due to disparity in approach, operational system and investment nature are the basis why he considers the financial aid provided by private sectors as a short term solution. He posits that the agricultural space differs from other sectoral spaces in the following ways: agribusiness involves all the factors of production, it is characteristed by under utilisation and incompetent appraisal of the credit system of agro-projects and investments, and the nature of its investment is usually a medium to long term output, hence, a prolonged realisation of funds.

Both speakers spoke on the difficulty in meeting funding criteria especially in public sector and concurred that it arose from the lack of digital visibility and an evidence of capacity to produce. This lead to the last factor being the absence of appropriate infrastructure to support digitised, well-structured and sophisticated agro financing system. Thirdly, as a means of eradicating these impeding factors, both speakers agreed that the first and most important means of building a structure for agro financing is a shift in mindset and attitude towards agriculture from a mere culture to a sophisticated business system.

Also, there should be investment in farmer’s education and awareness on matters like structured medium and strategies for farming, marketing insurance schemes for farmers, education on available credit system to be undertaken. An extension of funding beyond basic production to the secondary aspect of farming such as processing, distribution and marketing should be promoted to ensure a value-based system of farming. This would increase the growth from a 3-5% business margin to a 25% margin. Ineffective and unimplementable paper-worthy policies and funding systems, where a bulk of the funds is tied to the operation of the funds, should be abandoned.

There must exist a perfect blend of public-private partnership where public spending is channeled to necessary infrastructure to ensure adequate production. Fourthly, policy change to attract adequate investors was proposed by both speakers. This is done by the creation of apt policies like policies influencing land ownership/acquisition and sensitisation of the target audience, promotion of participation in financial activities evidencing a capacity to produce, use of inclusive and participatory funding, elimination of red-tapism in implementation process to attract investors and Domestic Reverse Charge marketing, stabilisation of determining investment factors as currency value, and growth fostering environment, among others.

Lastly, talking about financing opportunities in Hervest, a digital platform providing financial inclusion for women through a Gender Lens Investment (GLI) approach, Solape Akinpelu said that its target are women in rural areas and might allow alias members, men who are interested in agribusiness and investing. The investment approach adopted is the impact investment approach, a peer-to-peer method of pooling funds, which employs the collation of accurate data to beat volatility. To promote inclusive and participatory agri-tech finances, it adopts the use of Unstructured Supplementary Serive data codes. The advantages include a measurable, traceable and digitised financial visibility system, among others.

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