Grain storage and aggregation
Grain storage and aggregation
Business Model Description
Construct technologically improved grain storage silos and provide transportation services.
Expected Impact
Increase value added in food chains, prevent food waste, strengthen economic growth and generate decent jobs.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Nigeria: North West
- Nigeria: North East
- Nigeria: North Central (Middle Belt)
Sector Classification
Food and Beverage
Development need
About 25.5% of Nigeria’s population lacks adequate and improved nutrition.(1) Similarly, data from the National Bureau of Statistics suggests 26.4% of the population experienced severe food insecurity in 2016.(1) The Sustainable Development Report ranks Nigeria number 48.0 for SDG 2 (Zero Hunger). While performance against this Goal has improved, major challenges persist.(2)
Policy priority
The government intensified efforts to improve agricultural yield, and investments aim to improve agricultural infrastructure.(1) Policy priorities outlined in the Economic Recovery and Growth Plan aim to: increase agricultural GDP (gross domestic product) to NGN 21.0 trillion in 2020 at an average annual growth rate of 6.9%; reduce food imports; and become a key exporter of agricultural products.(3)
Gender inequalities and marginalization issues
Agriculture and trade account for the majority of Nigeria's employment opportunities. Most people in these sectors work informally (92% of those employed in agriculture, and 56% of those employed in trade), and so rely on daily wages. Generally, informal workers have no pension or life insurance, and have limited health insurance coverage. They are more exposed to shocks, especially to their health, and are vulnerable to poverty and hunger. Micro, small and medium enterprises (MSMEs) are most likely to be affected by the upcoming recession, and will take longer to overcome the economic impacts of COVID-19.(4)
Investment opportunities introduction
The government is also considering strategies such as providing irrigation infrastructure to enable year-round production to boost agricultural productivity.(3)
Key bottlenecks introduction
The Sustainable Development Report ranks Nigeria number 48.0 for SDG 2 (Zero Hunger). While performance against this Goal has improved, major challenges persist.(2)
Food and Agriculture
Development need
In 2018, agriculture accounted for 21.2% of Nigeria's GDP (gross domestic product) and employed two-thirds of the working population.(3) Indicators of adult obesity have improved, while indicators of undernourishment have underperformed. Prevalence of stunting in children is falling.(5)
Agricultural Products
Pipeline Opportunity
Grain storage and aggregation
Construct technologically improved grain storage silos and provide transportation services.
Business Case
Market Size and Environment
< 5%
Nigeria has an active grain market, producing 25 million+ metric tonnes (MT) each year.(6)
Nigeria's grain market is distributed across the country. In terms of supply and demand, it is expected to grow by 2.5-3% each year.(6)
The market is dominated by small and medium scale farmers and traders, with a growing number of commercial grain producers and industrial offtakers.(6)
At the national level, Nigeria recently invested NGN 66 billion (USD 171 million) to establish 33 silo complexes, 25 grain aggregation centers, and 9 units of Blumberg warehouses, which have now been privatized by way of concession.(7)
Indicative Return
> 25%
According to Federal Ministry of Agriculture and Rural Development (FMARD) estimates, the average internal rate of return (IRR) for silo complexes is 57%.(6)
The net present value (NPV) of commercial operation of the silo complexes is NGN 25.8 billion (USD 67 million). On a risk adjusted basis, the private sector will create NGN 4.34 billion (USD 11 million) additional financial value. The estimated present value of the cost of operating the silo complexes is USD 538 million.(6)
Investment Timeframe
Short Term (0–5 years)
It takes 6-12 months to establish grain storage silos. Therefore an investor will see cash flow in about 2 years.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
The agricultural sector has been characterized by poor infrastructure including roads, irrigation and storage facilities. This has limited farmers' access to domestic and international markets. The United States Department of Agriculture (USDA) estimates that upwards of 30% of grain is wasted through post-harvest losses.(6)
FAO (Food and Agriculture Organization of the United Nations) estimates that as much as 3 million metric tones – 10% of total supply across all grains – is lost after harvest. Millet was particularly affected in 2011, with losses representing 36% of production and imports. Soybeans, sorghum and maize also all suffer 10-15% losses relative to local production.(8)
Given the current post-harvest loss rates of up to 60% for perishable crops, Nigeria needs to rapidly introduce new storage solutions across its agricultural system.(7)
Gender & Marginalisation
Long term efforts to improve women's access to agriculture and livelihood resources (including land, agricultural inputs and education) requires tackling cultural and gender norms that prevent women’s empowerment. Anecdotal evidence shows women are less likely to gain access to credit, land and other agricultural inputs.(18)
Expected Development Outcome
Investments could: increase agricultural productivity across several value chains; increase food security across the country; reduce post-harvest loses especially for small holder farmers; increase employment opportunities; and boost value chain development.
Investments could open up foreign markets, and therefore increase export opportunities/foreign exchange earnings, as well as the quality and volume of supply chains. Further, improved transparency of grain markets should help support higher revenues by increasing grain sale volumes.
Gender & Marginalisation
Economic Recovery and Growth Plan (NERGP) 2020 target for female population that owned agriculture: 80.8%. SDG target by 2030: 100%.(19)
Primary SDGs addressed
1.1.1 Proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)
1.2.1 Proportion of population living below the national poverty line, by sex and age
1.2.2 Proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions
62.6% of Nigeria's population live below the international poverty line: 69% of people in rural areas live below the international poverty line, compared with 51% of people living in urban areas.(18)
46% in 2018.(20)
42.2% in 2017.(18)
The Federal Government is implementing a national Social Investment Programme which focuses on providing Social Safety Nets for the poor, welfare for the unemployed and job creation and skills enhancement with a target of creating about 3 million jobs. (18)
21.1% by 2030.(18)
2.1.1 Prevalence of undernourishment
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
25.5% in 2015.(19)
Moderate: 26.4%. Severe 19.6%.(19)
Derived ERGP (Economic Recovery and Growth Plan) target by 2020: 17%, by 2030: 0.(19)
Derived ERGP (Economic Recovery and Growth Plan) target by 2020: 17.6%, by 2030: 0.(19)
Secondary SDGs addressed
Directly impacted stakeholders
People
Outcome Risks
Health effects may arise due to unsafe use of pesticide and agrochemicals in storage units.
Impact Risks
Alignment risk given production may not be locked into an enterprise model.
Efficiency risk given the high engagement of public bodies in this IOA.
Impact Classification
What
Likely to have positive outcomes such as food security, employment opportunities, foreign exchange earnings, reduction in post-harvest losses.
Risk
Exchange rate fluctuations, market price volatility
Impact Thesis
Increase value added in food chains, prevent food waste, strengthen economic growth and generate decent jobs.
Enabling Environment
Policy Environment
Federal Government Agriculture Promotion Policy: This policy emphasizes the need to engage the private sector in building an agribusiness economy that can meet domestic food security goals, generate exports, and support sustainable income growth.(9)
There is a positive policy environment for private sector participation.
Financial Environment
Financial incentives: Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances.(15) Funding for agricultural value chain development is available within the Central Bank of Nigeria (Central Bank of Nigeria / Nigerian Incentive-Based Risk Sharing System of Lending / Bank of Agriculture / Nigerian Export-Import Bank).
Fiscal incentives: Section 33(3) of the Companies Income Tax Act (CITA) exempts the income of a company engaged in agricultural trade from paying minimum tax. Zero tariffs are extended for importing agricultural equipment.(15) Tax holidays are available for investing in processing plants in staple crop processing zones.(16)
Regulatory Environment
Land Use Act of 1978: Under this Act, State Governments grant land rights and access rights to the Federal Ministry of Agriculture and Rural Development (FMARD). It also transfers responsibility for outstanding construction contracts relating to the silo complexes and agro-processing unit purchase and installation.(10)
Public Procurement Act 2007: This Act regulates and establishes guidelines for public procurement. It also regulates the scope of action of the Bureau of Public Procurement, which is responsible for contracting and overseeing public-private purchasing (PPP) schemes. (11)
Infrastructure Concession Regulatory Commission (Establishment, Etc.) Act 2005: This Act regulates private sector participation in Federal infrastructure.(13)
Public Enterprises (Privatization and Commercialization) Act, Cap P.18 Laws of the Federation of Nigeria 2004.(12)
National Environmental Standards Regulations and Enforcement Agency (Establishment) Act 2007 (NESREAA) and 33 Regulations made by the Minister of Environment under section 34 of the Act: This Act and the Regulations prescribe environmental management regulation.(14)
Marketplace Participants
Private Sector
Cold Hub, SGS Nigeria, Sahel Capital, Standard Chartered, Fledge Co, Factor Ventures
Government
NIRSAL (Nigerian Incentive-Based Risk Sharing System for Agricultural Lending), Ministry of Agriculture
Multilaterals
African Development Bank (AfDB), World Bank, International Finance Corporation (IFC), United Nations Industrial Development Organization (UNIDO), United Nations Environment Programme Global Environment Facility (UNEP/GEF), German Corporation for International Cooperation (GIZ)
Non-Profit
Acumen Fund, Raw Material Research, Bill and Melinda Gates Foundation
Public-Private Partnership
Africa Agriculture and Trade Investment Fund (AATIF)
Target Locations
Nigeria: North West
Nigeria: North East
Nigeria: North Central (Middle Belt)
References
- (1) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf
- (2) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G. (2019). Sustainable Development Report 2019. New York: Bertelsmann Stiftung and Sustainable Development Solutions Network (SDSN).
- (3) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
- (4) Dalberg (2020). Charting the future for Africa's largest economy: Economic impact of COVID-19 in Nigeria. https://dalberg.com/wp-content/uploads/2020/04/FINAL_Dalberg-Report-Charting-the-Future-of-Africa%E2%80%99s-Largest-Economy.pdf
- (5) Federal Republic of Nigeria (2011). Agricultural Transformation Agenda 2011.
- (6) Federal Ministry of Agriculture and Rural Development (2016). PPP transactions for 33 silo complexes in Nigeria. https://ppp.icrc.gov.ng/media/384
- (7) Energypedia (2020). ColdHubs - solar cold rooms in Nigeria. https://energypedia.info/wiki/ColdHubs_-_Solar_Cold_Rooms_in_Nigeria
- (8) Food and Agriculture Organization of the United Nations (2020). FAO in Nigeria. http://www.fao.org/nigeria/fao-in-nigeria/nigeria-at-a-glance/en/
- (9) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
- (10) Land Use Act, Chapter 202, Laws of the Federation of Nigeria 1990. http://admin.theiguides.org/Media/Documents/Land%20Use%20Act.htm
- (11) Public Procurement Act 2007. https://goprs.unodc.org/documents/Public_Procurement_Act_2007.pdf
- (12) Public Enterprises (Privatisation and Commercialisation) Act. https://lawsofnigeria.placng.org/laws/P38.pdf
- (13) Infrastructure Concession Regulatory Commission (Establishment, Etc.) Act 2018. https://www.icrc.gov.ng/assets/uploads/2018/12/ICRC-Act-2018.pdf
- (14) National Environmental Standards and Regulations Enforcement Agency (Establishment) Act 2007. http://extwprlegs1.fao.org/docs/pdf/nig120569.pdf
- (15) Nigerian Investment Promotion Commission (2020). 3: Sector Specific Incentives. https://nipc.gov.ng/compendium/3-sector-specific-incentives/
- (16) Federal Republic of Nigeria (2011). Agricultural Transformation Agenda 2011.
- (17) World-Grain.com (2019). Nigeria seeking grain self-sufficiency. https://www.world-grain.com/articles/11898-nigeria-seeking-grain-self-sufficiency
- (18) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf
- (19) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf
- (20) UNDP (2020). Human Development Report (2020). https://www.ng.undp.org/content/nigeria/en/home/library/human_development/the-2020-human-development-report.html