Sustainable food and cash crop production
Sustainable food and cash crop production
Business Model Description
Sustainable production of cash crops and food crops, especially cocoa, rubber, shea, palm oil, cashews, rice, soy beans, ginger, sesame, cassava, tomatoes, cow peas and sugar
Expected Impact
Increase value added in food chains, 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: Countrywide
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
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.(14)
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.(4)
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)
Agricultural Products
Pipeline Opportunity
Sustainable food and cash crop production
Sustainable production of cash crops and food crops, especially cocoa, rubber, shea, palm oil, cashews, rice, soy beans, ginger, sesame, cassava, tomatoes, cow peas and sugar
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
The 2018 Nigerian Export Promotion Council report shows untapped market potential for Nigerian produce. For example, the export market for cocoa beans alone is valued at USD 425 million. Major markets include Germany, Malaysia, Singapore and other international markets.(5)
Indicative Return
20% - 25%
A medium sized company investing in production of maize, soy beans, rice, sorghum showed an average return on investment (ROI) of 22% within 9-10 months.(6)
Another investor in ginger and sesame production showed a returns on investment (ROIs) of 28% and 27% respectively within 6-9 months.(7)
Another company estimates a return on investment (ROI) of 55% - 65% on investment in palm oil on 15 hectares of land (beginning from year 5 for 25 years).(8)
Investment Timeframe
Short Term (0–5 years)
Investments in food crop production typically take less than 1 year to mature. Investors typically see cash flow in less than 2 years.(9)
Cash crop production can have a time horizon of 5-7 years, depending on the crop.(9)
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
In 2018, agriculture accounted for 21.2% of Nigeria's GDP (gross domestic product).(10) The sector also employs two-thirds of the working population.(11)
Over the past 20 years, agricultural value added per capita has risen by less than 1% annually.(11)
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.(14)
Expected Development Outcome
Investments could facilitate improved food security for the entire nation and nutrition at the household level.
Investments could facilitate increased employment opportunities (especially for youth) via development of the agricultural sector, increased value chain development and export opportunities/foreign exchange earnings.
Investments could lead to higher levels of protection of biodiversity and the entire ecosystem.
Gender & Marginalisation
Economic Recovery and Growth Plan (ERGP) 2020 target for female population that owned agriculture: 80.8%. SDG target by 2030: 100%.(15)
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.(14)
46% in 2018.(16)
42.2% in 2017.(14)
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.(15)
21.1% by 2030.(14)
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. (15)
Moderate: 26.4%. Severe 19.6%. (15)
Derived ERGP (Economic Recovery and Growth Plan) target by 2020: 17%, by 2030: 0. (15)
Derived ERGP (Economic Recovery and Growth Plan) target by 2020: 17.6%, by 2030: 0. (15)
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Outcome Risks
Investments could result in environmental pollution, land degradation (loss of soil fertility) and erosion.
Impact Risks
Alignment risk because production may not be locked into an enterprise model.
Unexpected impact risk given the negative effects of agricultural production especially on biodiversity.
Stakeholder participation risk given land use issues may arise after agricultural production reaches large scale.
Impact Classification
What
The outcome is likely to be positive because investments in agricultural production can increase food security, create employment opportunities and increase foreign exchange earnings.
Risk
Investments in agriculture face a number of risks including disease/pest outbreak, volatility of commodity prices, limited working capital and unstable rainfall patterns.
Impact Thesis
Increase value added in food chains, strengthen economic growth and generate decent jobs.
Enabling Environment
Policy Environment
Economic Recovery and Growth Plan (2017-2020): Agriculture is a major priority for Nigeria, particularly efforts to diversify the economy away from reliance on crude oil.(3)
Additionally, the government is setting up staple crops processing zones (SCPZ), attracting private sector agribusinesses to set up processing plants in zones of high food production, to process commodities into food products.(3)
Financial Environment
Financial incentives: Companies engaged in wholly agricultural activities are entitled to an unrestricted capital allowance.(12) Funding for agricultural value chain development (USD 178 million for palm oil) is available via the Central Bank of Nigeria.
Fiscal incentives: Income of a company engaged in agricultural trade is exempt from paying minimum tax.(12) Zero tariffs are extended for importing agricultural equipment. Tax holidays are extended for investors establishing processing plants in staple crops processing zones.(4)
Other incentives: An extended moratorium on loans is also available and at reduced interest rates.
Regulatory Environment
Act No 19 of 1993 (as amended) and the Food and Related Products (Registration) Act No. 20 of 1999: The National Agency for Food and Drug Administration and Control (NAFDAC) is the regulatory body that regulates and controls food production, importation, exportation and sales.
Regulation: Other regulatory bodies include the Standard Organization of Nigeria (SON), Quarantine service, the Federal Produce Inspection Service (FPIS), PIA, the Federal Ministry of Agriculture, and the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).
Marketplace Participants
Private Sector
AFEX, Babban Gona, ChubiAgro, Standard Chartered, Sahel Capital, Psaltry International, Onyx Rice Mill, Olam Group, NASCO, Nestle, Group Farma
Government
SON (Standard Organization of Nigeria), Quarantine service, FPIS (Federal Product Inspection Service), PIA (Presidential Initiative on Agriculture), Federal Ministry of Agriculture, NIRSAL (Nigerian Incentive-Based Risk Sharing System for Agricultural Lending)
Multilaterals
IFC (International Finance Corporation), International organizations with focus on agriculture such as International Fund for Agricultural Development, Cultivating New Frontiers in Agriculture (CNFA)
Non-Profit
Bill and Melinda Gates Foundation, USAID, Local food banks, NGOs (non-government organizations), Acumen Fund
Public-Private Partnership
Africa Agriculture and Trade Investment Fund (AATIF)
Target Locations
Nigeria: Countrywide
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) Federal Republic of Nigeria (2011). Agricultural Transformation Agenda 2011.
- (5) Nigerian Export Promotion Council (2018): Promising Markets - Cocoa Beans.
- (6) ChubiAgro (2020). Farms ROI. https://www.chubiagro.com.ng/farms-roi
- (7) Group Farma (2020). Farms https://www.groupfarma.com.ng/farms
- (8) Nigeria Farmers Group (2020). Farm Expansion Fund. https://nigeriafarmersgroup.org/farm-expansion-fund/
- (9) PwC/UNDP Consultations 2020.
- (10) Nigerian Bureau of Statistics (2019). Nigerian Gross Domestic Product Report, Q1 2019.
- (11) 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/
- (12) Nigerian Investment Promotion Commission (2020). 3: Sector Specific Incentives. https://nipc.gov.ng/compendium/3-sector-specific-incentives/
- (13) Olam Group (2021). Nigeria. https://www.olamgroup.com/locations/africa/nigeria.html
- (14) 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
- (15) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf
- (16) UNDP (2020). Human Development Report (2020). https://www.ng.undp.org/content/nigeria/en/home/library/human_development/the-2020-human-development-report.html