| Nigeria | Jan 27, 2022
Nigeria's agrofood industry is on the lookout to create added value through industrialized farming, local processing, and foreign investment.
Nigeria’s great potential for agricultural activities has not gone fully unnoticed. The topsoil is rich, it has frequent rainfall, and catastrophic events such as droughts or floods are uncommon. It is for these same reasons that the UN’s Food and Agriculture Organization (FAO) believes the agro-food industry is the most important pillar of Nigeria’s economy.
However, the agricultural sector in Nigeria has not been fully industrialized. Many households grow crops such as maize, yam, and cassava mostly for their own consumption and sometimes even sell surplus crops, but all this happens in a traditional manner. However, given that Nigeria has at least 70 million ha of land conducive to agriculture, industrialization can create a great deal of synergy and, thus, significantly increase the agricultural output.
The obstacles ahead of industrialized farming in Nigeria are myriad: old-fashioned land ownership systems are still in place in many states, dividing large farming lands into many small pieces, essentially making industrial farming impossible. Modern, high-efficiency irrigation solutions have not yet become common practice in many parts of Nigeria. On top of this, the right fertilizers at the right time are rarely accessible due to the lack of fertilizers and agriculture engineers in many parts of Nigeria. With the removal of these obstacles Nigeria’s raw agricultural output can grow exponentially.
A few groups have taken the initiative to unite Nigeria’s many smallholders and increase their profitability. Agrorite, for example, is a global agritech platform with a strong presence in Nigeria that “helps smallholder farmers with finance, advisory services, and market access.” It initially began as a website where individuals can sponsor a farmer for a farming circle and then watch their money grow. Essentially, Agrorite unites smallholders and enables them to function collectively as an industrialized farm.
Toyosi Ayodele, Founder & CEO of Agrorite, told TBY that “Our farmers are paid based on performance, and so we do not pay salaries whereby when there is no work they do not earn. We provide them with insurance for farming activities, health insurance for themselves, and we make sure they are financially included and even able to make investments.” However, the export of raw agricultural products rarely fetches as much added-value as the export of processed agro-food goods. Nigeria has the capacity to launch a large number of processing plants and is thus becoming a huge continent-wide player in the processed food industry. Regrettably, Nigeria exports some of its raw agricultural products such as nuts and tomatoes only to import them in the form of processed nuts, edible oils, and tomato paste. The construction of food processing plants across the country can not only create added value for the sector, but also create many jobs for the local population as well in the bargain. This has not escaped the notice of Nigerians. A Nigerian start-up called Relief has earmarked USD4.2 million to boost the food processing technology in the continent. The new processing equipment will be set up in strategically located plants to solve the logistics problems, which slow down the supply chain in the agro-food industry. The company has thus far “raised USD2.7 million in seed and grants toward the effort to build proprietary hardware and software solutions to make these farmers and food factories more efficient and profitable,” according to Business Post Nigeria.
Foreign companies, too, are taking a keen interest in investing in Nigeria’s food processing sector given its high potential. A Spanish food company, GBfoods, completed a tomato processing unit in Kebbi State. It is estimated that the company has invested well over USD51 million in the construction of the new processing plant. The company will engage Nigerian farmers in the area to grow tomatoes that the company needs, while also buying tomatoes from farmers who are not specifically working with the company.
The new enterprise was developed as a joint effort between the Kebbi state government, the Central Bank of Nigeria (CBN), and GBfoods. The Spanish investor has furthermore promised that by the time the final phase of the project is completed, the processing plant will be the largest of its kind in sub-Saharan Africa, which will make Nigeria a market leader in one of its key agricultural commodities—tomatoes. More such joint efforts will speed up the industrialization of agriculture in Nigeria, while bringing in more FDI.
Processing nuts is yet another niche in Nigeria’s agro-food industry. Exporting processed sesame and sesame oil alone can easily fetch up to USD1.5 billion a year, to say nothing of cashews, which can easily bring in at least USD5 million a year. It remains to be seen whether these two cash crops will bring more added value to Nigeria’s agro-food sector and if the investment trend of local start-ups and foreign companies in food processing plants in Nigeria will continue to boom.