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AGRICULTURAL
FINANCE AND
STOCK
EXCHANGE
COMMITTEE
F
FINANCING
AGRICULTURE IN
NIGERIA
2013 WORK PLAN
18/07/13 1Prepared by Iretioluwa Oniyide

BASIC FACTS ON ACHIEVING FOOD
SECURITY
We must treat and see agriculture as a
business
Investment in Agriculture is critical for
the growth of the agricultural sector
An estimated USD 83 billion/YR must
be made in the agric sector in developing
countries to have enough food to feed
the world by 2050
 For Sub Saharan Africa (SSA) we need
an estimated USD 11 Billion/YR
 Nigeria being the largest country in
SSA we need and must invest USD 2
Billion/YR

BASIC FACTS ON FOOD SECURITY
CONT’D
 Capital must be mobilized from the
private sector domestically and
internationally
 Public sector cannot adequately
meet the need
 Public sector can be and must be
effective in stimulating and
leveraging private sector investment
in agricultural/agro industrial
projects

PUBLIC SECTOR INTERVENTION
PUBLIC SECTOR INTERVENTION IN OTHER PARTS
OF THE WORLD HAD INVOLVED:
 Direct Grants
 Farmstead Programs
 Farm loan guarantees
 Farm Loan Credit System
 Farm Land Credit Bank
 Subsidies
 Economic Diplomacy
 Tax Incentives
 Research Grants to Entities
 Capacity Development
 Rapid Infrastructural Development
 Agricultural Investment Funds

PRAYER TO FEDERAL
GOVERNMENT
 Create an enabling environment
 Continue and build on the on going ATA
 Bailout farmers, processors, producers, just like government
bailed out the banks, stockbrokers, and airline operators
(Banks N600 billion, Stockbrokers N82 Billion and airline
operators N200 Billion)
 Develop an effective agric subsidy program urgently
 Improve infrastructure urgently – power, road etc
 10 years tax incentive for players in the agric value chain
 Use economic diplomacy stimulate exports
 Encourage more effective research
 Guarantee programs for agric debt finance
 Support/Back CASON efforts to establish and implement
Agric Value Chain Finance (AVCF) strategies
 Ensure that Nigeria’s financial system meet the
requirements needed for modern state of art agro food value
chain18/07/13 5Prepared by Iretioluwa Oniyide

AGRICULTURAL VALUE CHAIN
FINANCE(AVCF) STRATEGY FOR NIGERIA
 EFFECTIVE AVCF PROCESS WILL ASSIST
IN THE DEVELOPMENT OF THE AGRO
SECTOR
AVCF OBJECTIVE
‘TO DEVELOP EFFECTIVE AVCF SERVICES
TO BENEFIT FARMERS, PROCESSORS,
PRODUCERS, AGRIBUSINESS FIRMS IN
THE VALUE CHAIN AND NIGERIA’

CASON’S GOAL
DEVELOP AN EFFECTIVE PROGRAM
IMPLEMENTATION STRATEGY THAT
WILL STRENGTHEN PRIORITY VALUE
CHAIN THROUGH INTERVENTIONS
WHICH WILL ADDRESS:
 CAPACITY NEEDS
 FINANCING NEED
 INNOVATIVE/CUTTING EDGE POLICIES
 BUILD SUPPORTING INFRASTRUCTURE
 FISCAL MEASURES – TAX INCENTIVES,
SUBSIDIES, CUSTOMS/EXCISE DUTY
REGIMES

AGRICULTURAL VALUE CHAIN FINANCE
(AVCF)
ROLE IN DEVELOPMENT FINANCE
 EXCELLENT UNDERSTANDING OF AVCF WILL
IMPROVE EFFECTIVENESS OF THE PLAYERS
THAT WANT FINANCE AS WELL AS THE
FINANCE PROVIDERS
AVCF OFFERS THE OPPORTUNITIES TO
EXPAND FINANCING FOR:
 RAPID AGRICULTURAL DEVELOPMENT
 IMPROVED EFFICIENCY AND REPAYMENT OF
LOANS
 STRENGTHEN AND SOLIDIFY LINKAGES
AMONG PARTICIPANTS
 PROMOTE POWERFUL COLLABORATION
WITH GOVT AND OTHERS IN NIGERIA

AVCF CONT’D
 AVCF IS NOT A DEVELOPMENT GOAL RATHER
IT IS A MEANS TO ACHIEVE SOCIAL AND
ECONOMIC GOAL
 AVCF IS A FINANCIAL APPROACH AND A SET
OF FINANCIAL INSTRUMENTS THAT CAN BE
USED IN THE AGRIC VALUE CHAIN PROCESS
 AVCF IS AN IMPORTANT COMPONENT OF
VALUE CHAINS AND THEIR DEVELOPMENT
 AVCF WILL FACILITATE INCREASED
FINANCIAL ACCESS AND REDUCED COST AND
RISKS OF AGRICULTURAL FINANCING

AVCF CONT’D
AVCF WILL IMPROVE THE QUALITY AND
EFFICIENCY FOR FINANCING AGRIC
VALUE CHAIN BY:
 IDENTIFYING FINANCING NEEDS TO
MAKE AGRIC VALUE CHAIN STRONG AND
SUSTAINABLE
 REDUCING FINANCIAL TRANSACTION
COST THROUGH DIRECT DISCOUNTS
REPAYMENTS/DELIVERY OF FINANCIAL
SERVICES
 USING VALUE CHAIN
LINKAGES/COLLABORATIONS AND
KNOWLEDGE OF THE CHAIN TO
MITIGATE RISK OF THE CHAIN

VALUE CHAIN FINANCE
DEFINITION
THE FLOW OF FUNDS TO AND AMONG THE VARIOUS
LINKS WITHIN A VALUE CHAIN, IN THIS CASE
AGRIC VALUE CHAIN
THIS INCLUDES:
FINANCIAL SERVICES
 PRODUCTS AND SUPPORT SERVI CES
 FUNDING
 SALES OF PRODUCTS
 PROCUREMENT
 RISK MANAGEMENT
 CREDIT ENHANCEMENT PRODUCTS
 EFFICIENCY
 SUSTAINABILITY

INTERNAL VALUE CHAIN/EXTERNAL
VALUE CHAIN
INTERNAL VALUE
CHAIN
FINANCE TAKES PLACE
WITHIN THE VALUE
CHAIN, EXAMPLE
INPUT SUPPLIER
PROVIDES CREDIT TO
A FARMER OR WHEN
A LEAD FIRM
ADVANCES TO
MARKET
INTERMEDIARY
EXTERNAL VALUE
CHAIN FINANCE
MADE POSSIBLE BY
VALUE CHAIN
RELATIONSHIP/COLL-
ABORATION AND
MECHANISM. A BANK
GIVES A LOAN TO
FARMERS BASED ON A
CONTRACT WITH A
TRUSTED BUYER OR A
WAREHOUSE
RECEIPT FROM A
RECOGNIZED
STORAGE FACILITY

VALUE CHAIN FINANCE
CONT’D
IT IS IMPORTANT TO NOTE
THAT AVCF DOES NOT
INCLUDE CONVENTIONAL
AGRIC FINANCING FROM
BANKS, AND CREDIT UNIONS
TO PLAYERS UNLESS THERE IS
A DIRECT CORRELATION TO
THE VALUE CHAIN

MORE DEFINITIONS
VALUE CHAIN – THE SET OF ACTORS
(PRIVATE, PUBLIC, AND INCLUDING
SERVICE PROVIDERS AND THE
SEQUENCE OF VALUE-ADDING
ACTIVITIES INVOLVED IN BRINGING A
PRODUCT FROM PRODUCTION TO THE
FINAL CONSUMER. IN AGRICULTURE
THEY CAN BE THOUGHT OF AS A ‘FARM TO
FORK’ SET OF INPUTS, PROJECTS AND
FLOWS
(MILLER AND DA SILVA 2007)

MORE DEFINITIONS CONTINUED
VALUE CHAIN ANALYSIS
ASSESSMENT OF THE ACTORS AND FACTORS
INFLUENCING THE PERFORMANCE OF AN
INDUSTRY AND THE RELATIONSHIPS
AMONGST PARTICIPANTS TO IDENTIFY THE
MAIN CONSTRAINTS TO INCREASE
EFFICIENCY, PRODUCTIVITY AND
COMPETITIVENESS OF AN INDUSTRY AND
HOW THESE CONSTRAINTS CAN
BE OVERCOME
(FRIES, 2007)

DEFINITIONS CONTINUED
VALUE CHAIN FINANCE
FINANCIAL SERVICES AND
PRODUCTS FLOWING TO AND/OR
THROUGH VALUE CHAIN
PARTICIPANTS TO ADDRESS AND
ALLEVIATE DRIVING
CONSTRAINTS TO GROWTH
(FRIES, 2007)

FINANCIAL INSTRUMENTS USED IN
AVCF
CATEGORY
A. Product Financing
B. Receivable Financing
C. Physical Asset
Collateralization
INSTRUMENTS
• Trader Credit
• Input Supplier Finance
• Lead Firm Financing
• Trade Receivable Finance
• Factoring
• Forfeiting
• Warehouse Receipts
• Repurchase Agreement
(Repos)
• Financial Leasing

FINANCIAL INSTRUMENTS
CONTINUED
CATEGORY
D. Risk Mitigation Products
D. Financial/Credit
Enhancements
INSTRUMENT
• Insurance
• Forward Contracts
• Futures
• Securitization
Instrument
• Loan Guarantees
• Joint Venture Finance

PROPOSED INNOVATIONS IN
AGRICULTURAL FINANCING IN
NIGERIA
 AGRICULTURAL CREDIT COMPANIES
 AGRICULTURAL EQUIPMENT LEASING
COMPANIES
 AGRICULTURAL INDUSTRIAL EQUIPMENT
LEASE/FINANCE COMPANIES
 AGRICULTURAL MICROFINANCE COMPANIES
 AGRICULTRUAL INPUT CREDIT COMPANIES
 AGRICULTURAL VENTURE CAPITAL FIRMS
 AGRICULTURAL INVESTMENT FUND (AIF)
 GOVERNMENT SPONSORED ENTERPRISES FOR
SECONDARY MARKET PURPOSES
 FARM CREDIT BANKS
 AGRICULTURAL CREDIT BANKS

LET US NOW FOCUS ON
AGRICULTURAL INVESTMENT
FUND FOR NIGERIA
 WE NOW KNOW CLEARLY THAT
INVESTMENT IN AGRICULTURE IS
CRITICAL FOR THE GROWTH OF THE
SECTOR IN NIGERIA
 PRIVATE INVESTMENT IS CRITICAL FOR
THE SUCCESS OF THE ON GOING
AGRICULTURAL TRANSFORMATION
AGENDA (ATA) OF FEDERAL MINISTRY OF
AGRICULTURE AND RURAL
DEVELOPMENT (FMARD)

AIF - BACKGROUND
 INVESTMENT S IN AGRICULTURE
THROUGH AIF HAVE
EXPERIENCED SIGNIFICANT
GROWTH IN RECENT YEARS IN
OTHER PARTS OF THE WORLD
AIF – DEFINITION:
CLEAR FOCUS ON INVESTMENTS
SOLELY IN AGRICULTURE,
AGRIBUSINESSES AND OTHER
AREAS LINKED TO AGRICULTURE

WHY INVEST IN AGRICULTURE
 SOCIALLY RESPONSIBLE
 WILL CREATE WEALTH
 WILL CREATE EMPLOYMENT
 WILL INCREASE RURAL INCOME
 WILL ADDRESS FOOD SECURITY

POTENTIAL INVESTORS IN THE
NIGERIAN AGRICULTURAL
INVESTMENT FUND (NAIF)
 PUBLIC INVESTOR (NO RETURN
EXPECTATION)
 PRIVATE INVESTORS
 PENSION FUNDS
 INSURANCE COMPANIES
 SMALL PRIVATE INVESTOR FUND
POOLED TOGETHER TO FINANCE
AGRICULTURAL PROJECTS
 VENTURE CAPITAL FIRMS
 EQUITY AND GUARANTEE FUNDS FOR
AGRO –INDUSTRIES AND AGRO BUSINESS

ESSENTIAL ELEMENT FOR
IMPLEMENTING NAIF
 PPP CAN BE A USEFUL TOOL TO ENGAGE
THE PRIVATE SECTOR AS THIS
PROVIDES FOR THE SHARING OF COSTS
AND RISKS
 LOCAL PRESENCE OF FUND MANAGER
AND HIGHLY SPECIFIED AGRICULTURAL
EXPERTISE
 CAREFUL RISK ASSESSMENT AND
PORTFOLIO DIVERSIFICATION AND
INNOCULATION
 DEVELOPMENT OF TAILOR MADE
PRODUCT FOR AGRIC VALUE CHAIN
PLAYERS

POLICY RECOMMENDATIONS
 POLICIES/REGULATIONS/LEGISLATION
AFFECTING AGRICULTURAL PRODUCTION AND
INVESTMENTS IN NIGERIA
 CAPITAL REPATRIATION AND TAX INCENTIVES
FOR FOREIGN DIRECT INVESTMENT (FDI)
 TAX INCENTIVES FOR DOMESTIC INVESTORS
 INVESTMENT IN INFRASTRUCTURE,
TECHNOLOGY AND EDUCATION
 INVOLVEMENT OF PUBLIC AND PRIVATE SECTOR
ENTITIES
 INTER-MINISTERIAL AND INTERAGENCY
ALIGNMENT

DISCUSSION/QUESTIONS/ANSWERS
AND NEXT STEPS
 ROLE OF FMARD
 ROLE OF CASON
 ROLE OF CENTRAL BANK
 ROLE OF THE NIGERIAN STOCK EXCHANGE
 ROLE OF SECURITIES AND EXCHANGE
COMMISSION
 ROLE OF STATE GOVERNMENTS
 ROLE OF PENSION FUNDS
 ROLE OF THE NIGERIAN INSURANCE
COMMISSION
 ROLE OF THE NIGERIAN AGRIC BANK
 ROLE OF COMMODITY EXCHANGE

THANK YOU FOR LISTENING
LET US GET IT DONE
18/07/13 Prepared by Iretioluwa Oniyide 27

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