Investing in Nigeria: Investment Gaps and Opportunities

Presentation by MR. ALIYU A.

ABDULHAMEEDMD/CEO NIRSAL

AFRICAN AGRI INVESTMENT INDABA (AAII)NOVEMBER 2019

CONTENT

2

Investment Destination: Nigeria

Accessing Nigeria’s Agriculture Sector Investment Opportunities the de-risked NIRSAL Way

Conclusion

1 2 3

Section 1Investment Destination: Nigeria

3

The Opportunities

4

Post 2016 recession, Capital Importation to Nigeria has been on a steep increase at a cumulative average growth rate of 20%

Source(s): National Bureau of Statistics (NBS)

• In 2018, a total of US$16.8billionwas invested into the Nigerianeconomy from overseas.

• As at Q2 2019, CapitalImportation into Nigeria wasUS$14.3 billion – 21% higher thanthe value as at Q2 2018.

• Capital importation to Nigeria,typically comprises:

o Portfolio Investment - 70% oftotal in 2018

o Other Investment - 23% oftotal in 2018; and

o Foreign Direct Investment (FDI)– 7% of total in 2018.…there must be something the world is seeing in Nigeria,

beyond the skepticism

9.64

5.12

12.23

16.81

2015 2016 2017 2018

Capital Importation - Nigeria (in US$ Billion)

37% growth

139% growth

5

For investments in Nigeria, think Agriculture…

6

84 million hectares of

arable land with less than 50% in

use

LANDPredictable

rainfall pattern; Billions cu. m of

surface and underground

water

WATERHuge supply of

labour– over 90 million

population aged 15-65 years

LABOURHuge consumer,

industrial and export markets with unsatisfied

demand

MARKET

Nigeria is blessed with four (4) major Agricultural Opportunities…

Agriculture is the only non-oil export class growing consistently since 2016, contributing 25% to non-oil exports in 2018

Source: National Bureau of Statistics (NBS)

5.35% 6.84% 25.36%

2016 2017 2018Manufacturing Energy Goods Solid MineralsRaw Material Agriculture

• Only Agricultural Non-Oil Exports grew consistently between 2016 – 2018, at a CAGR of 37.6%

• The sector accounted for 25% of total non-oil exports in 2018 and 19% as at mid-year 2019 (Jan-Jun only)

Sectoral Contribution to Non-Oil Exports (%) – Nigeria, 2018

8

9

Several other factors are in favour of Nigeria’s Agriculture

Government/ Policy Focus on Agriculture

Rapid populationgrowth

Rapid urbanization Rising middle income

$22billion imports substitution

AfCTAsignature

$5trillion global food industry

Foreign trade policiese.g. US-China Trade Wars

$110billion imports into Africa by 2025

Source: AFDB, OECD-FAO Agricultural Outlook 2018-2027, McKinsey 2015, NIRSAL Analysis

Local

Global

Rapid populationgrowth – regional, global

Nigeria’s agricultural production can be increased by over 159% by 2036

Agriculture Production in NigeriaNigerian Naira, Billions, Constant 2010 prices

38,4005,355

+159%

10,38014,850

7,815

2016 Increased Yield

Increased Acreage

Shift to Higher Value Crops

Potential 2036

Current Additional potential1

1 Es.mate based on modelling in McKinsey’s ‘Lions on the Move: The Progress and Poten.al of African Economies ͘ For ‘increased yield’, large farms in Nigeria toreach 90% of yields of developed agricultures; smallholder farms to close 80 - 100% of gap to developing country / emerging market level (e.g. Ghana in Yams,Bangladesh in rice)͘ For ‘Increase acreage’ assumes addi.on of 14 m ha new agricultural land, approximately 38% of Nigeria’s unused arable land of 36.9m ha. For‘Shi^ to higher value crops’, assumes shi^ of 20% of current cereals produc.on to hor.culture ͘

SOURCE: McKinsey Global Institute; team10

Examples of agricultural Commodity Value Chain Opportunities in Nigeria

11Source: Fishery Committee for the West Central Gulf of Guinea, 2014/2016, PIND, FAO 2017, Business Day, GAIN Report

April 2018, NIRSAL Analysis

• Dairy import -USD1.3bn per annum

• Estimated Cassava net worth of $8.5bn by 2020

• Bread flour substitution c. N254bn p.a.

Commodity Value Chain Opportunities

• 3.2m MT annual Fish DEMAND

• 2.2million MT Local SUPPLY DEFICIT

• 4.7million MT annual Wheat DEMAND

• 250,000 MT local Wheat PRODUCTION

• US$4.5bn Imports

Pre-Upstream Upstream Midstream Downstream

AVC

Se

gmen

ts

• Retailers• Industrial

Processors• Export brokers• Export

Merchants and Logistics

• Fertilizer Agro-dealers• Seed, CPP & other

Input Distributors• Tractor & Equipment

Hiring Agents, Operators, Mechanics, etc.

• Research Farmers• Extension Agents• Geo-mapping

agents

• Primary Producers of Cereals, Tubers, Tree Crops Aquaculture, FFV, Poultry, Ruminants, Apiculture, etc.

• Agro-processors (extraction, milling, drying, cleaning, etc.)

• Service Providers for:o Haulageo Aggregationo Storageo Transportationo Packaging

• Middlemen/ Intermediaries

Agr

ibus

ines

ses

*2013 NBS and SMEDAN Report

Examples of agribusiness opportunities along agricultural value chain segments in Nigeria

12

The Need

13

Project feasibility and viability

Technical capacity of promoters

Visibility on fund flows

Fall back options, insurance cover

Existence of high market demand

Track record of success

Assurance of Return on

Investments

Favourable exit plan

NIRSAL understands that the imperatives of Financiers, Investors and Capital Providers must be met to gain their participation in agriculture

Robust Agricultural/

Agribusiness Risk Management

15

NIRSAL PLC exists to facilitate and de-risk the flow of investments to Nigerian Agricultural value chains in a manner that assures maximum and safe returns

Section 2Accessing Nigeria’s Agriculture Sector Investment Opportunities the de-risked NIRSAL Way

16

Section 2Accessing Nigeria’s Agriculture Sector Investment Opportunities the de-risked NIRSAL Way

16

About NIRSAL PLC

17

Several issues account for the low level of finance and investment deployed to Agriculture and Agribusiness in Nigeria:• Broken Agricultural Value Chains • Poor understanding of the Agriculture Sector• Perceived high risks• Complex credit assessment processes/ procedures• High transaction costs• Inadequate Funding

NIRSAL’s Mandate

18

Redefine, Measure, Price and Share

agribusiness related credit risk

Build long term capacity

Stimulate the flow offinance and investment

in to the a gr icu l tu ra lvalue chains

Fix b r o k e n agricultural value

chains (AVC)

Institutionalize incentives for

agricultural lending

NIRSAL was therefore created with the mandate to:

CBN

Designed to Re-Define, Measure, Re-Price, Share

Agricultural based risks

Incorporated

2013 $500million Non-Bank Financial Institution

Nigerian Bankers Committee

Federal Ministry of Agriculture & Rural

Development

Public Private Partnership

Raise commercial bank agric. lending portfolio

from the current figure to 7% by 2026;

Expand Insurance Coverage from 0.5 to 3.8 million small-scale farmers across various agric. value

chains

Expand commercial lending to 3.8 million small-scale farmers by 2026 using

value-chains

NIRSAL Objectives

About NIRSAL

NIRSAL: An Institutionalized RSF

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Share credit risks with providers of Finance and Investments (up to 75% loss incurred)

Develop innovative Insurance productsto beneficiaries

Build capacity of financial institutions and agricultural value chain players; Fixing the broken AVC

Rate lenders and Value Chain actors according to their effectiveness

Reward value added performance by AVC actors and lenders

Risk Sharing $300milion

Insurance$30millon

TechnicalAssistance$60million

Rating$10million

IncentiveMechanism$100million

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NIRSAL’s five (5) strategic pillars provide the basis for its risk management operations and interventions in the agriculture sector

NIR

SAL’

s A

grib

usin

ess

Fina

nce

Faci

litat

ion

Tool

s

Technical Assistance and Structuring

Agribusiness Models and Financing FrameworksInnovative Insurance Products

Credit Risk Guarantees and Interest Draw Back Scheme

Climate-Smart Irrigation

NIRSA

L’s Agribusiness Finance

Facilitation Tools

Comprehensive Agricultural Mechanization

Geo-spatial Mapping and Field Structuring

Comprehensive Field Monitoring

PH-P3 Technologies

21

Pre-Upstream Upstream Midstream Downstream

• Research for Innovation

• Inputs Mechanization

• Primary Production• Post-Harvest Primary

Processing

• Value-added Processing

• Logistics • Wholesale

• Retail/ Consumer Market• Industrial Market• Export MarketSu

b-Se

gmen

tsKe

y Se

gmen

ts

NIRSAL’s De-risking and Finance Facilitation Tools

22

Primary Production

Mechanization

Processing

75%

75%

50%

Integrated Farms

Logistics

Agro-dealing, Input and Equipment Supply

30%

30%

30%

NIRSAL Credit Risk Guarantee

Categories

NIRSAL Interest Draw Back Scheme (up to 40%)

Risk

Sha

ring

Rate

sRisk Sharing Rates

NIRSAL’s Credit Risk Guarantee (CRG) and Interest Draw Back (IDB) Products

NIRSAL CRG and discretionary IDB are applicable to all commodities

22

Primary Production

Mechanization

Processing

75%

75%

50%

Integrated Farms

Logistics

Agro-dealing, Input and Equipment Supply

30%

30%

30%

NIRSAL Credit Risk Guarantee

Categories

NIRSAL Interest Draw Back Scheme (up to 40%)

Risk

Sha

ring

Rate

s

Risk Sharing Rates

NIRSAL’s Credit Risk Guarantee (CRG) and Interest Draw Back (IDB) Products

NIRSAL CRG and discretionary IDB are applicable to all commodities

• USD502.4million Loans Guaranteed

• 693 Projects Guaranteed

• USD6.3million Interest Draw Back paid to 266 Obligors

• Developed and launched the Area Yield Index Insurance product and protected up to USD21.2million revenues of 35,492 farmers over 37,399 hectares of landwith USD0.4million paidout in compensation to farmers

• Developed Curriculum and Trained 1,221 Middle Management and Agric. Desk Officers of commercial banks.

• Provided GAP training to 700,000 farmers and 74 Extension Workers

Risk Sharing Fund

Insurance

Technical Assistance

Investment attracted/Loans guaranteed

USD502.4million

Direct EmploymentCreated:

400,000+

Lives Impacted:

2,000,000+Some of NIRSAL’s

Results to date

Guidance on the establishment of Risk Sharing Facility (RSF) models for African Countries under the aegis of the African Development Bank (AfDB). Recently concluded the set up of MIFA in Togo.

Rest of Africa Engagement

23

How NIRSAL provides value for investors in Nigerian Agriculture

24

NIRSAL’s AGRICULTURE FINANCE AND INVESTMENT FACILITATION is built upon four main principles

25

01

MARKET-DRIVEN

APPROACH

03

SMALLHOLDER INCLUSION AND OPTIMIZATION

02

COMMODITY FOCUS BY

ECOLOGICAL ADVANTAGE

04

INTEGRATED VALUE CHAIN

BASED -BUSINESS MODELS

THE NIRSAL WAY

All layered upon ROBUST DE-RISKING

NIRSAL focuses on the upgrade, development and integration of end-to-end agricultural value chains through its MAPPING TO MARKET STRATEGY

Principal Trade Relationship

Strategic Trade Relationship

NIRSAL has developed the Mapping to Markets (M2M)

concept, an innovative approach focused on

transforming the Upstream segment, referred to as the

’black hole’ in the value chain into the gold mine that

drives the development of all the other segments.

26

Based on extensiveresearch andanalysis, NIRSAL hasidentified 5-4-3-2-1+commodities withhigh market demand,that will besupported (in themedium term) underNIRSAL’s value chainintegrationapproach.

27

Under the Optimized NIRSAL Operating System, 5-4-3-2-1+ Commodity Value Chains are being supported in areas of ecological advantage

++

1

2

5

4

VAT specialis

m

3

NIRSAL’s 5-4-3-2-1+

CommoditiesIN

DUST

RIA

L C

OM

MO

DITIE

S

EXPO

RT

COMMODITIES

CONSUMERCOMMODITIES CONTROLLED

ENVIRONMENT

AGRICULTURE

COMMODITIES

INTEG

RATED

LIVESTOC

KC

OM

MO

DITY

Maize; Soya;

Wheat; Cassava;

and Cotton

V.A Hibiscus; V.A Sesame; V.A Ginger;

and V.A Shea

*V.A: Value AddedRice;

Potato (Sweet & Irish); and Beans Fresh Fruits and

Vegetables (Tomato, Onions...); and Aquaculture

(in Fish Estates)

Beef + Dairy + Hides & Skin and Poultry

*Youth driven Controlled Environment Agriculture Production Systems in 37

State Capitals

* In Integrated Ranch Fodder

Bank, Feedlot and Auction Systems

SUGARCANE, V.A CASHEW

+

NIRSAL’s Inclusive Integrated Private Agriculture/Agribusiness Investment Development (iPAID) Model

TOPLINEInvestment/ Financing

Opportunities

MIDLINEInvestment/ Financing

Opportunities

BASELINEInvestment/ Financing

Opportunities

MARKETS:Domestic Consumer, Domestic Industrial and ExportFR

ESH

FRUI

TS &

VE

GET

ABL

ES**

HIBI

SCUS

SESA

ME

CA

SHEW

GIN

GER

&

SHEA

** *

CO

TTO

N**

**

RIC

E +

BEA

NS

***SHEA (COLLECTION + PROCESSING)****COTTON TO THREAD (CTT)

LIV

ESTO

CK*

****

*****LIVESTOCK (POULTRY, BEEF, DAIRY)

MA

IZE

+ SO

YA

POTA

TO

(S

WEE

T &

IRIS

H)

AQ

UAC

ULTU

RE

WHE

AT

SUG

AR

CA

NE

Primary Production, Harvesting, Primary Processing, Primary Transportation and Primary StoragePHP3

Land Preparation and Seed Processing ServicesLPSP

NIRSAL Climate-Smart Irrigation Program for Optimized Smallholder Agricultural ProductionNCIS

Smallholder-based Commercial Agricultural Sites and Services (Agricultural land development)SCASS*

FIN

AN

CE

(FD

I, C

BN, D

FIs,

Equi

ty In

vest

ors,

Com

mer

cial

Ban

ks)

**FFV (TOMATO, ONIONS,…)

CA

SSA

VA

Captive Off-Grid Energy Services COES

*Land is organized in iPAID Land Banks and in GeoCoops @0.5ha per smallholder farmer (SHF) (targeting 16,000 Geo-Coops and 8 million SHFs))

VALUE ADDED PROCESSING

NIRSAL’s Geo-Cooperative Formation Initiative presents an opportunity for stunning profits to investors

30

4 million structured hectares

USD2.5 billion in

Profits

USD4billion in Cost of Primary Production

USD6.5billion in Gross Revenues

will consume and produce

generating

NIRSAL is currently structuring 4million hectares of land into 16,000 Geo-Coops covering 8 MILLION SMALLHOLDER FARMERS for the production of the chosen commodities across the different Agro-

ecological zones in Nigeria. Midline Investment/

Financing Opportunities:

Illustration

Section 4Conclusion

31

32

NIRSAL facilitates the flow of finance and investments across the Ecosystem

• Large integrated andbankable financing tickets

• Central account domiciliationfor multiple agricultural valuechain actors

• Demand and supplytransactions locked in amongstvalue chain actors

• Virtual financial transactionswithin an integrated ecosystemfor payments and settlements

• Near-Zero Cash Movements

• INVESTOR/FINANCIER Visibilityand control over financial flows

NIRSAL’s robust De-Risking

PRE-UPSTREAM FINANCE

UPSTREAM FINANCE

MIDSTREAM FINANCE

DOWNSTREAM FINANCE

INVESTOR/ FINANCIER

International investors and financiers in the agricultural and agriculture finance value chains should take advantage of NIRSAL’s presence as a risk management

institution, and facilitator of systematic collaborations

The optimization of Agricultural Value Chains (AVCs),...

…and thedevelopment and implementation of bespoke agriculture financing solutions by Financiers…

…within theFramework of NIRSAL’s de-risking tools and approaches…

…guaranteemaximum Returns on Investment for both AVC actors and Financiers

Financiers and Investors should take advantage of

the inherent opportunities in Nigerian Agriculture and

NIRSAL’s agriculture/ agribusiness de-risking

value offerings.33

• Take advantage of Nigeria’s land,water, labour and marketopportunities, and favourablepolicies.

• Take advantage of NIRSAL’s CRG,IDB, Geo-Cooperative formation,Insurance, Models and other de-risking interventions.

• Explore long term agribusinessopportunities in Nigeria.

• Enjoy maximum de-risked returns oninvestment over the decades tocome.

Financial Investors

NIRSAL De-risking agriculture

and facilitating agribusinesses

Technical Investors

Call to Action

• Take advantage of NIRSAL’s suite offinance and investment de-riskinginterventions and instruments.

• Jointly develop products andmechanisms for financing NIRSAL-de-risked agribusiness projects inNigeria.

• Enjoy maximum de-risked returns oninvestment over the decades tocome.

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Thank you

Plot 1581 Tigris Crescent, Maitama District, Abuja 900221, FCT, Nigeria

www.nirsal.com info@nirsal.com

nirsalconnect

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