1

Emerging Opportunities in the Agriculture Sector

LBS Breakfast Club

Private and confidential

1 Macro Trends in

Agriculture

2 Identified Gaps in the

Sector

3 Emerging Opportunities

in Agriculture- Horticulture

- Cocoa

- Rice

4 How Can We Harness

These Opportunities

5 AFEX’s Story

6 Closing

Outline…

Agriculture has been a major contributor to Nigeria’s

GDP, and the largest employer of labor

3

IndustryConstruction

Trade

ServicesCrop

Production

Livestock

Forestry

Fishing

Other

2015 GDP, % Nominal Prices

Crop Production has driven the growth in the Agricultural Sector, with CAGR of about 10% in last 15 years

N17 Trillion

Crop, 2015 GDP,

% Nominal Prices

0

50

100

150

200

250

300

350

0

20

40

60

80

100

120

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Nigeria Major Food Production Per Capita (Kg per Person)

Maize Millet Sorghum

Soybeans Cassava

Have we really produced more food?

4

0

50

100

150

200

250

300

350

0

10

20

30

40

50

60

70

80

2004 2007 2010 2013

Cas

sava

Oth

er C

rop

s

MaizeMilletSorghumSoybeansCassava

0

10

20

30

40

50

60

0

2

4

6

8

10

12

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Cas

sava

Oth

e C

rop

s

Nigeria Food Production (Million MT)

Production - Maize Production - Millet

Production - Sorghum Production - Soybeans

Production - Cassava

Data: FAO Stat

We have remained at, or below our export levels

since independence.

5

1.43

0.86

0.25

0.0

0.5

1.0

1.5

2.0

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Cocoa Production (Million MT)

Production - Côte d'Ivoire

Production - Ghana

Production - Nigeria

0

2000

4000

6000

8000

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Cocoa Yield (Hg per Ha)Yield - Côte d'Ivoire

Yield - Ghana

Yield - Nigeria

Data: FAO Stat

0.0

0.5

1.0

1.5

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Production of Major Export Crops (Million MT)

Production - Cocoa, beans Production - Cotton lint

Production - Oil, palm Production - Sesame seed

0.0

0.5

1.0

1.5

2005 2008 2011 2014

Mill

ion

s

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Gaps and Opportunities across Value Chains

Both productivity and technology adoption gaps will

require creative funding solutions.

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Food requirement in Africa is fast outpacing our per

capita food production; creating a supply gap

8

- While the recent trend in lending to the agriculture fund is positive, it is far from historical levels

- We need to urgently activate risk sharing mechanisms (NIRSAL) and incentivize lending by DMBs

- To augment lending from DMBs, we need to expand our support to MFBs to reach rural communities and

stimulate access to patient capital from the capital market for agro-industrialization.

Who do we blame? Have we done our part by

providing funding to the agriculture sector?

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4.45%3.97%

0%

1%

2%

3%

4%

5%

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

DMB Loans to Agriculture as a % of Total Loans

19.6%

10.0%

1.4%

3.5%

0%

5%

10%

15%

20%

25%

1981 1986 1991 1996 2001 2006 2011

DMB Loans to Agriculture as a % of Total Loans

2014

Data: CBN Stat; CBN Statistical Bulletin

668.19

1,114

2,227

5,568

Credit to Agriculture- % of Total

Credit to Priv. Sector N’ Bill

Today

??

10

3.5% of Total Credit

5% of Total Credit

10% of Total Credit

25% of

Total

Credit

Rice Maize & Soy

Current Production (MT) 4,000,000 9,600,000

Additional Requirement (MT)

3,000,000 3,400,000

Avg Size - Large Mill50,000

100,000

#New Mills60

34

CAPEX Cost per Mill (N'Mill)1,500

500

CAPEX (N'Mill)90,000

17,000

Working Capital (N'Mill)187,500

170,000

Production (N'Mill)350,000

520,000

Total New Investments (N’ Million)

N 627,500 N 707,000

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Emerging Opportunities in Agriculture

Horticulture, Rice, Cocoa

Horticulture – Cut Flower

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USD 8.35 Billion

Global Cut Flower Trade (USD' Million); Challenger Nations are Gaining Market Share, Kenya is the Top Gainer

3,527 , 42%

$1,303.33

$760.88

654 , 8%

606 , 7%

$147.45$121.20

$105.16

Netherlands

Colombia

Ecuador

Kenya

Ethiopia

Belgium

Isreal

Malaysia

Italy

China

Thailand

Others

$

$

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Cut Flower - $8.35 Billion

Cut Flowers are also known as roses, lilies, tulips, pansies

Cut Flowers are the 338th most traded product and the 1124th most complex product according to the Product Complexity Index

The top exporters of Cut Flowers are the Netherlands ($3.53B), Colombia ($1.3B), Ecuador ($760M), Kenya ($653M) and Ethiopia ($605M)

The top importers are the United States ($1.55B), the Netherlands ($1.23B), Germany ($1.17B), the United Kingdom ($1.01B) and Russia ($496M)

In Kenya horticulture is a leading agricultural sector in terms of foreign exchange, food security, employment creation and poverty alleviation

The Kenyan horticulture industry contributes 27.3% to GDP and employs 500,000 Kenyans directly and indirectly

Nigeria has comparative advantage for production of flowers nationwide for domestic and export uses. States with good soil include: Plateau, Cross River, Taraba, Enugu, Ogun, Rivers, Lagos, Kaduna and FCT

There is a high demand for Nigerian roses in the international market – FMARD, NEPC

Nigeria has a National Horticulture Research Institute (NIHORT) Ibadan and Federal College of Horticulture Dadinkowa in addition to IITA etc.

Post-Harvest

Cooling Technology

Grading &

Packaging

Packaging &

Labelling Materials

Refrigerated Trucks

& Logistics

Freight Forwarders

Clearing and

Forwarding Agents

Air Carriers,

Commercial

Charters

Plant Stock

Greenhouse,

Shading Structures

Irrigation

Technologies

Pre-Cooling

Technologies

Fertilizers, Pesticides,

Herbicides

Agricultural Clusters

Horticultural Clusters (Fruits &

Vegetables)

Flower FarmingPost-Harvest

Handling; Transport & Logistics

Tourism Cluster

Government Agencies, Non-Profits Cooperatives and Industrial

Associations

Education, Innovation, Research, Quality Control and Standardization

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Cocoa – Our Past Glory

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USD 8.35 Billion

Cote D'ivore,

$3,748 , 39%

Ghana,

$1,976 , 21%

Ecuador,

$742 , 8%

Cameroon,

$579 , 6%

Nigeria,

$504 , 5%

Others,

$1,950 , 21%Cote D'ivore

Ghana

Ecuador

Cameroon

Nigeria

Others0

500

1000

1500

2000

2500

3000

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Cocoa Production Value (US$ Million)

Ghana

Ivory Coast

Nigeria

2015

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Cocoa – $9.5 Billion

The top exporters of Cocoa Beans are Coted'Ivoire ($3.75B), Ghana ($1.98B),

Ecuador ($742M), Cameroon ($578M) and Nigeria ($504M)

The top importers are the Netherlands ($2.2B), the United States ($1.39B),

Germany ($886M), Belgium-Luxembourg ($856M) and Malaysia ($728M)

Cocoa production is geographically concentrated in Southern Nigeria and 64% of

production occurs in 3 states: Osun – 20%, Ondo – 25% and Cross River – 19%

Just above 5% of cocoa produced in Nigeria is processed beyond cocoa beans;

West Africa remains a net importer of chocolate, despite producing over 72% of

global cocoa production

Improved Varieties with 3 years to production now locally available

Chocolate - $25.4 Billion

The top exporters of Chocolate are Germany ($4.21B), Belgium-Luxembourg

($2.89B), Italy ($1.78B), the United States ($1.59B) and the Netherlands ($1.51B)

The top importers are the United States ($2.47B), the United Kingdom ($2.07B),

Germany($2.05B), France ($2.03B) and the Netherlands ($1.14B)

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Rice – Can we feed ourselves?

20

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

196

1

196

3

196

5

196

7

196

9

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

Do

me

stic

Su

pp

ly

Imp

ort

& P

rod

uc

tio

n

Nigeria - Rice Trade Flows Mill MT, Milled Eq)

Import Quantity

Production

Domestic supply

quantity

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Nigeria - Imports by Origin (Mill MT, Milled Eq)

Thailand India Brazil Others

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0

100

200

300

400

500

600

700

800

900

Input – 23%

Input Trade – 2%

Cultivation – 39%

Logistics & Trade3% 3%

Processing – 24%

Wholesale – 3%

Retail – 3%

Process Value Addition

Input Trade Irrigation Punp (depreciation) + Seed + CPPs + Fertilizer + Labor

Input Trade 10% Trade Margins

Cultivation Yield of 4MT per Ha; Selling Price of N125,000 per MT

Trading & Aggregation -Paddy

5% Trade Margin

Logistics N5,000 per MT

Processing 60% Recovery yield; N15,000 per bag of rice

Wholesale & Distribution

N500 per bag of rice

Retail N500 per bag of rice

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How can we move from Opportunities to Profit

We need a robust strategy, with the right financing,

skills and efficiency…

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FOF

[Trustee]

Input Financing Programs,

Commercial Farms

Government Strategic Food

Reserve, School Feeding

Program, Relief Programs

Blue Chip Corporates, SMEs

with Forward Contracts

Credit, Bonds, Loans Commodity Backed Warrants Repos, Forwards & Futures

$500 Million Food Security Fund

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Ag Funds and Impact Investors

Capital Market Operators

Investment Banks, Financial

Institutions

SWF – Sovereign Wealth Fund; DFI – Development Finance Institutions; PF – Pension Funds; RI – Retail Investors

SWF DFIs PFs RITA

Fund Investment

Committee

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