3 AGRIBUSINESS STARTUP MODELS IN NIGERIA

There is a growing interest in agriculture among Nigerians. However, there is little knowledge about how to go about starting an agribusiness. Some agriculture startups in Nigeria are finding success as they adopt different agribusiness models and are getting middle-class Nigerians to take up farming.

The World Bank estimates that the global population would increase to about 9 billion by 2050. With the increase in global population, agricultural productivity would need to increase by 70 percent. The agribusiness sector is critical to feeding the growing world population; the mass production by existing multinational megafarms alone won’t be enough to feed all those people.

Nigeria has an estimated population of 170 million which is expected to grow significantly in the next 30 years. The farming population in Nigeria is about 48 million. The country has an abundant arable land that is suitable for the cultivation of a variety of crops. Agriculture employs over 70 percent of the Nigerian labour force. However, these are mostly smallholder farmers who cultivate or own less than 5 hectares of farmland; and collectively account for 90 percent of total farm output.

Agribusiness startups models

Agribusiness Entrepreneurs in Nigeria

The hope for the future in Nigeria therefore lies in the production by these smallholder farmers. However, the crop yield by these farmers is below their potential because of the numerous challenges the farmers face. Farmers are constrained by factors such as; limited mechanisation, poor access to the banking system, price controls, poor infrastructure etc. These factors hamper production and make the agricultural products not competitive globally or have low profit margins.
Agribusiness entrepreneurs are finding ways to transform subsistence farming. These entrepreneurs believe that the transformation of the sector will lead to food security and are finding innovative solutions. Some of the agribusiness models in Nigeria are:

1. Agricultural franchise (Babban Gona) model
Babban Gona — which means “great farm” in the Hausa language of northern Nigeria. This model works like a fast-food franchise. Farmers-franchisees are trained and offered loans. Seed and fertilizer are delivered directly to the farms on credit and district managers track production and dispense advice throughout the season. At harvest, franchisees are provided transportation and support such as access to tractors that can do in one hour what would typically take a farmer 10 days to do by hand. The famers are also provided the sacks, the needle, and the thread to package grains e.g. maize. The franchisor warehouses the grain at the end of the process; commoditizes and sells it to food conglomerates.

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2. Harvest Cycle Funding
In these model, interested middle-class Nigerians fund existing farms for between $200 and $750 for a harvest cycle rather than purchase farmlands and get involved the daily routine of farming. The harvest cycle is insured, protecting investors investments and investors earn a share of profit at the end of a harvest cycle. The harvest cycle can last between five and six months depending on the crop. The model is technology driven and the entire process happens online. Although investors can visit farmlands if they wish to, no physical interaction is required.
The investors once signed up, are kept informed by bi-weekly email updates and videos detailing the progress of farms and expected harvest. They receive the capital plus a pre-agreed profit margin via bank transfer at the end of a harvest cycle.
This model provides a network of over 3500 farmers with funds which they can readily access to hire more labour and cultivate larger farmlands. In addition to providing funds, the business model also provides equipment and technical support to the farmers.
Orders are also taken from prospective buyers before each harvest cycle to ensure that supply matches demand.

 

3. Farmland Leasing
The model focusses on channelling funds from middle class Nigerians with an interest in agriculture to small scale farmers. In this model, the startup leases farmlands from communities and then contracts farmers to plant crops based on demand. The model like harvest cycle funding, provides farmers with access to capital, guaranteed sales and helps to improve agriculture value chain by providing technical support to farmers through mobile devices. It also helps farmers improve their efficiency for yields and better produce by facilitating periodic visits by specialists – who educate farmers on modern farming techniques.

 

The future of agribusiness is bright in Nigeria even as the World Bank estimates that agribusinesses in Africa could create a trillion-dollar food market by 2030; if they were able to access to more capital, better technology and improved electricity.

 

  • The Solution to the Global Food Crisis Just Might Come from Nigeria; Stories – Harvard Business School.
  • Technology is helping middle-class Nigerians turn to farming without getting their hands dirty – Quartz Africa.
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