AGRICULTURAL FINANCE AND

STOCK EXCHANGE COMMITTEE

FFINANCING AGRICULTURE

IN NIGERIA2013 WORK PLAN

11/04/23 1Prepared by Iretioluwa Oniyide

BASIC FACTS ON ACHIEVING FOOD SECURITY

We must treat and see agriculture as a businessInvestment in Agriculture is critical for the growth of the agricultural sectorAn 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

11/04/23 2Prepared by Iretioluwa Oniyide

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

11/04/23 3Prepared by Iretioluwa Oniyide

PUBLIC SECTOR INTERVENTIONPUBLIC 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

11/04/23 4Prepared by Iretioluwa Oniyide

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 chain11/04/23 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’

11/04/23 6Prepared by Iretioluwa Oniyide

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

11/04/23 7Prepared by Iretioluwa Oniyide

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

11/04/23 8Prepared by Iretioluwa Oniyide

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

11/04/23 9Prepared by Iretioluwa Oniyide

AVCF CONT’DAVCF 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

11/04/23 10Prepared by Iretioluwa Oniyide

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

11/04/23 11Prepared by Iretioluwa Oniyide

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

11/04/23 12Prepared by Iretioluwa Oniyide

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

11/04/23 13Prepared by Iretioluwa Oniyide

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)

11/04/23 14Prepared by Iretioluwa Oniyide

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)

11/04/23 15Prepared by Iretioluwa Oniyide

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)

11/04/23 16Prepared by Iretioluwa Oniyide

FINANCIAL INSTRUMENTS USED IN AVCF

CATEGORYA. 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

11/04/23 17Prepared by Iretioluwa Oniyide

FINANCIAL INSTRUMENTS CONTINUED

CATEGORYD. Risk Mitigation Products

D. Financial/Credit Enhancements

INSTRUMENT• Insurance• Forward Contracts• Futures

• Securitization Instrument

• Loan Guarantees• Joint Venture Finance

11/04/23 18Prepared by Iretioluwa Oniyide

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

11/04/23 19Prepared by Iretioluwa Oniyide

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)

11/04/23 20Prepared by Iretioluwa Oniyide

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

11/04/23 21Prepared by Iretioluwa Oniyide

WHY INVEST IN AGRICULTURE

SOCIALLY RESPONSIBLEWILL CREATE WEALTHWILL CREATE EMPLOYMENTWILL INCREASE RURAL INCOMEWILL ADDRESS FOOD SECURITY

11/04/23 22Prepared by Iretioluwa Oniyide

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

11/04/23 23Prepared by Iretioluwa Oniyide

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

11/04/23 24Prepared by Iretioluwa Oniyide

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

11/04/23 25Prepared by Iretioluwa Oniyide

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

11/04/23 26Prepared by Iretioluwa Oniyide

THANK YOU FOR LISTENING

LET US GET IT DONE

11/04/23 Prepared by Iretioluwa Oniyide 27