Nigeria’s agritech sector offering investment opportunity to exploit

AGRICULTURE AS PRACTISED in developed societies has transformed beyond the traditional production of food for human consumption and animal feeds into a global financial stronghold and economic reserve.

Understandably, to harness the challenges of sustaining a growing world economy and overcome the problems of food production, climate volatility, modernised policies and urbanisation trends, the agric sector has been vastly diversified and made flexible enough to link more capital with agricultural projects albeit digitally.

With new developments and opportunities stemming from the agriculture value chain, the sector has in recent years, seen an accelerated growth in the establishment of agricultural technology (agritech) companies aiming to address the challenges faced by smallholder farmers, create unique products catering to stakeholders’ needs, and to improve financial livelihoods through application of innovative digital solutions.

The emergence of these agritech companies has also resulted in an expansion of technological transformation of agribusinesses and farming driven by mainstream digital functionalities such as, mobile apps, digital mapping, field sensors, cloud-based business systems, and smart farming equipment, among others.

Agriculture analysts say this has expanded the field and improved reinvention of agribusiness operations and farming across different value chains in Nigeria.

Some of the most prominent agritech companies in Nigeria and the unique services they offer include:

AFEX

With the development and deployment of a digitalised commodities exchange model for the African market, this company utilises commodities produced by farmers as capital by generating tradeable electronic warehouse receipts to increase the bargaining power of farmers and linking them to agronomic education, access to inputs and credit. AFEX aims to impact over one million farmers by providing services in productivity, value capture and access to finance and markets.

Farmcrowdy

The tech-infused platform facilitates stakeholder access to maximum profitability in the food value chain by connecting

Provides a mobile-based digital

the investing public with farmers (crowdfunding). The farmers use the investors’ funds in financing farming activities of which the investors get a significant Return on Investment (ROI) at the end of the farming cycle. Farmcrowdy ensures that investors are able to monitor farmers’ activities and progression through periodic updates on their mobile devices.

Hello Tractor

The agritech company promotes a collaborative farming arrangement that enables smallscale farmers to request and pay for tractor services via SMS and mobile money, as and when they need specific services.

TradeBuza

This is a cloud-based web and mobile-based platform that helps outgrowers, commodities aggregators, exporters and other related stakeholders to manage the visibility of their outgrower schemes, source market activities, and trade commodities more effectively.

AgroMall

It supports smallholder farmers by using digital tools to provide effective agronomic advisory, extension services, management and engagements in agricultural value chains.

Verdant AgriTech

solution to farmers that offers market information, managerial support and access to markets to smallholder farmers.

Crop2Cash:

The company provides smallholder farmers access to formal financial services. Its partnership with First City Monument Bank (FCMB) provides a digital payments solution to farmers, particularly those in the rural areas to build their financial identities and increase agricultural production.

These companies along with a host of other established and emerging agritech organisations and startups have through their digital platforms, provided access to market, credit and inputs for farmers; enhanced productivity of small-holder farmers; created investment opportunities for the investing public to exploit; and most importantly, broadened the agricultural sector into an allinclusive venture beyond food production.

Challenges affecting Nigerian agritech firm

Despite some of the remarkable achievements recorded by Nigerian agritech companies within a short period, many of the agritech startups have been limited by challenges such as, unfavourable business environment, funding gaps, limited availability of local capital, a lack of institutional investors investing in agritech and an inability to attract big-ticket investments which have to a large extent, affected scalability.

A report by the Global System for Mobile Communications Association (GSMA) titled, “AgriTech in Nigeria: Investment Opportunities and Challenges,” stated that while over 80 agritech companies and 30 start-ups have emerged in Nigeria over the last decade, the majority remain nascent and face barriers to scale due to the country’s underdeveloped agricultural sector and infrastructure,

“Nigerian agritech companies also struggle with the basics of a functional business environment. For instance, businesses constantly deal with frequent power outages, limited access to finance, political instability and insecurity,” GSMA noted.

The report added that many Nigerian business organisations are reluctant to invest in agritech ventures due to the perceived risk of investing in agriculture and the opportunity cost compared to other sectors.

Osazuwa Osayi, co-founder, Farmforte, an agritech startup, noted that agritech companies are being challenged by the low adoption of agritech solutions in Nigeria compared to developed countries.

He added that security instabilof ity in some farming communities across the country has disrupted market activities, limiting the penetration of agritech companies in the country.

Osayi also pointed out that the country’s harsh economic environment makes it difficult for agritech startups to develop their value proposition and demonstrate a viable business model as they have to address rising operational costs, while they are being forced to generate huge revenue right from inception.

Addressing challenges in agritech sector

To promote investments in the agritech sector, GSMA urged agritech start-ups to seek long term and patient engagement with investors to raise awareness of the benefits their digital solutions could bring to farmers, and how the investors might benefit from working with them.

The global communications association also called for increased partnerships between agritechs and Mobile Network Operators (MNOs), Financial Service Providers (FSPs) or fintech companies offering mobile money services.

This, it explained, has the potential to improve the business models of agritech companies, presenting them with several assets, including distribution capacity, network coverage, attraction of potential customers and brand recognition, while the MNOs and financial partners benefit from increased mobile money use and higher patronage.

GSMA also enjoined the Nigerian government to support the agritech sector by creating an enabling environment for innovation, primarily for digital financial services and mobile money uptake.

“The agritech sector stands to benefit from the development of physical and financial infrastructure to support the agricultural ecosystem, as well as from policies designed to improve the basics of the business environment and attract investment,” it stated.

On his part, Osayi noted that collaboration that cuts across governmental organisations and private sectors is key to developing the agritech sector.

He also emphasised the relevance of data infrastructure and increased funding to boost agritech, noting that it is the paradigm shift needed to develop the agricultural sector in the country.

“We need to see about $50 billion in investment over the next five to seven years to really move the sector to its potential,” he said.