Starting a Modern Commercial Agricultural Enterprise in Nigeria
Think Local and Act Global!
Starting a Modern Commercial Agricultural Enterprise in Nigeria:
It is without dispute that agriculture is divinely inspired. The reason is simple: agriculture was the driving force of the ancient economy. God started with a garden and put Adam there. Then in the days Father Abraham—a man well versed in animal husbandry and ranching—it took a new turn.
Abraham’s nearest descendant, Isaac, expanded the business with creative ideas. He started digging and operating numerous wells, a form of irrigation system, which is now called tube. This is very popular in Nigeria’s Kebbi State. It is functional in the rice transformation agenda of the state government.
Jacob, another of Abraham’s descendants, diversified into animal breeding. Then Joseph, Jacob’s son, entrenched the concept and became a specialist in Warehouse Receipt Systems. He implemented this expertise while serving as a Prime Minister in a foreign Land and that is why I align my thoughts with the decision of the Central Bank of Nigeria (CBN) in proposing the establishment of the Nigeria Commodity Exchange.
Agriculture has been practiced by very important as well as lowly-placed people now and in the past. It is a major enterprise that individuals and institutions can set up willingly without the search for sophisticated skills. But for us to move forward as a nation leveraging on the importance and impact of agriculture, a bit of skills have to be infused into the practice to make the enterprise workable.
Across the globe, the buzz word amongst economic and development policy experts is entrepreneurship. This is the practice and process of starting and running a business. Entrepreneurship involves the optimum utilization of the factors of production by investing in people and ideas for the purpose of solving frictions in the society at large through the development of products and services to create viable commercial enterprise.
Therefore, to infuse skill into our agricultural dynamics, it has to be taken as an enterprise building investment in land, labour, capital and entrepreneurship by relevant individuals or institutions in private or public sector. Ironically, people often put a lot of investment into oil and gas and reap a lot of returns, whereas, they will invest less resources in agriculture and expect to reap a lot of returns. Let us not forget that you can only reap what you sow.
We know for a fact that prior to recent times, American farmers were said to be extraordinarily rich while African farmers were considered to be extremely poor. We can also infer from the fact that in Africa, we are beginning to record some successful African farmers; nevertheless, the difference between a traditional African farmer and the American farmer is in the amount of investment that is put into their individual agricultural businesses.
However, the most defining resources in commercial agricultural enterprise is the issue of land and land ownership because it is land that is usually accepted as a form of collateral for financial transactions in the continent. The land ownership tussle system in Africa is quite fragmented and deeply uncoordinated; making access to land for entrepreneurs difficult; thus setting the stage for a limited growth.
More so, the labour or skills required to invest and manage commercial agriculture in the continent is still largely rudimentary. While agricultural innovations are rarely encouraged, agricultural financing rules are hardly taught and appreciated. Therefore, the sector can hardly generate the kind of Bill Gate and Steve Jobs results that you get in the ICT sector.
Interestingly, most ICT operators often show interest in agriculture, and often call it ICT in agriculture but make the mistake of thinking that they can do agriculture absently, and get the kind of results they get in ICT. Having taught entrepreneurship as a subject for some time now, as well as played in the commercial agriculture space, I have learnt so much and heard so many different opinions on how to grow commercial agriculture business.
From my combined experiences, I have discovered that many people think that the major constraint in entrepreneurship is capital. But I make bold to say that they are wrong or put lightly, to conclude that capital is the major constraint is entrepreneurship 101. In advanced entrepreneurship 505, there are different ways to raise capital such as OPM (other people’s money), data driven platforms like crowd funding, and knowledge managed relationships like venture capitals that can be deployed in raising capital for commercial agricultural transformation.
For example, two young men, Shola Akinlade and Ezra Olubi in Nigeria recently developed a payment platform called Paystack, the African version of paypal leveraging on venture capital funds and got investors to buy the enterprise for 200 million USD (N90 Billion Naira) as at the time they cashed out. What an investment!
While these funding windows can bring us out from sticking to this notion that funding is the major constraint to commercial agriculture, another enterprising idea that can help us deploy and improve on our commercial agricultural transformation is the models known as the Out-grower Schemes, and the Warehouse Receipt System.
There is no gainsaying that bringing entrepreneurship into commercial agriculture will go a long way in developing the sector, emphatically, training and retraining of the workforce is also an indispensable component of developing the sector. This is true of the 21st century — the century of knowledge economy where the concept of garbage in, garbage out, has become the order of the day. This is an era of disruption where whatever you put in is what you will get!
The African continent has shown a deliberate disregard of its workforce; its people; and its population for too long. If we must take advantage of what commercial agriculture can provide through entrepreneurship, we must begin to learn to value and respect our people and respect their expertise. This is equally true in the sense that, no matter how we adopt and adapt relevant technologies, like machines and robots, you will still need people to not just build but manage those drone’s and robots.
So, the people component of entrepreneurship, which is people; and their ideas, is still very crucial. People must be respected and motivated to get the desired output that an organisation wants. We cannot talk about commercial agriculture without talking about the subject matter of output; that is, talking about your ability to cash out borrowing from the ICT geeks.
For you to achieve a visible and valuable final output; we have to visit the subject of Agricultural Value Chain; aka agribusiness. This is the series of actions and activities needed to bring a product from initiation to the final consumer. As an individual or institution interested in commercial agriculture, you must take the value chain into consideration.
For example, when I was commissioned by a state governor in Nigeria to set up a rice mill, we had to start the project from production — land clearing, ploughing/harrowing, and harvesting; and in a period of four months, rice paddy was available, to the amazement of the locals. And in forty-eight hours thereafter, milled rice was ready using the contract milling model. The rice was bagged and ready for market with all the process managed by our team.
Going forward, it becomes imperative for us to focus on agribusiness rather than agriculture. That is we must move away from doing the traditional practice of agriculture. Agribusiness is the use of value chain approach to drive agricultural practices and processes. Agribusiness sees agriculture beyond passion or way of life; to using sound business and good management practices to drive the agricultural processes and practices thereby putting on the lens of profitability and turnover.
Let me conclude by recommending that, for us to achieve the transformation from traditional agriculture to commercial agricultural enterprise, Africa must learn to adopt the seven pillars of agribusiness transformation as enumerated by United Nations Industrial Development Organization (UNIDO) as follows;
Pillar One: increasing agriculture productively. An average farmer in China is 10 times better than a farmer in Nigeria. While in Africa, we produce an average of three tons per hectare, China or American farmers produce an average of 8 to 10 tons per hectare. So we must learn to produce more from less.
Pillar Two: Upgrading Value Chains. We have defined value chain and agribusiness above. There is therefore the need to deepen our knowledge and practice of how agricultural value chain can be used to transform agriculture in Africa.
Pillar 3: Exploiting local, regional, and international demand. We must think local and act global! There are over two million Nigerians living in UK, USA, and South Africa. What a market! We can take advantage of our local food and textiles to penetrate those markets.
Pillar 4: Strengthening technological efforts and innovation capabilities. Technology and innovations are the best way to go. Despite the huge challenge that we have in Africa, we have to think technology. We are the highest producers of cassava, cocoa, cashew, shea butter, sesame, among others, in the world. So, we need to bring technology to the table to be commercially viable and relevant.
Pillar 5: Promoting effective and innovative source of financing. Setting up modern commercial farm enterprise can never be achieved without promoting effective and innovative source of financing. Traditional commercial financing technique as adopted by our banks in Africa can never solve the problem. You have to use schemes like the group approach, warehouse receipt system, modified contract farming techniques, if we must commercialize.
Pillar 6 & Pillar 7: Stimulating private sector participation and improving infrastructure and energy access. These are areas that government intervention is required for us to achieve incremental progress in starting-up of modern commercial agriculture enterprise in Nigeria.
Godfrey Ajayi Godfrey, Managing Partner/CEO, Gconsulting international Services Ltd, Abuja