Financing agricultural and agro industrial development in nigeria 1
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Financing agricultural and agro industrial development in nigeria 1

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Financing Agriculture in Nigeria Presented by Mr Iretioluwa Moniyide Coordinator Agriculture Financing and Stock Exchange Committee (CASON)

Financing Agriculture in Nigeria Presented by Mr Iretioluwa Moniyide Coordinator Agriculture Financing and Stock Exchange Committee (CASON)

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Financing agricultural and agro industrial development in nigeria 1 Financing agricultural and agro industrial development in nigeria 1 Presentation Transcript

  • AGRICULTURAL FINANCE AND STOCK EXCHANGE COMMITTEE F FINANCING AGRICULTURE IN NIGERIA 2013 WORK PLAN 18/07/13 1Prepared by Iretioluwa Oniyide
  • BASIC FACTS ON ACHIEVING FOOD SECURITY We must treat and see agriculture as a business Investment in Agriculture is critical for the growth of the agricultural sector An 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 18/07/13 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 18/07/13 3Prepared by Iretioluwa Oniyide
  • PUBLIC SECTOR INTERVENTION PUBLIC 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 18/07/13 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 chain18/07/13 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’ 18/07/13 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 18/07/13 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 18/07/13 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 18/07/13 9Prepared by Iretioluwa Oniyide
  • AVCF CONT’D AVCF 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 18/07/13 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 18/07/13 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 18/07/13 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 18/07/13 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) 18/07/13 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) 18/07/13 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) 18/07/13 16Prepared by Iretioluwa Oniyide
  • FINANCIAL INSTRUMENTS USED IN AVCF CATEGORY A. 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 18/07/13 17Prepared by Iretioluwa Oniyide
  • FINANCIAL INSTRUMENTS CONTINUED CATEGORY D. Risk Mitigation Products D. Financial/Credit Enhancements INSTRUMENT • Insurance • Forward Contracts • Futures • Securitization Instrument • Loan Guarantees • Joint Venture Finance 18/07/13 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 18/07/13 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) 18/07/13 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 18/07/13 21Prepared by Iretioluwa Oniyide
  • WHY INVEST IN AGRICULTURE  SOCIALLY RESPONSIBLE  WILL CREATE WEALTH  WILL CREATE EMPLOYMENT  WILL INCREASE RURAL INCOME  WILL ADDRESS FOOD SECURITY 18/07/13 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 18/07/13 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 18/07/13 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 18/07/13 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 18/07/13 26Prepared by Iretioluwa Oniyide
  • THANK YOU FOR LISTENING LET US GET IT DONE 18/07/13 Prepared by Iretioluwa Oniyide 27