Agricultural Opportunities in Nigeria

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Presents opportunities in Nigerian Agricultural sector from a global perspective

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Agricultural Opportunities in Nigeria

  1. 1. AGRICULTURE A Global Perspective! Covenant Capital & Microfinance Michael Olorunninwo July 2013
  2. 2. Covenant Capital 2 Outline Global Demand for Agricultural Produce Pressure on Grains, Cassava, etc. Impact of Growing Middle Class on Protein Demands Opportunities in Nigeria
  3. 3. Covenant Capital 3 Credits • United Nations Food & Agriculture Organisation (UNFAO) • World Bank • United States Department of Agriculture (USDA) • World Health Organisation (WHO)
  4. 4. Covenant Capital 2007 2030 4 Introduction World Sub-Saharan Africa Food Consumption per Capita (kcal), 2007 to 2030 13% 22% • Buoyed by increasingly income and sophistication • Sub-Saharan Africa has highest incidence of food insecurity • By 2050 it will also witness highest proportion of population growth and account for 20% of population 2540 3050 3,050 kCal x 6.5 billion people!!!
  5. 5. Covenant Capital 5 Introduction 0 50 100 150 200 250 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Trend shows increases in the average price index of food items 45%+ Global Food Price Index 2008 to 2013 Index rebounded after 2008 financial crisis
  6. 6. Covenant Capital 6 Introduction Trend shows increases in the average price index of food items 0 50 100 150 200 250 300 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Meat Dairy Cereals Indices for Cereals & Diary products follow general Food Index Global Price Index for Meat, Dairy & Cereals (2008 to 2013)
  7. 7. Covenant Capital 7 Drivers of Global Agricultural Demand
  8. 8. Covenant Capital 8 World Population will increase by 35% to 9.3bn by 2050 21% 35% 58% 130% 0% 20% 40% 60% 80% 100% 120% 140% 160% 2030 2050 World Sub-Saharan Africa Nigeria Expon. (Nigeria) NIG: Additional 231 million • By 2050, Nigeria’s population will increase to 389 Million 63% 146% Base Year: 2010
  9. 9. Covenant Capital 9 Significant Number of People Now Live in Urban Areas • Today, about 70% of world population, live in urban areas • This shift happened in 2008 • Compared to 1960, almost the same number of people live in rural areas
  10. 10. Covenant Capital 10 High Proportion of Dependent /Consuming population • World population is ageing with 65% between ages 16 and 64 years − Increased Longevity − Low Fertility • Africa has the highest proportion of dependent (consuming) population
  11. 11. Covenant Capital 11 Increasing Income Levels • Global GDP per Capita grew by almost 100% between 2002 and 2012, from less USD5,338 to USD10,170 0 2000 4000 6000 8000 10000 12000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 91% • By 2030 the world will be 80% richer • More money means increased demand for more food, most importantly protein and diet- variety GDP per Capita, 2002 - 2012
  12. 12. Covenant Capital 12 Reasons for Pressure on Grains & Cassava
  13. 13. Covenant Capital 13  Grain production is land intensive  Adverse weather conditions is wiping out harvestable crops  Discovery of novel uses of grains as biofuels Contributing Factors to Grain Demand Pressures  Increased use of grains as animal feed to meet protein demands  More pressure on arable lands as yield growth declines
  14. 14. Covenant Capital 14 Composite Use Increasing Demand Pressures Humans Grains, Cassava, etc. Livestock Biofuels Production Energy Consumption
  15. 15. Covenant Capital 15 Food, 1000 Animal Feed, 750 Industrial Use, 500 Others, 50 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Tonnes (millions) • Only about 40% of production is used as food • Industrial use such as biofuels is taken increasing proportion Production and Uses of Grain in 2012 43% 33% 22% 2%
  16. 16. Covenant Capital 16 Ethanol Production from grains has increased by 300% Ethanol Production, mostly from grains • 25billon gallons of ethanol will be produced, mostly from grains, in 2016 • Major source of biofuels & biodiesels include corn, soybean, sugarcane, wheat, etc.
  17. 17. Covenant Capital 17 Growth in Cereals Production from 2000-2010 • In terms of Production, Harvested Area & Yield, Africa is registering significant improvements
  18. 18. Covenant Capital 18 Demand for Protein
  19. 19. Covenant Capital 19 Livestock is Major Source of Protein Humans Grains, Cassava, etc. Livestock Biofuels Production Energy Consumption Milk
  20. 20. Covenant Capital 20 Demand for Meat Increases with Income • High income countries consume more meat • Per Capita meat consumption and income are positively correlated
  21. 21. Covenant Capital 21 Meat Consumption is Higher in High Incomes Countries • Meat consumption i.e. demand for protein and diet diversification is expected to rise • Low income countries have low meat consumption per capita and vice versa
  22. 22. Covenant Capital 22 Uses of Grains & Cassava – Meat Conversion Rates • Feed-to-meat conversion rates, not favourable • Chicken is most feed-efficient
  23. 23. Covenant Capital 23 • Only about 12% of world marine stock is under/moderately exploited Aquaculture will be a major source of fish protein
  24. 24. Covenant Capital 24 Opportunities in Nigeria
  25. 25. Covenant Capital 25 Agriculture is Land Intensive!  Need to capture available arable land for agriculture purposes −Livestock production is even more land intensive −Focus on sub-Saharan Africa by European farmers seeking for Arable Land −Opportunity exists for Lease and Capital Gains income 80% of land in Nigeria is Arable
  26. 26. Covenant Capital 26 How About CASSAVA!  Reliable source of food in Nigeria, 90% of cassava production is processed into Food  Significant demand exists −Use of High Quality Cassava Flour (HQCF) as 10% replacement in bread flour, noodles, adhesive, about 1.15 million tons in demand −100% duty on flour imports −Native and modified starches in food, paint and pharmaceutical industries −Dried cassava chips had regional market and can be used for local animal feed −Nigeria adopted 10% ethanol E-10 policy, representing 1 billion litres per annum  Need to improve value-chain efficiency and quality control  Investment in Farmer Education and Extension services
  27. 27. Covenant Capital 27 Cassava Production – Nigeria and Thailand Nigeria Thailand Production ('000t) 36,804.00 30,088.00 Harvested area ('000ha) 3,126.00 1,326.00 Yields (t/ha) 11.70 22.70 Utilization Garri (60%) Native & Modified Starch (40%) Fufu (20%) Fuel Ethanol (20%) Lafun (10%), Tapioca (5%), Native Starch (3%), Animal feed (2%) Chips/pellets (40%) Farm Size (ha/Farm) 1 to 2 4 to 5 Cassava area (Ha/farm) 0.5 to 1 2 to 3 Crop System - Monocrop – Intercrop 10% 95% 90% 5% Time of Planting Apr-June Apr-May Land Preparation Manual/tractor Tractor Weed control Manual Tractor/herbicide/manual Fertilization - Organic - Chemical none medium very little medium Labor costs (US$/day) 3 to 4 4 to 5 Prod. costs (US$/ha) (US$/t fresh roots) 450-900 650-800 37.99 28.68
  28. 28. Covenant Capital 28 Fishery, Poultry and Animal Husbandry  Meat consumption in Nigeria is expected to increase with income levels −Increasing levels of middle class population and diet sophistication will drive demand  Known protein sources such as fish, beef, chicken, goat, eggs will continue to be in demand Beef 41% Fish 24% Egg 12% Goat Meat 12% Chicken 6% Mutton 3% Pork 2% Protein Consumption in Nigeria
  29. 29. Covenant Capital 29 Other Opportunity Areas Fertilizers – Less government involvement – Currently driving private participation in production, processing and marketing – Use of subsidies to promote usage by Farmers and improve Yield Marketing – Government promoting independent marketing companies to expand supply pipeline – Marketing companies to coordinate production, promote investment, establish standards Financing – Access to US$500m fund from CBN through incentive-based risk management system under NIRSAL – Banks are becoming more open towards agricultural-financing Infrastructure – 30% of produce are lost annually – Need for quality storage facilities – Need to improve transport logistics – Requires efficient supply-chain management services
  30. 30. Covenant Capital 30 Other Opportunity Areas Capacity Development – Need to attract young Nigerians into the Sector – Need for investments in training and development – Advanced skills in animal husbandry, crop expertise or veterinary science is scarce Grains – Wheat, Rice, Corn – Imposition of Import Tariffs on major grains such as wheat and rice – Demand for noodles, cereal meals, biscuits, bread, pasta, will keep demand up – Provision of adequate storage facilities – Use of grains for animal feed – Investment in processing facilities Importation & Assemblage of Implements
  31. 31. Covenant Capital 31 The Nigerian Consumer Analysis of Consumer Buying Patterns, 2015 est. (N’b) Food & Bev. 59% Clothing & Footwear 11% Health & Med. Serv. 8% Household Goods & Serv. 6% Alcoholic Bev. & Tobacco 4% Comm. 3% Misc. Goods & Serv. 9%
  32. 32. Covenant Capital 32
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