Investment in Nigeria’s agricultural value chain as a catalyst for development

For over 20 years, the agricultural sector, one of Nigeria’s largest contributors to GDP and the largest employer of labour, remains underutilized, despite the fact that it is reportedly touted as Nigeria’s untapped route to prosperity.

From a total land capacity of about 125 million hectares, Nigeria currently boasts of over 84 million hectares of arable land – the largest in Africa, with only about 35 million of this currently being cultivated. Despite this immense potential, the country remains a net importer of agricultural products, with 2019 net import and export values reported at ₦959.5 billion and ₦269.8 billion respectively. In sharp contrast, the Netherlands with a landmass of 4.1543 million hectares (slightly over half the size of Niger State – Nigeria’s largest state, with 7.6363 million hectares in land mass) generated €94.5billion (N41.4trillion) from agricultural exports in 2019 and €90.4billion (N39.6trillion) in 2018.

As of 2019, the agricultural sector contributed 25% of Nigeria’s gross domestic product (GDP), and 48% of its jobs with crop production contributing the largest share of activities in the sector (22.6%).

Key factors such as the large volumes of food imported, availability of arable land, the ubiquity of manpower at competitive rates as well as the consumption needs of the ~300 million people across the ECOWAS sub-region, signal the opportunity to adopt an import substitution strategy to address the demand-supply gap for agricultural products in Nigeria specifically and the rest of the sub-region by extension.

Unlocking Nigeria’s agricultural potential requires innovation, on-the-ground effort, and patient capital for agriculture infrastructure development. Below are some of the potential quick wins along the agriculture value chain.

Input supply

Reliable supply of agricultural input is a sine qua non to ensuring a successful planting season. A report from the Food and Agricultural Organisation (FAO) shows that Nigeria remains one of the countries with the least mechanized agriculture sectors in the world with a tractor density of 0.27hp/hectare, which is far below the FAO tractor density recommendation of 1.5hp/hectare. To meet the global average, Nigeria needs nearly 750,000 tractors according to Antti Ritvonen, the CEO of Dizengoff, one of the leading manufacturers of agricultural machinery in the world.

Poor seedlings and lack of access to inorganic fertilizers are also major challenges facing the cultivation of crop efforts and reducing yield per hectare. Data from the Food and Agricultural Organisation (FAO) shows that Nigeria records the least yield per hectare in West Africa. Improved participation of private sector players in democratizing access to quality seeds and seedlings, as well as fertilizer procurement and distribution can significantly improve yields.

Crop Production

The large gap between domestic demand and supply of produce such as rice, wheat, maize, sugar cane, palm oil, cashew and their byproducts has contributed significantly to the rising cost-push inflation experienced in-country.

As part of government efforts to fill this gap, Nigeria was recorded in Q3 2019 to have spent ₦239.9 billion on agricultural products and ₦42.1 billion on the exportation of agricultural raw materials as the race towards local production continues to present opportunities for private investors looking to ride the import substitution curve in the agriculture industry.


Post-harvest losses are a common phenomenon amongst players in Nigeria’s agriculture industry as a result of inadequate storage facilities and the absence of efficient modes of distributing harvested produce. In 2019 alone, 19% of rice cultivated in the country was lost and about 45% of the country’s annual tomato harvest tuned bad before being processed or sold to final consumers. These storage and processing challenges contribute to making Nigeria the 13th largest importer of tomato pastes in the world and third largest in Africa. An investment in this area will ensure the local production of tomato paste and conservation of the much-needed foreign exchange deployed to the importation of products that are available locally in near-sufficient quantities.

Furthermore, despite having one of the largest rain forests in Africa, Nigeria imported $79 million worth of processed timber and wood products in 2018 owing to the moribund state of its wood processing facilities. Bold investors may be willing to embark on the daunting task of reviving legacy entities such as the African Timber and Plywood (AT&P) Limited (located in Delta State), which used to be the largest wood processing facility in the world, through the systematic deployment of human and financial capital.


The is still much to be hoped for regarding the activities of commodity exchanges in Nigeria with respect to their primary mandate of connecting local farmers to off-takers who are able to purchase produce on a spot or futures basis. In addition to smoothening the earnings profile of many smallholder farmers, it also allows for fair and competitive pricing while allowing the farmers (as opposed to middlemen) capture more value as along the agriculture value chain. Nigeria’s commodity exchange markets together boast of an estimated total of 46,160 metric tonnes (N6.3 billion) transactions (between Q2 2016 and Q4 2017). In contrast, the Ethiopian commodity exchange market, despite the relatively smaller size of the Ethiopian agricultural market, already trades 715,000 metric tonnes (as at 2016) and serves as a vehicle for 3.5 million smallholder farmers in the rural communities to sell their agricultural produce locally and internationally.


The capital base of the Bank of Agriculture (BOA) which stood at ₦50billion is grossly inadequate to support Nigeria’s agriculture industry on a yearly basis. Hence, this call for private capital investment by commercial banks, venture capital and private equity firms as well as other capital providers. The Central Bank of Nigeria has also put in place mechanisms to further de-risk the sector through the creation of initiatives such as the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).

Attracting large scale investments into the sector through innovative risk-sharing mechanisms could guarantee food security, conserve foreign reserves, and uplift a significant number of the country’s labour force out of unemployment.

The agricultural sector also remains critical to Nigeria’s quest to achieve some of the Sustainable Development Goals by 2030. From an impact perspective, investments in the agriculture sector are expected to offer the greatest return with respect to ending hunger, ensuring healthy lifestyles, alleviating rural poverty, promoting gender inclusion, tackling the climate challenge, and raising the standard of living of the populace.

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