Experts in the agricultural sector have listed the numerous hindrances facing operators who attempt to access loans to expand their agricultural business.
The experts spoke in Lagos recently during the United Kingdom-West Africa Agritech summit.
They pointed out that over $50bn investment was needed to maximise opportunities in the African food industry in the next 10 years and investors were available and willing to invest but that the risks associated with investing in the region had to be identified and militated against.
Speaking during a panel session, the Managing Director, Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, Aliyu Abdulhammed, pointed out that unless there was finance, the huge opportunities in the agricultural sector would remain opportunities.
He said tapping into the opportunities rested on the ability to bring players who had capacity and knowledge of the business into the value chain.
He said, “If we are able to do an analysis and understand the expertise involved, then we can put a figure to it.
“We look at what the provider of the finance wants. This is why aggregation of the farmers into cooperatives makes it a lot easier to guarantee the loan.”
Also speaking, the Country Manager, West Africa UK Export Finance, Steve Gray, noted that in Africa specifically, there were increasing risks in the agricultural sector.
His listed some of the risks to include pest attacks, temperature, clarity of and ownership of land title as well as security challenges.
Gray said in advancing loans to farmers, investors articulate the business and the risks associated with the business.
“What we see about the Nigerian agricultural sector is that there is a lot of pest problem and that poses a risk of access to finance.”
According to him, investors also look at the management structure of a company; they want to know if the people in management know the business.
“We look at the balance sheet of the private firm and its credit worthiness also,” he said.
The Managing Partner, Sahel Capital, Mezuo Nwuneli, said the concern of financiers had always been finding entrepreneurs who could handle their finances and manage the loans given to them and who could work outside Abuja and Lagos, adding that most of the farm work were done outside these two cities.
He advised entrepreneurs to start small and build up so that they could learn lessons as they grow.
“Focus on your tax compliance because when you need to raise capital, you have to ensure that your tax compliance is neat,” he said.
The Managing Director, Private Investment Promotion Agency, Guinea, Mr Namory Camara, stressed the need for banks and financial houses to receive education about agriculture business.
He noted that the reason why banks were reluctant to advance loans to farmers was because most of the bankers giving out the loans had no knowledge of the operation of the sector, a situation that had resulted in them giving loans to traders and importers than farmers who would employ local people and develop the economy.
“Expertise in the agricultural sector is needed in the banks because you cannot finance a sector you do not understand,” he said.