Grain storage and aggregation

Grain storage and aggregation
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Grain storage and aggregation
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage
Food and Agriculture
Business Model Description

Construct technologically improved grain storage silos and provide transportation services.

Expected Impact

Increase value added in food chains, prevent food waste, strengthen economic growth and generate decent jobs.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
> 25% (in IRR)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
< 5% (CAGR)
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Zero Hunger (SDG 2)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Decent Work and Economic Growth (SDG 8) Responsible Consumption and Production (SDG 12) Climate Action (SDG 13)
Country
Regions
  • Nigeria: North West
  • Nigeria: North East
  • Nigeria: North Central (Middle Belt)
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage
FB

Development need: About 25.5% of Nigeria’s population lacks adequate and improved nutrition.(1) Similarly, data from the National Bureau of Statistics suggests 26.4% of the population experienced severe food insecurity in 2016.(1) The Sustainable Development Report ranks Nigeria number 48.0 for SDG 2 (Zero Hunger). While performance against this Goal has improved, major challenges persist.(2)

Policy priority: The government intensified efforts to improve agricultural yield, and investments aim to improve agricultural infrastructure.(1) Policy priorities outlined in the Economic Recovery and Growth Plan aim to: increase agricultural GDP (gross domestic product) to NGN 21.0 trillion in 2020 at an average annual growth rate of 6.9%; reduce food imports; and become a key exporter of agricultural products.(3)

Gender inequalities and marginalization issues: Agriculture and trade account for the majority of Nigeria's employment opportunities. Most people in these sectors work informally (92% of those employed in agriculture, and 56% of those employed in trade), and so rely on daily wages. Generally, informal workers have no pension or life insurance, and have limited health insurance coverage. They are more exposed to shocks, especially to their health, and are vulnerable to poverty and hunger. Micro, small and medium enterprises (MSMEs) are most likely to be affected by the upcoming recession, and will take longer to overcome the economic impacts of COVID-19.(4)

Investment opportunities introduction: The government is also considering strategies such as providing irrigation infrastructure to enable year-round production to boost agricultural productivity.(3)

Key bottlenecks introduction: The Sustainable Development Report ranks Nigeria number 48.0 for SDG 2 (Zero Hunger). While performance against this Goal has improved, major challenges persist.(2)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Agriculture
FB.1

Development need: In 2018, agriculture accounted for 21.2% of Nigeria's GDP (gross domestic product) and employed two-thirds of the working population.(3) Indicators of adult obesity have improved, while indicators of undernourishment have underperformed. Prevalence of stunting in children is falling.(5)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Agricultural Products
FB-AG
Investment Opportunity Area

Grain storage and aggregation

Business Model

Construct technologically improved grain storage silos and provide transportation services.

CAGRDescribes the historical or expected annual growth of revenues in the IOA market.
< 5%
Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
Nigeria has an active grain market, producing 25 million+ metric tonnes (MT) each year.(6)

Nigeria's grain market is distributed across the country. In terms of supply and demand, it is expected to grow by 2.5-3% each year.(6)

The market is dominated by small and medium scale farmers and traders, with a growing number of commercial grain producers and industrial offtakers.(6)

At the national level, Nigeria recently invested NGN 66 billion (USD 171 million) to establish 33 silo complexes, 25 grain aggregation centers, and 9 units of Blumberg warehouses, which have now been privatized by way of concession.(7)

IRRDescribes an expected annual rate of growth of the IOA investment.
> 25%

According to Federal Ministry of Agriculture and Rural Development (FMARD) estimates, the average internal rate of return (IRR) for silo complexes is 57%.(6)

The net present value (NPV) of commercial operation of the silo complexes is NGN 25.8 billion (USD 67 million). On a risk adjusted basis, the private sector will create NGN 4.34 billion (USD 11 million) additional financial value. The estimated present value of the cost of operating the silo complexes is USD 538 million.(6)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)

It takes 6-12 months to establish grain storage silos. Therefore an investor will see cash flow in about 2 years.

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Capital - Limited Investor Interest
Agricultural financing is generally considered a risky investment. NIRSAL (the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending) is minimizing the risk of agricultural lending via its anchor borrowers programme.
Business - Supply Chain Constraints
Inadequate infrastructure
Sustainable Development Need

The agricultural sector has been characterized by poor infrastructure including roads, irrigation and storage facilities. This has limited farmers' access to domestic and international markets. The United States Department of Agriculture (USDA) estimates that upwards of 30% of grain is wasted through post-harvest losses.(6)

FAO (Food and Agriculture Organization of the United Nations) estimates that as much as 3 million metric tones – 10% of total supply across all grains – is lost after harvest. Millet was particularly affected in 2011, with losses representing 36% of production and imports. Soybeans, sorghum and maize also all suffer 10-15% losses relative to local production.(8)

Given the current post-harvest loss rates of up to 60% for perishable crops, Nigeria needs to rapidly introduce new storage solutions across its agricultural system.(7)

Gender & Marginalisation

Long term efforts to improve women's access to agriculture and livelihood resources (including land, agricultural inputs and education) requires tackling cultural and gender norms that prevent women’s empowerment. Anecdotal evidence shows women are less likely to gain access to credit, land and other agricultural inputs.(18)

Expected Development Outcome

Investments could: increase agricultural productivity across several value chains; increase food security across the country; reduce post-harvest loses especially for small holder farmers; increase employment opportunities; and boost value chain development.

Investments could open up foreign markets, and therefore increase export opportunities/foreign exchange earnings, as well as the quality and volume of supply chains. Further, improved transparency of grain markets should help support higher revenues by increasing grain sale volumes.

Gender & Marginalisation

Economic Recovery and Growth Plan (NERGP) 2020 target for female population that owned agriculture: 80.8%. SDG target by 2030: 100%.(19)

Primary SDGs addressed
1 - No Poverty
No Poverty (SDG 1)

1.1.1 Proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)

1.2.1 Proportion of population living below the national poverty line, by sex and age

1.2.2 Proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions

Current Level

62.6% of Nigeria's population live below the international poverty line: 69% of people in rural areas live below the international poverty line, compared with 51% of people living in urban areas.(18)

46% in 2018.(20)

42.2% in 2017.(18)

Target Level

The Federal Government is implementing a national Social Investment Programme which focuses on providing Social Safety Nets for the poor, welfare for the unemployed and job creation and skills enhancement with a target of creating about 3 million jobs. (18)

21.1% by 2030.(18)

2 - Zero Hunger
Zero Hunger (SDG 2)

2.1.1 Prevalence of undernourishment

2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)

Current Level

25.5% in 2015.(19)

Moderate: 26.4%. Severe 19.6%.(19)

Target Level

Derived ERGP (Economic Recovery and Growth Plan) target by 2020: 17%, by 2030: 0.(19)

Derived ERGP (Economic Recovery and Growth Plan) target by 2020: 17.6%, by 2030: 0.(19)

Secondary SDGs addressed
8 - Decent Work and Economic Growth
Decent Work and Economic Growth (SDG 8)
12 - Responsible Consumption and Production
Responsible Consumption and Production (SDG 12)
13 - Climate Action
Climate Action (SDG 13)
Directly impacted stakeholders
People
Small and medium-scale grain farmers will directly benefit from storage infrastructure. Most lose a significant percentage of their grains through post-harvest losses due to lack of access to storage infrastructure.
Outcome Risks

Health effects may arise due to unsafe use of pesticide and agrochemicals in storage units.

Impact Risks

Alignment risk given production may not be locked into an enterprise model.

Efficiency risk given the high engagement of public bodies in this IOA.

What

Likely to have positive outcomes such as food security, employment opportunities, foreign exchange earnings, reduction in post-harvest losses.

Who

Small and medium-scale farmers, traders, offtakers, general population

Risk

Exchange rate fluctuations, market price volatility

Impact Thesis

Increase value added in food chains, prevent food waste, strengthen economic growth and generate decent jobs.

Policy Environment

Federal Government Agriculture Promotion Policy: This policy emphasizes the need to engage the private sector in building an agribusiness economy that can meet domestic food security goals, generate exports, and support sustainable income growth.(9)

There is a positive policy environment for private sector participation.

Financial Environment

Financial incentives: Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances.(15) Funding for agricultural value chain development is available within the Central Bank of Nigeria (Central Bank of Nigeria / Nigerian Incentive-Based Risk Sharing System of Lending / Bank of Agriculture / Nigerian Export-Import Bank).

Fiscal incentives: Section 33(3) of the Companies Income Tax Act (CITA) exempts the income of a company engaged in agricultural trade from paying minimum tax. Zero tariffs are extended for importing agricultural equipment.(15) Tax holidays are available for investing in processing plants in staple crop processing zones.(16)

Regulatory Environment

Land Use Act of 1978: Under this Act, State Governments grant land rights and access rights to the Federal Ministry of Agriculture and Rural Development (FMARD). It also transfers responsibility for outstanding construction contracts relating to the silo complexes and agro-processing unit purchase and installation.(10)

Public Procurement Act 2007: This Act regulates and establishes guidelines for public procurement. It also regulates the scope of action of the Bureau of Public Procurement, which is responsible for contracting and overseeing public-private purchasing (PPP) schemes. (11)

Infrastructure Concession Regulatory Commission (Establishment, Etc.) Act 2005: This Act regulates private sector participation in Federal infrastructure.(13)

Public Enterprises (Privatization and Commercialization) Act, Cap P.18 Laws of the Federation of Nigeria 2004.(12)

National Environmental Standards Regulations and Enforcement Agency (Establishment) Act 2007 (NESREAA) and 33 Regulations made by the Minister of Environment under section 34 of the Act: This Act and the Regulations prescribe environmental management regulation.(14)

Private Sector

Cold Hub, SGS Nigeria, Sahel Capital, Standard Chartered, Fledge Co, Factor Ventures

Government

NIRSAL (Nigerian Incentive-Based Risk Sharing System for Agricultural Lending), Ministry of Agriculture

Multilaterals

African Development Bank (AfDB), World Bank, International Finance Corporation (IFC), United Nations Industrial Development Organization (UNIDO), United Nations Environment Programme Global Environment Facility (UNEP/GEF), German Corporation for International Cooperation (GIZ)

Non-Profit

Acumen Fund, Raw Material Research, Bill and Melinda Gates Foundation

Public-Private Partnership

Africa Agriculture and Trade Investment Fund (AATIF)

country static map
rural
Nigeria: North West
Grain storage silos are most suited for the northern part of the country, where grain production is highest.
rural
Nigeria: North East
Grain storage silos are most suited for the northern part of the country, where grain production is highest.
rural
Nigeria: North Central (Middle Belt)
Grain storage silos are most suited for the northern part of the country, where grain production is highest.
Sector Sources
  • 1) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf 2) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G. (2019). Sustainable Development Report 2019. New York: Bertelsmann Stiftung and Sustainable Development Solutions Network (SDSN). 3) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning. 4) Dalberg (2020). Charting the future for Africa's largest economy: Economic impact of COVID-19 in Nigeria. https://dalberg.com/wp-content/uploads/2020/04/FINAL_Dalberg-Report-Charting-the-Future-of-Africa%E2%80%99s-Largest-Economy.pdf 5) Federal Republic of Nigeria (2011). Agricultural Transformation Agenda 2011.
IOA Sources
  • 6) Federal Ministry of Agriculture and Rural Development (2016). PPP transactions for 33 silo complexes in Nigeria. https://ppp.icrc.gov.ng/media/384 7) Energypedia (2020). ColdHubs - solar cold rooms in Nigeria. https://energypedia.info/wiki/ColdHubs_-_Solar_Cold_Rooms_in_Nigeria 8) Food and Agriculture Organization of the United Nations (2020). FAO in Nigeria. http://www.fao.org/nigeria/fao-in-nigeria/nigeria-at-a-glance/en/ 9) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning. 10) Land Use Act, Chapter 202, Laws of the Federation of Nigeria 1990. http://admin.theiguides.org/Media/Documents/Land%20Use%20Act.htm 11) Public Procurement Act 2007. https://goprs.unodc.org/documents/Public_Procurement_Act_2007.pdf 12) Public Enterprises (Privatisation and Commercialisation) Act. https://lawsofnigeria.placng.org/laws/P38.pdf 13) Infrastructure Concession Regulatory Commission (Establishment, Etc.) Act 2018. https://www.icrc.gov.ng/assets/uploads/2018/12/ICRC-Act-2018.pdf 14) National Environmental Standards and Regulations Enforcement Agency (Establishment) Act 2007. http://extwprlegs1.fao.org/docs/pdf/nig120569.pdf 15) Nigerian Investment Promotion Commission (2020). 3: Sector Specific Incentives. https://nipc.gov.ng/compendium/3-sector-specific-incentives/ 16) Federal Republic of Nigeria (2011). Agricultural Transformation Agenda 2011. 17) World-Grain.com (2019). Nigeria seeking grain self-sufficiency. https://www.world-grain.com/articles/11898-nigeria-seeking-grain-self-sufficiency 18) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf 19) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf 20) UNDP (2020). Human Development Report (2020). https://www.ng.undp.org/content/nigeria/en/home/library/human_development/the-2020-human-development-report.html