AfDB invests $9mn to support enterprise in Nigerian agriculture
The African Development Bank (AfDB) at the weekend said it has approved a $9 million equity investment in the Fund for Agricultural Finance in Nigeria (FAFIN).
The amounts, which represents approximately 12 percent of the fund’s capitalization, is to provide expansion capital to agricultural small and medium-sized enterprises (SMEs), the bank said in a statement posted on its website.
FAFIN is a first-generation private equity fund that provides financial, capacity-building and technical assistance to commercially viable SMEs in the Nigerian agribusiness sector.
The fund tries to accomplish this through a unique value chain-centric approach, and using a combination of equity, quasi-equity and convertible loan instruments.
FAFIN implements its strategy and constructs its portfolios through a bifocal lens consisting of the twin objectives of competitive financial returns and measurable positive social impact.
The fund is jointly sponsored by the German KfW Development Bank and the government of Nigeria, through the federal ministry of agriculture and rural development (FMARD), and is managed by Sahel Capital Limited, a fund management firm incorporated in Mauritius in 2013.
The project is expected to deliver strong development outcomes from household benefits and employment through the creation of a large number of jobs and the provision of certain agricultural products.
Others are positive gender and social effects through the implementation of out-grower schemes and supporting rural development; and private sector development through alleviation of financial constraints faced by agribusinesses and enhancing agricultural value chains.
The project’s contribution to inclusive growth is expected to be significant, given the large numbers of jobs to be created and out-growers to be reached at the level of sub-projects.
The Fund’s primary focus will be on SMEs across the agricultural value chain with crop value chain and geographic diversification.
It aims at fixing broken value chains to increase efficiencies, reduce post-harvest loss, and increase smallholder farmer incomes and SME agribusiness profitability.
Investment instruments will be primarily quasi-equity (convertible bonds, preference shares and structured royalties) and direct equity. The ticket size ranges from USD 500, 000 to USD 5 million.
The Fund is aligned with the Bank’s Ten Year Strategy focusing on inclusive growth, strengthening agriculture and food security, and access to local SME finance; which is encapsulated in the Bank’ High Five Development Agenda for Africa, specifically Feed Africa and Industrialise Africa.
It is also in line with the Bank’s Strategy for Agricultural Transformation in Africa (2016-2025), Strategy on Jobs for Youth in Africa (2016-2025) and the Bank’s Country Strategy Paper for Nigeria (2013-2017), which supports an enabling environment for agriculture.