Examining $200m agro partnership between NSIA, Old Mutual

Nigeria is making frantic efforts to ensure that agriculture and allied services play a key role in its quest for economic and revenue diversification.

                  

This stems from the humongous negative impact of drop in oil prices on the economy, which includes recession and unemployment.

 

To support the current diversification drive and mitigate the impact of oil price, the Nigeria Sovereign Investment Authority (NSIA) recently entered into a $200 million arrangement with Old Mutual Investment Group (OMIG) and UFF Agri-Fund for the establishment of agro investment vehicle that will boost agricultural productivity and ensure food security in the country.

 

The fund is expected to promote rural economic development and will be invested in the entire value chain, while addressing the infrastructural gaps in the agricultural sector.

                               

Indubitably, one of the greatest problems confronting rural farmers and communities in Nigeria is the absence of critical infrastructure such as ‘motorable’ roads. Farmers continue to suffer low levels of agricultural productivity due to infrastructural deficit across the country, which reduces their profit and impact their capacity to expand.

               

“The main reason our economy has not grown in the way it should have is our lack of infrastructure.  The problem with agriculture is infrastructure. It is not that we don’t grow enough but it is that very often it rots in the field because it is so difficult to move it out or to store it,” said Kemi Adeosun, Minister of Finance, during the signing ceremony held recently in Abuja.

“One of the meetings I’m going to next is a meeting in the privatisation of rail because until you can move goods from the farm to where they are sold efficiently, we can’t be competitive,” Adeosun said.

According to Adeosun, it is cheaper to move goods from China to Lagos than move them from Kano to Lagos because the country does not have good infrastructure base.

 

The provision of critical infrastructure is a pre-requisite for enabling Nigeria stimulate economic growth and to reach the targets for economic diversification.

 

The finance minister stated that developing agriculture is very critical in the country’s efforts to diversify, which can only be achieved if heavy investments are made in infrastructure.

 

“The platform which NSIA and Old Mutual Investment Group have created can be replicated elsewhere, where we bring the local knowledge and the local capital that the NSIA brings and international best practices and international capital, working together to invest in specific opportunities within Nigeria, to create Nigerian jobs and Nigerian opportunities,” Adeosun said.

 

The NSIA’s proposed investment Fund is $25 million, with matching capital from Old Mutual, bringing the first close to $50million while an additional capital of $150million is then expected to be raised from 3rd party investors, bringing the fund to a final close of $200million.

 

 Uche Orji, managing director and chief executive officer, NSIA said, “In agriculture, it is equity that we are investing. There are several strands to what we are doing in agriculture. We are looking at industrial-scale farming with particular focus on things that can be exported.”

 

The fund will increase private capital investment in the country’s primary agriculture and integrate poorer sections of the population into a sustainable process of economic growth and development.

 

In turn, this will reduce poverty by providing jobs directly and indirectly that will serve as a stimulus to the Nigerian economy and agricultural sector.

 

“Our dealings with agriculture as an asset class have shown that it has already gained huge momentum globally but is still in its infancy in Africa. This presents a significant investment opportunity for both local and international investors,” said Diane Radley, CEO, Old Mutual Group.

 

 “We all know there will be more than nine billion people inhabiting this planet by 2050 out of which 25 percent will be based in Africa. And food security to ensure social stability is an economic imperative. For us, it is a no brainer to be investing in agriculture,” she added.

The investment will also attract international capital and expertise to the sector, say experts.