PREAMBLE
The agricultural potential of Nigeria is barely being tapped and this explains the inability of the country to meet the ever increasing demand for agricultural produce. Although the agricultural sector remains a dominant employer of labour, serious investment is needed across the board to enhance production and increase the contribution of the sector to GDP. Hence the need for local and foreign investment in Nigerian agribusiness sector. The agricultural industry in Nigeria is the largest sector of the country’s economy, consistently contributing an average of 25% of the total GDP, employing about 70% of the total labour force. The sector accounts for over 70% of the country’s non-oil export. Nigeria has enormous agricultural resources, most of which are yet to be fully exploited.
Nigeria is the 10th most populous country in the world and as a result ought to be one of the top 10 contributors to the global Gross Domestic Product (GDP). The projection of world population growth projected that Nigeria will become the third most populated country of the world by year 2050, thus displacing United States of America. And the only feasible means of sustaining this alarming population growth is through sustainable investment in agribusiness.
ADVANTAGES OF AGRIBUSINESS INDUSTRIES IN NIGERIA
As a result of the recent downward swing in economic activities in Nigeria that resulted in general economic decline and the resultant effect of a drop in the stock market, increase in unemployment etc., Nigeria is considered by many to be one of the countries sliding into economic recession. Hence the urgent need to reverse the ugly trend of the said economic recession.
Driven by the need for economic growth and sustenance through diversification, the Nigerian government is hoping to initiate a transition of the Nigerian economy from a mono product economy to a more robustly based one that offers opportunity for real growth.
To achieve this objective, a lot of hope is being placed in the Agricultural Sector in particular. Although the viability of the agricultural sector to generate significant revenue and the desired economic growth may be arguably low for now; this however does not rule out the investment opportunities that the sector presents to local and foreign investors.
A World Bank report and collection of development indicators reveals that the Nigerian population is growing at a rate of 2.8%, while food production increases at 1.5% per annum. Thus the population is rising faster than food production and supply. Agriculture remains the base of the Nigerian economy, providing the main source of livelihood to most Nigerians.
According to an expert projection, agribusiness as a contemporary global concept can generate at least one million jobs every year. Agribusiness is a seamless combination of agriculture with business, manufacturing, science, information technology, infrastructure, trading, and marketing. Thus it is the whole gamut of value chain from soil management, to crop, live-stock or poultry production, to harvest, storage, agro processing, packaging and branding as well as marketing and distribution.
In this Issue our objective is to provide an overview of the investment opportunities that the sector presents and the incentives available within the existing legal and tax framework.
Areas of Opportunity: The following is merely a simple guide to those aspects of agribusiness that present opportunities for investment.
LIVESTOCK FARMING AND CROP PRODUCTION
Investors can expect a relatively high yield from the production of cash crops such as cassava, cocoa and cashew, which are viable for export. The restriction on imported agricultural goods also provides an opportunity to meet the huge demand by commercial retailers and individual consumers.
The Government’s objective is to provide food security and provide export earnings by encouraging private sector investments. Companies engaged in the cultivation, processing and preservation of food crops, and deep sea fishing are entitled to a five year tax holiday. They can also carry losses forward indefinitely.
Support of Agro-allied Industries:
Agro-allied industries are those industries that are dependent on agriculture for the raw materials needed in producing their finished goods. Without the production of these raw materials, these industries will cease to exist. The shift in focus to agriculture provides an opportunity to service these industries.
REGULATORY FRAMEWORK/AGENCIES FOR AGRIBUSINESS IN NIGERIA
The regulatory framework for agribusiness in Nigeria encompasses laws that govern land use and acquisition, incentives, and organisations that monitor the different aspects of agricultural production. These regulatory agencies include:
The National Agency for Food and Drug Administration and Control (NAFDAC) regulates and controls the manufacture, importation, exportation, distribution, advertisement, sale and use of food, drugs, cosmetics, chemicals, detergents, medical devices and packaged water. Potential investors in the agricultural business with the aim of exporting processed or semi processed food commodities are required to register with NAFDAC.
The Standards Organization of Nigeria (SON), which regulates the standard of machineries and equipment imported into the country. Investors are mandated to obtain a permit known as the SONCAP import permit from SON before importation of any farm machinery and equipment or related parts for fabrication agricultural implements.
The National Agricultural Quarantine Service (NAQS) is charged with a responsibility for the prevention, introduction and spread of animal and zoonotic diseases, as well as exotic pests of plants and animals & fisheries, including their products. NAQS enforces import and export compliance with agricultural quarantine control measures, international agreements, protocols, convention and treaties on agricultural quarantine and such other agricultural quarantine agreements as may from time to time come into force.
Companies engaged in the manufacture of agricultural machinery and equipment are exempted from tax payment for five-years, known as a tax holiday; those engaged in fabrication of spare parts, tools and equipment for local consumption are entitled to a 25% investment tax credit while companies that purchase locally manufactured plant, machinery or equipment for use in their businesses are entitled to a 15% investment tax credit on such assets. Importers of agricultural machinery and equipment shall incur 0% duty and are exempted from VAT.
We conclude this essay by reaffirming our earlier assertion that Nigeria is highly endowed with enormous and rich agricultural resources. With its huge youth population, the prevailing socio-economic environment is indeed ripe for agribusiness investment.
In spite of the current challenges facing the Nigerian economy, its agricultural sector still remains economically viable for investment both at the local and foreign levels. Prospective investors must however seek professional advice on the most efficient ways to structure their businesses when seeking opportunities in the Nigerian agricultural sector.
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