INVESTMENT SCOPING REPORT: ANALYSIS OF PRIORITY … · 2018. 4. 3. · February-April 2013, the...

JUNE 2014

This publication was produced for review by the United States Agency for International Development.

It was prepared by CARANA Corporation.

INVESTMENT SCOPING REPORT:

ANALYSIS OF PRIORITY INVESTMENT

OPORTUNITIES ON THE LAKAJI

CORRIDOR

NIGERIA EXPANDED TRADE AND TRANSPORT (NEXTT)

DISCLAIMER

This report is made possible by the generous support of the American people through the United States

Agency for International Development (USAID). The contents are the responsibility of CARANA

Corporation and do not necessarily reflect the views of USAID or the United States Government.

INVESTMENT SCOPING

REPORT: ANALYSIS OF

PRIORITY INVESTMENT

OPORTUNITIES ON THE

LAKAJI CORRIDOR


JUNE 2014


i

CONTENTS

CONTENTS i

INTRODUCTION 1

BACKGROUND 1

CRITERIA FOR SELECTION & PRIORITIZATION 2

SUMMARY OF OPPORTUNITIES 3

SHORT-TERM TARGETS 4

MEDIUM-TERM TARGETS 14

LONG-TERM TARGETS 16

NEXT STEPS 18


1

INTRODUCTION

This report contains a summary of the results of a scoping mission led by Mima Nedelcovych, NEXTT’s

Corridor Assessment Team Leader and Investment Advisor, for NEXTT’s investment pipeline on the

LAKAJI Corridor. The scoping trip was held in February 2014.

The scoping mission was a follow-on assignment to NEXTT’s Y1 assessment of agricultural investment

needs and opportunities on the LAKAJI Corridor. The objective of the assignment was to delve deeper

into several of the highest priority investments in NEXTT’s pipeline, liaise with project promoters to

detail the next steps required to finalize these deals, and develop a realistic timeline for facilitating each

deal, with the goal of mobilizing at least $5M in investment/financing in Y2.

In support of the objective above, the consultant held detailed discussions with 23 project promoters

and/or financiers representing the highest priority investments identified, in order to develop detailed

action plans (in the form of “Scopes of Work” (SOW)) to bring these priority deals to closure before

September 30, 2014.

This report includes:

Criteria for selecting and prioritizing investment opportunities to receive support by the

NEXTT project.

A summary of NEXTT’s priority investment opportunities, the mode of intervention to be

targeted, and the anticipated impact of NEXTT’s support, in terms of private investment on the

LAKAJI corridor.

Summaries of next steps and activities required for finalizing short-term investment targets.

These are based on the detailed SOWs created by the consultant, which are included in Annex

A. These SOWs will be used by NEXTT to develop Requests for Proposals (RFP) for Business

Development Services (BDS). The SOWs include recommended activities, associated level of

work (LOE), and recommended payment schedules tied to key deliverables. NEXTT will use

these SOWs as frames of reference when issuing RFPs and reviewing proposals submitted by

BDS firms.

Descriptions of medium-term investment targets that could become NEXTT’s pipeline for 2015.

Descriptions of long-term investment targets for 2015-2016.

BACKGROUND

The Nigeria Expanded Trade and Transport Program (NEXTT) seeks to improve trade policy, support

trade capacity building and remove bottlenecks to the free flow of goods, especially agricultural goods.

NEXTT builds on and extends trade and transport activities begun under the USAID MARKETS

(Maximizing Agriculture Revenue in Key Enterprise and Target Site) Project and on the export

promotion activities of NEEP (the Nigeria Expanded Exports Program).

NEXTT will contribute to food security and poverty reduction in Nigeria and support regional trade and

transportation objective by facilitating trade flows. It supports the African Growth and Opportunities

Act (AGOA) and complements agricultural productivity improvement efforts under the United States’

Government’s food security initiative Feed-the-Future, with three program activities: transport corridor

improvements, policy reform and trade facilitation, and expanded export support.


2

This follow-on assessment builds upon NEXTT’s previous work identifying and facilitating agricultural

investment opportunities on the LAKAJI Corridor. In an initial assessment conducted between

February-April 2013, the NEXTT team identified and profiled 33 high-priority, commercially viable

agribusiness investment opportunities along the 8 state corridor with a high potential for development

impact and improving trade flows on the corridor. The focus was on bringing small-medium sized

enterprises (SMEs) into the full agro-allied value chain to include inputs, production, processing,

warehousing, distribution and infrastructure. Those 33 project profiles were at the core of the

discussions and presentations during the launch of these findings at the LAKAJI Agricultural Growth

Corridor Investment Summit, held in Abuja in August, 2013.

The investment profiles highlighted the levels and types of financing required for various projects;

however, additional follow on work was required to identify how NEXTT could provide the technical

assistance support to push forward these opportunities from the idea stage to the facilitated

investment/financing stage. It is anticipated that the Project Development Facility (PDF) will be used to

finance some of the technical assistance (TA) required to facilitate these investments. By conducting in-

depth scoping on TA needs in anticipation of the roll out of the PDF, NEXTT is positioned to move

forward quickly when this happens, or utilize existing project resources for ‘quick-wins’ in the short-

term, and thus meet Y2 investment targets.

CRITERIA FOR SELECTION & PRIORITIZATION

As business is dynamic, certain deals in NEXTT’s investment pipeline advanced and others stalled since

the 2013 LAKAJI Agricultural Growth Corridor Investment Summit. The consultant’s mission was to

dive deeper into viable opportunities to move them closer to the finish line by outlining BDS

opportunities that could utilize NEXTT’s existing resources and anticipated resources through the

proposed PDF. This included short-term projects, achievable in the next six months, as well as the

identification of longer-term opportunities and partners for years 3 and 4 of the project.

The criteria for prioritizing opportunities for follow-on support are described in Table 1 below.

Table 1: Criteria for Investment Prioritization

CRITERIA EXPLANATION

1 Connection to SMEs The focus has been, and continues to be, on identifying and assisting SMEs

to be connected to, and to supply goods or services to larger companies,

if in fact they were not producing the final product.

2 Catalytic Potential The potential to add value and spur growth in their own and associated

value chains, reinforcing the need for a LAKAJI Corridor, whereby

investments are “crowded in” the growth corridor as a way to incentivize

focused infrastructure provision and trade up and down the corridor.

3 Diversity of Value

Chain Stages

Opportunities were sought all along the agro-allied value chain, whether

the investment was a greenfield start up or expansion that opened up

opportunities for SMEs. NEXTT is seeking opportunities in production,

processing, packaging, input supply, and logistics, which can be linked

together and re-enforce the effectiveness of investments.

4 Commercial Viability Investment opportunities must be commercially viable.

5 Gender Impact Special efforts were made to identify and profile women-owned

businesses.

6 Existence of Market

Demand

Strong market demand either for the domestic market or export market.


3

7 Export potential Given NEXTT’s target of increasing exports by $6 million prior to the

close of Y2, particular focus is also provided to targeted SMEs aiming to

export goods either directly, or via additional processing through a larger

company

8 Quick-wins The greatest effort went into selecting and doing a deeper dive on those

investment opportunities that were closest to fruition and for which

NEXTT intervention, through existing BDS services or a future PDF

window, could make a difference.

Based on the above criteria, eight prospects were selected for immediate/short term assistance by the

NEXTT team, 5 potential investments were identified for the medium term (2015) and 10 prospects

were defined for the longer term (2015-16). The eight short term/immediate opportunities are targeted

for some form of closure in the next six months with the concerted assistance of NEXTT, existing BDS

resources and the proposed PDF. For those prospects, detailed SOWs were developed with a

definition of the type of advisory/BDS required to bring them to a close. The five medium term

prospects will require further discussions to align interests and identify the requirements for bringing

them to closure. Briefs will be provided for these prospects for NEXTT/PDF staff to follow up on, with

a goal of bringing them to closure in early 2015. Finally, the list of 10 potential longer term investments

were profiled require further discussion by NEXTT/PDF staff over the course of 2015 to see if and how

they could be facilitated to bring them to closure.

SUMMARY OF OPPORTUNITIES

The companies targeted for short and medium-term intervention by NEXTT are identified below in

Table 2, including mode of intervention for BDS and estimated potential impact, by size of the

investment/financing package. If the PDF is operationalized by the end of May, and the opportunities

below are confirmed by the project selection committee, NEXTT could feasibly facilitate $25,300,000 in

financing by the end of the project year (October 2014). Several of these deals can be facilitated using

existing project resources.

Table 2: Short and Medium-Term Investment Priorities

NAME OF

PARTNER

VALUE

CHAIN STATE

INVESTMENT

OPPORTUNITY

MODE OF

INTERVENTION

IMPACT

(INVESTMEN

T USD)

Short Term Targets:

CDMA Projects Cassava Ogun

Secure 4000 ha

cassava farm/off take

agreement with Thai

Farms

Conduct feasibility

study and develop

business plan for

PPP development

4,000,000

Lisabi Mills

Maize, Bean

Flour Lagos

Rehabilitate and

upgrade maize custard

and bean flour

processing mill

Conduct market

study and develop

business plan

1,500,000

Wilbahi Industries Horticulture FCT

Locate and establish

fresh veggie

conditioning and

handling center

Update business

plan and identify

"pad" for industrial

site

10,000,000


4

A&Shine Honey Honey FCT

Establish bee farm for

honey production

Conduct pre-

feasibility study for

greenfield

investment

1,000,000

Nelsag Shea Niger

Expand shea butter

processing

BDS provision for

operating capital

and equipment

purchase

300,000

Strange Industries Shea FCT

Expand shea butter

processing

BDS provision for

operating capital

500,000

Dantata Industries Sesame Seed

FCT/

Kano

Secure greenfield

investment to develop

a series of sesame

seed oil processing

mills

Conduct feasibility

study and develop

business plan for

greenfield

investment

5,000,000

DANSA Tomato Kano

Develop small holder

tomato farm scheme

through support of

tomato producer

coops.

Conduct scoping

study and develop

business plan

3,000,000

TOTAL

25,300,000

Medium Term Targets:

Doreo Partners Maize Kaduna

Expand "Franchised

Farming" in maize

Finance one

coop/franchise;

training of trainers

TA; ICT

applications

300,000

Shoprite Horticulture National

Expand sourcing of

local produce

Survey prod. &

supply parameters

for 30+ new stores

1,000,000

Olam Cashew Oyo

Expand cashew

production in Ilorin

Develop business

plan for new

cashew

plantations/improv

ed varieties

2,500,000

Multi Trex Cocoa Ogun

Expand domestic

cocoa consumer

products

Structure

advertising

campaign for Moor

& Frangada

products

3,000,000

Access Mobile Poultry Oyo

Introduce digital

platform poultry

industry

Map Poultry Value

Chain and finalize

telecom and

financial

agreements

500,000

TOTAL

7,300,000

SHORT-TERM TARGETS

1. CDMA Cassava Farms – Ogun State


5

Sponsor: Ms. Foluke Michael, Principal Partner

Email: [email protected]

Mobile: +234 (0) 705 954 1105

OBJECTIVE

To move forward this investment NEXTT must engage a BDS provider to conduct a feasibility study,

due diligence and develop a business plan for the CDMA Cassava Farms investment in Ogun State. A

public commitment should be obtained by the investor to invest and lenders to finance at least the first

phase prior to September 30, 2014.

BACKGROUND & CONTEXT

Foluke Michael, CEO of CDMA Projects Ltd. has an “Implementation Agreement” signed off by

USAID/MARKETS II and Ondo State Agricultural Development Program to mobilize 500 farmers into

the program (with average 2 hectare farms each) with an off take agreement from Thai Farms to

purchase up to a total of 10,000 MT of tubers per annum. With farmers averaging 10 tons/hectare, and

each farmer having up to 2 hectares, CDMA can only supply the existing off takeof guaranteed by Thai

farms. Therefore, there is room for both increases in per hectare yield, as well as increases in the

hectares planted as orders grow.

Thai Farms is increasing its present processing capacity of 100 MT/day to 300 MT/day and could

ostensibly increase the off takeof agreement with CDMA to 30,000 MT or more. Assuming an average

of 10 tons/ha, that will require 3,000 hectares to fill the Thai Farms order. In order to meet that

increased order potential to supply to Thai Farms, CDMA has obtained the right to plant

and/or organize farmers on 4,000 hectares in nearby Ogun State, where the soil conditions and

availability lend themselves to cassava production. CDMA intends to build out the 4000 hectares of

cassava production over the course of 5 years, as it also expects Thai Farms and other millers in the

area to continue to increase their demand.

On the basis that the cost of development of each hectare of land amounts to approximately $1000/ha

the total development cost of this 4000 hectare project over the 5 years would run at least $4 million

without taking into consideration the cost of capital equipment (another approximate $1-2 million) and

working capital/input financing requirements. The detailed feasibility study will bring out all the

costs involved in the development of this project, as well as prove or disprove the viability

of the investment in terms of ability to provide an attractive return.

ACTIVITIES

The feasibility study and business plan to be conducted by the selected consulting firm should include

the following activities:

1. Conduct due diligence on existing agreements with Ogun State for the land and Thai Farms for

the off take of tubers.

2. Define estimated costs of land preparation on a per hectare basis.

3. Produce all elements of input costs for production and post-harvest handling up through

delivery to factory gate.

4. Establish requirements and cost of equipment, machinery and infrastructure.

5. Conduct overall market study for off-takers as alternatives or supplemental to Thai farms.

mailto:[email protected]


6

6. Perform full financial projections for 5 years with ramp up of production starting with the 60

hectares already cleared and planted to the ultimate goal of having 4000 hectares planted.

Include all standard parameters of loan reimbursements, working capital needs, rates of return,

sensitivity analysis, etc. in the projections.

7. Define all elements of input supply and manpower training requirements to maintain required

quality standards. Provision of Technical Assistance (TA) from Thai Farms as necessary.

Start date could be as early as June 2 upon completion of detailed SOW agreed upon with CDMA

Projects who will bear 50% of the total costs, plus success fee that will be included in the financing.

Completion date is 90 days from mobilization, which in this case would be August 31.

2. Rehabilitation and Upgrade of Lisabi Mills – Lagos State

Sponsor: Mr. Shex Ladipo, Managing Director


Mobile: +234 1 802 303 3590

OVERVIEW

The next step for moving forward this opportunity is engaging a BDS provider to develop a marketing

and business plan for the rehabilitation and upgrade of Lisabi Foods investment. A public commitment

should be obtained by the investor to invest and lenders to lend into the business prior to September

30, 2014.


Shex Lapido is the Chairman and CEO of Lisabi Mills, a family owned business dating back to 1939. The

company is a pioneer in the production of consumer sized convenience foods in Nigeria, including the

well-known Gold’s Custard Powder (vanilla, banana and strawberry), Yam Flour, Bean Flour, Wheat Mill

Flour, and Gold’s Wheat”O” and Choco product lines. The products come in attractively packed 2kg

and 500g plastic containers and 500g sachets. The Gold’s Custard Powder is in fact so popular,

capturing some 40% of the maize custard market, that it has spawned contraband imitations in the

market.

Lisabi Mills’ biggest problem is antiquated and dilapidated machinery, including the mills and packaging

lines, with overreliance on manual operations. This causes Lisabi Mills to be non-competitive and too

expensive in the market, hence incentivizing “knock-off” contraband products to capitalize on the brand

loyalty.

Therefore, Lisabi Mills must modernize and upgrade their mills and packaging lines to become more

price competitive and remove the margin for the counterfeit products to compete with them and take

away as much as 50% of Lisabi Mills’ market. This counterfeiting problem is a serious, asGold’s Custard

is 85-90% of Lisabi’s annual turnover and is currently 40% of the national custard market. Therefore,

simply regaining the “stolen” share of the market would mean significant profits for Lisabi.

Lisabi Mills is a family owned business at a critical juncture in their history at this moment. Their annual

sales are surpassing 250 million Naira and they must either modernize or upgrade now, capitalizing on

their brand name and the growth in the convenience food consumer market (largely due to the

urbanization of Nigeria) or they will fall prey to counterfeiters and outright competitors. As

Chairman, Lapido has received the green light from his Board to proceed to such a plant

modernization and restructuring of the business, and is keen on receiving assistance from



7

the PDF in doing so. A healthy growth and expansion of his business would be a success for SMEs in

Nigeria and a boon to the farmers producing the products for convenience foods, primarily based in the

north.

The growth strategy is based both on recapturing the “lost” share of the custard market

as well as diversifying into bean flour, and wheat “meal” flour, both items that are now

being driven by the more health conscious buyer. Market indications are that the urban wheat

“meal” flour market will surpass Naira 100 million per month. The marketing strategy is further

reinforced by a strong push to expand shelf space in the more modern super markets such as Shoprite,

where they have already achieved a 10-1 million Naira/month sales turnover.

In order to maximize production and reach efficiency goals to be able to supply the achievable growth

targets that have been set, Lisbi Mills expects to need some $500,000 to $1 million in financing for new

milling and packaging equipment and would need an operating line of credit to purchase raw materials

roughly in that same range. They have started some discussions with the Bank of Industry, but would

like to develop a complete business plan to also shop financing and equity partners if necessary more

broadly.

ACTIVITIES

The market study and business plan to be conducted by the selected consulting firm will conduct the

following activities:

1. Conduct a thorough market analysis for their existing and new product lines that Lisabi Foods

wants to introduce into the market, to include market share and competitor analysis.

2. As part of the marketing plan, propose alternative packaging designs and distribution channels.

3. Establish requirements and cost of new equipment, machinery and infrastructure, as well as

rehabilitating and upgrading existing equipment to meet the demands of the new production

lines and output targets.

4. Design full physical layout of packaging plant site and estimated costs.

5. Define input and working capital requirements to include origin, purchase and storage of raw

materials and all operating expenses.

6. Determine the manpower requirements, training needs, skill sets and associated costs.

7. Perform full financial projections for 5 years to include all standard parameters of loan

reimbursements, working capital needs, rates of return, sensitivity analysis, etc. in the

projections.

Start date could be as early as June 2 upon completion of detailed SOW agreed upon with Lisabi Mills

who will bear 50% of the total costs, plus success fee that will be included in the financing.

3. Wilhabi Industries – Horticulture and Poultry Farm in FTC

Sponsor: Ms. Wilma Aguele, CEO


Mobile: +234 (808) 014 6157

OVERVIEW

This investment requires an update to the Business Plan commissioned by Wilbahi Industries in 2011 for

the purpose of establishing a fresh vegetable conditioning and handling center in FCT. The consultant

must conduct the requisite due-dilligence and assist the company in identifying the best site to locate the



8

center and insure proper commitments by the investor(s), the lender(s) and government authorities

prior to September 30, 2014.


CEO Wilma Aguele established Wilbahi Industries in the early 1990s as an engineering concern and a

developer, investor and operator in a number of agricultural businesses in several States in Nigeria. Its

farming division manages 2 primary production units (farms) in Edo state in southern Nigeria. One

farm of 300 hectares, produces palm oil, while the other farm of 50 hectares holds cashew

trees and trails of pineapple. Discussions are also under way for a poultry/piggery project in

Lagos State, as well as a rice milling center in Edo State.

Ms. Aguele has a very commendable track record with her projects to date and the local financing

institutions are quite willing to support her. A feasibility study conducted 3 years ago identified very

strong opportunities for export of certain vegetables as well as a growing domestic market for quality

produce and vegetables, particularly in the Abuja area where the population has grown exponentially.

Other than updating the business plan and conducting proper due diligence, the most important

requirement is identifying the most suitably located “industrial pad” for the conditioning/packing center

and warehouse at the most attractive cost, hence the importance of the State Government linking into

the “vision”.

ACTIVITIES

The update and due diligence of the 2011 business plan to be conducted by the selected consulting firm

will conduct the following activities:

1. Conduct a thorough desk review and update all cost factors and financial projections of the

2011 Business Plan.

2. With the promoter, discuss if there are any changes in the business plan to be introduced.

3. As part of the review, conduct proper due diligence on both the suppliers in the chain and the

off-takers, domestic and international.

4. Set parameters for the most suitable location for the plant and identify the highest potential

sites.

5. Assist in negotiating with the State Government the most advantageous terms and conditions

for the real estate on which to base the plant.

6. Finalize the necessary financing which is in the range of $10 million for capex and $3 million for

working capital.

Start date could be as early as June 2 upon completion of detailed SOW agreed upon with Wilbahi

Industries who will bear 50% of the total costs, plus success fee that will be included in the financing.

Completion of assignment is expected before the end of September.

4. A&Shine Honey – FTC

Sponsor: Ms. Bukola Adeshina, Managing Director


Mobile: +234 (70) 84 34 91 22

OVERVIEW



9

This investment requires assistance from an expert in the honey business in the US, in association with a

Nigerian honey value chain expert, in order to conduct a pre-feasibility study on the establishment of a

new greenfield investment in a bee farm in FCT for supplying the existing domestic market being

presently met by the company, as well as securing potential export markets to the US. The purpose of

the pre-feasibility study is to determine whether supplying the US markets is feasible, as well as

establishing the detailed terms of reference for a full feasibility study and business plan to be conducted

for supplying the Nigerian market irrespective of whether US market is a target or not. The goal is to

define a specific scope of work for proceeding to a full feasibility study and business plan within the next

three months.


A&Shine Honey is a family business, founded in 2000 and currently owned by Bukola and Ademola

(Fatai) Adeshina, In 2013 they produced and sold 90 tons of honey into the Nigerian market,

with total sales of Naira 78 million, of which Naira 6 million was sold to Shoprite for the

first time.

In the past, the honey was being sourced from their bee farms in the Incubator Center in Minna, which

they have since abandoned as the farms were vandalized by “bee hunters” who burn the hives to chase

away the bees in order to harvest the honey (a non-sustainable proposition). As a short term solution,

they have opted to purchase raw honey for the moment from independent suppliers to meet their

customer demand. Utilizing labs they own, quality control and packaging of the product is completed at

their site in FCT just outside Abuja.

The future intention is to establish a proper bee farm on 12 hectares, which they acquired in FCT on a

50 year lease basis. This land will produce high quality pure natural honey (as well as honey blended with

moringa or other natural herbs) for both domestic and export markets. The goal is to integrate the bee

farm with orchards and horticulture that would provide an additional cash flow from sales of fresh fruits

and produce (initial discussions are ongoing with Shoprite) to the business. They are also studying other

product lines natural to the bee hive business, including natural candle making.

To date all the business activities and expansion has been self-financed due to lack of ability to access

affordable financing. They had purchase orders from Whole Foods, who wanted to buy the

raw product in drums, but apparently the scale up in orders was such that they needed

external financing beyond their means and therefore could not execute. The two consultants

should focus on the potential for structured trade possibilities while conducting a pre-feasibility and

defining the detailed SOW for the full business plan.

ACTIVITIES

The pre-feasibility and scoping study to be conducted by the selected US based honey value chain expert

and Nigerian value chain expert will conduct the following activities:

1. Review A&Shine existing operations and analyze the potential for A&Shine Honey to enter into

the US market.

2. Establish the market niche and minimal quantity and quality of supply of honey product that

could enter into the US market.

3. Establish the potential for supplying and size of the domestic Nigerian and regional ECOWAS

market (desk study).


10

4. Define detailed SOW for a full feasibility study/business plan for growing the A&Shine honey

business into the Nigerian, regional ECOWAS and US markets, as seen by and justified as

potentially feasible by the two consultants.

Start date could be as early as June 2. The US consultant costs should be covered 100% by NEXTT

while the cost of the Nigerian consultant should be covered 50% by A&Shine Honey. Completion date is

45 days from mobilization, which in this case would be July 17, at which point the decision would be

made whether to proceed to the full feasibility study/business plan.

5. Nelsag – Shea Processing in Niger State

Sponsor: Ms. Nelly Osagie Ndaguba, CEO


Mobile: +234 (70) 41 03 35 54

OVERVIEW

Nelsag Enterprises requires assistance with formulating a business plan, financial spreadsheets and a loan

application justifying a working capital loan to purchase raw shea nuts for processing. The goal is to

secure such financing in the next 120 days in plenty of time for the beginning of the shea nut harvest

season in October.


Nelly Osagie Ndaguba owns Nelsag Enterprises which has been processing shea nuts since 2008 into

shea butter and shea soap. All processing is still conducted primarily manually due to the limited volume

she is processing. She would like to increase that volume, which to date has not topped 2 tons finished

product p.a. ($4,000 value) on the basis of 6 tons of beans purchased at an average price of $300/ton

($1,800 value). While she has an operating and net profit after paying her workers, it is a very small

business that needs some minor financing facility before she embarks on purchasing processing

equipment to take the next step. The BDS provider should help Nelsaq Enterprises acquire the first

financing facility to grow the company to a stage where the following year, purchasing equipment for

further expansion is feasible.

ACTIVITIES

The business plan, financial projections and loan application to be completed by a BDS firm will conduct


1. Due diligence on the suppliers of the raw nuts, buyers of the product and integrity of the

processing equipment.

2. Conduct cashflow analysis to determine the ability to repay the loan applied for

3. Assist in the completion of the loan application and negotiations for the most favorable terms

and conditions.

Start date could be as early as June 2, allowing more than sufficient time to complete and negotiate a

financing facility prior to shea nut harvesting season beginning in October.

6. Strange Industries – Shea Processing in FTC

Sponsor: Mr. Femi Solagbade, CEO





11

Mobile: +234 (80) 90 87 46 76

OVERVIEW

Strange Industries requires assistance with formulating a business plan, financial spreadsheets and a loan

application justifying a working capital loan to purchase raw shea nuts for processing. The goal is to

secure such financing in the next 120 days in plenty of time for the beginning of the shea nut harvest

season in October.


Femi Solagbade is an electrical engineer who in 2011 created the “Sheatraction” processed shea brand

for the local Nigerian market. He works closely with the communities in Niger State to collect the nuts

and processes them in Bida where he has some processing equipment. He has purchased an average of

Naira 7 million in raw nuts in the past couple of years and would like to procure a financing facility to

facilitate the purchasing ofnuts directly from the community rather than intermediaries who offer nuts

on terms. In addition he would utilize the financing facility to increase the volume of nuts he purchases

as he has idle processing capacity.

ACTIVITIES

The business plan, financial projections and loan application to be completed by a BDS firm will conduct


1. Due diligence on the suppliers of the raw nuts, buyers of the product and integrity of the

processing equipment.

2. Conduct a cash flow analysis to determine the ability to repay the loan applied for.

3. Assist in the completion of the loan application and negotiations for the most favorable terms

and conditions.

Start date could be as early as June 2, allowing more than sufficient time to complete and negotiate a

financing facility prior to shea nut harvesting season beginning in October.

7. Dantata Industries – Sesame Seed Processing in FTC/Kano

Sponsor: Alhaji Tajuddeen Dantata, Chairman/CEO


Mobile: +234 080 34 08 20 02

OVERVIEW

The next step required for moving forward this investment is hiring a BDS provider to complete a

feasibility study and develop a business plan for a green field investment to set up a series of sesame

seed processing mills under one industrial roof and operation in FCT. The feasibility study and business

plan will serve to secure the project financing necessary to undertake an investment that would be in

the range of $5,000,000 and Dantata is trying to obtain by the end of the year. The processed sesame

seed oil will be produced primarily for export markets, adding value to an otherwise raw material

exported without value addition.




12

Nigeria’s average annual production of sesame seed is approximately 400,000 tons, all of which today is

exported in raw form without any value added processing. Sesame seed is grown in many of the

northern states, including big production in the corridor states of Niger, Kano and Katsina. Dantata’s

aims to establish a sesame seed processing plant to produce sesame oil primarily for export (Japan and

China), as well as for some local consumption and sesame seed cake byproduct for poultry feed.

Dantata plans to establish an oil mill complex in FCT with an annual processing capacity of 60,000 tons

of seed per annum. This will impact thousands of farmers in Niger, Kano and Katsina, as it will take

15,000 hectares to produce that quantity of seed at an average production of 4 tons/hectare. The

project will have a major impact on adding value to exports with 15% of sesame production

now being exported with value added.

Moreover the investment will empower women and young entrepreneurs. Plans include one large mill

of up to 100 tons/day (valued at $1.0-1.5 million) within the same complex with up to 50 stand-alone 3

ton/day mills (valued at $20,000-25,000) all producing sesame seed oil and cake for Dantata Foods.

While some efficiency will be lost with the smaller mills, it will enable more entrepreneurs to enter into

the business, and ease the problem of a very large labor force to be managed by Dantata. It is an

interesting and innovative concept that would need to be carefully investigated by the expert

consultants. The total capital cost for the project would run in the region of $3 million, but would also

have to be attached to a sizeable working capital facility as sesame seed today on the market sells for

$1000-2000/ton. A working capital loan for raw materials to the industrial facility would also allow the

provision of raw materials to go out to independent oil mills.

Dantata is in discussion with the “Raw materials Development Research Council” to organize the

proper supply chain of raw materials and has negotiated a long term lease on a 10 hectare industrial site

with the FCT Government on which to base the processing facility. This includes all the storage bin

requirements to allow sesame seeds to be purchased when most competitively priced. As the business

develops there are also plans to put up a solvent extraction plant that would push processing capacity

up to 500-600 tons per day.

The overall capital costs for the industrial facility are estimated to be in the $5 million range with a

revolving working capital requirement for purchases of raw materials that could be in the $10 million

range if sesame seed is sold at $1000/ton and the facility is processing 60,000 tons/year. The working

capital requirement for purchasing raw sesame seeds would be guaranteed by the stock of seeds in the

storage facilities.

ACTIVITIES

The market study and business plan to be conducted by the selected consulting firm will conduct the

following activities:

1. Conduct a thorough market analysis and due diligence for the export potential of sesame seed

oil and the foreign markets/buyers to target, as well as the opportunities for selling cake and oil

into the local Nigerian market.

2. Conduct supply chain due diligence to insure sufficient throughput of sesame seed for the

designed size of the processing facility.

3. Establish requirements and cost of new equipment, machinery and infrastructure, to include the

large industrial mill as well as the 50 smaller mills.

4. Design full physical layout the industrial plant site and estimated costs.


13

5. Define input and working capital requirements to include origin, purchase and storage of raw

materials and all operating expenses.

6. Determine the manpower requirements, training needs, skill sets and associated costs,

particularly when integrating independent millers into the overall facility.

7. Perform full financial projections for 5 years to include all standard parameters of loan

reimbursements, working capital needs, rates of return, sensitivity analysis, etc. in the

projections.

Start date could be as early as June 2 upon completion of detailed SOW agreed upon with CDMA

Projects who will bear 50% of the total costs, plus success fee that will be included in the financing.

Completion date is end of September, 2014.

8. DANSA – Tomato processing in Kano

Sponsor: Alhaji Sani Dangote


Mobile: +234 70 30 91 62 53

OVERVIEW

This opportunity requires a scoping study which will investigate ways that small holder tomato farmers

can be brought into the supply chain for the DANSA tomato processing facility (initially producing

tomato puree) and prosper from the value chain. The processing plant being developed has the

capacity to process 1,200 tons of tomatoes/day and assuming 250 days operations the

annual requirement for tomatoes is 360,000 tons. Today’s average small holder produces 10

tons tomatoes/ha. With Syngenta seeds and crop protection, the indication is that they can increase

production to 40 tons/ha and the ultimate goal is to get 80 tons/ha from seedlings produced in the

greenhouses. Even taking a very optimistic average target of 50 tons tomatoes/ha (averaging commercial

farms with small growers) that would amount to a requirement of 6,000 hectares planted in tomatoes.

It is clear that a processing facility of that size creates a great opportunity for integrating smallholder

farmers. The first step is a physical inspection of the site and detailed discussions with the Dangote

Group investors. A tomato value chain expert must travel to Kano to investigate the possibilities and

draw up a SOW for a full business plan that would incorporate the small farmers into the scheme.


Nigeria is the world’s largest importer of tomato paste and sauce. DANSA is completing the

construction of a processing facility that will process 1,200 tons of tomatoes per day. They are

collaborating closely with Syngenta for the provision of improved seeds and crop protection. To

stimulate and boost higher quality production and introduction of improved varieties, DANSA is also

establishing a large number of greenhouses that will produce seedlings to be disseminated to outgrowers

for increased and quicker production. The missing component is the proper organization of the small

farmers as contract growers in the scheme, both to assure supply to the factory, as well as to

beneficiate those small growers. Before entering into major business planning and outreach

exercises, a tomato value chain expert must be sent to the field to conduct due diligence.

ACTIVITIES

The scoping study will require the consultant to:



14

Identify specific opportunities for supporting/financing tomato growing cooperatives or

independent owner/operators of greenhouses that grow the new seedlings for sale to

outgrowers.

Discuss further with DANSA possibilities for subcontracting and out sourcing to SMEs.

DANSA estimates they will need tomato production from 16,000 hectares, of which they want

some 40% or over 6,000 hectares to be in the hands of independent contract farmers. Further

opportunities could be defined for independent truckers to be transporting the tomatoes to

the plant (using 30 ton trucks, the requirement will be for 400 truck/trips per day).

The start date could be as soon as June 2. The LOE is estimated to be 7 days for site visit and report

writing. The consultant will need to be a tomato value chain exert and most likely will be an

international consultant.

MEDIUM-TERM TARGETS

1. Doreo Partners – “Franchise Farming” maize in Kano

Sponsor: Kola Masha, CEO


Mobile: +234 805 500 0350

Groups of 3-10 farms organized in “trust groups” to be provided training, credit, inputs and

market access for delivering maize at a contract price. A “caretaker” of the trust groups

manages up to 25 franchises. Scheme known as “Baban Gonna”” (“Better Farms”) is funded

primarily by DFID and private investors. Possible interventions to explore:

a. “Sponsor” one of the trust groups or finance one of the inputs across all the trust groups

b. Provide “training of trainers” modules in their MIK Training Institute

c. Support weather insurance costs

d. Propose full scale ERP mobile application

2. Shoprite – National Supply and Demand Survey for Fresh Produce

Sponsor: Ronnie Ferreira, Director, Freshmark


Mobile: +234 803 535 6768

Shoprite presently has 7 supermarkets with 6 new sites in the process of development, and a

target of 44 stores in the next few years. Freshmark is the in house supplier of fresh produce to

Shoprite. Each supermarket represents approximately a $20 million investment. Shoprite

procures from 54 farmer groups, primarily in Jos area, and is cognizant that they will need to

expand the farmer market base (they only purchase produce directly from farmer coops)

beyond Jos to supply their rapidly growing supermarket chains. Possible interventions to

explore:

a. A survey along the LAKAJI Corridor to identify new farmer coops that would be able to

supply the new Shoprite supermarkets that are springing up.

b. Identify ICT applications connecting farmer groups to Shoprite as a supply chain

management application.

3. Olam Nigeria – Ilorin Cashew Processing Plant

Sponsor: Mukul Mathur, Country Head


15


Mobile: +234 709 317 79 58

Olam is a major agro-industrial group in Nigeria and recently invested $52 million to expand

their cashew processing facility to 36,000 ton annual production in Ilorin, Oyo State. Part of the

facility expansion included a major warehouse valued at $15-20 million. Olam purchases a total

of 45,000 tons of cashews per annum, processing 35,000 tons and trading 10,000 tons of raw

cashews. Olam has a challenge with processing cashews from what are old trees in Nigeria and

have embarked on an initiative for Walmart to plant improved tree varieties. Possible

interventions to explore:

a. Initiate new plantations of improved cashew varieties with coops in the region.

b. Sublease excess warehousing space available to shea nut producers in the area.

4. Multi-Trex Integrated Foods – Cocoa Products for Local Consumption

Sponsor: Sade Bafunso, Executive Director


Mobile: +234 803 324 7718

Multi-Trex has a major cocoa processing facility in Ogun State where they produce cocoa liquor,

cocoa butter, cocoa cake and cocoa powder with a turnover of nearly Naira 9 billion per year.

In addition to the traditional cocoa processed for exports, Multi-Trex formulated and developed

two finished and packaged consumer drinks for the local market, under the Moor and Frangada

labels. Each of the products is in early infancy and have only just surpassed $100,000 in annual

sales. Multi-Trex are industry leaders in producing cocoa based drinks for the local market, and

are working on a market entry and marketing strategy. Possible interventions to explore:

a. BDS support for operating capital to expand the business.

b. STTA to devise marketing and sales campaign for new products with a view to expanding

domestic market for cocoa based drinks.

5. AccessMobile – Mobile Supply Chains Solutions SME

Sponsor: Kahwa Douoguih, Chief Operating Officer


AccessMobile is a mobile supply chain management solutions provider active in East Africa. They

build business–management software systems for business and other institutions that are usually

too small to buy versions made for western markets. In Uganda they help health clinics manage

medications, and support coffee washing stations in Rwanda to keep track of their various

buyers and sellers. AccessMobile is interested in working in Nigeria. They have developed a

Software as a Service (SaaS) product for the poultry industry, with modules for hatcheries,

slaughterhouses (and “broiler” ops) and sales. They are prioritizing Nigeria as the market for

this product. Possible interventions to explore:

a. Map poultry value chain to determine who are the major contributors, where are they

located, which segments are they operating in, etc.

b. BDS support to finalize agreements with telecom providers and financial agreements with

banks for additional operating capital


16

LONG-TERM TARGETS

1. Sahel Capital – FAFIN Fund Managers

Sponsor: Mezuo Nwuneli


Mobile: +234 802 291 0380

Sahel Capital is managing the FAFIN Fund, a $100 million (first tranche of $34 million just

closed) equity fund targeting SMEs in the food sector. The fund is supported by a number of

Development Finance Institutions (DFIs), including KFW and the Ministry of Agriculture. FAFIN

focuses on expansion capital for brownfield investments. The target is to fund 5 investments

per year. The opportunity lies in sharing pipeline development for deal flow throughout the

LAKAJI Corridor.

2. Legacy Investments – Equity Capital and Structured Finance

Sponsor: Enitan Obasanjo-Adeyele


Mobile: +234 808 757 5116

Legacy Investments is a young firm of “returnee” Nigerian investment bankers that is

aggressively seeking deals throughout Nigeria. The opportunity is for sharing pipeline

development for deal flow throughout the LAKAJI Corridor.

3. Grofin Nigeria – SME Finance Fund

Sponsor: Charles Chikezie


Mobile: +234 1 279 8046

Grofin is focused on SME financing with targeted companies having assets under $5 million and

looking for $100,000 to $1.5 million financing. Not averse to equity but prefer debt with 3 to 5

year tenors. The opportunity is for sharing pipeline development for deal flow throughout

LAKAJI Corridor.

4. APM Terminals – SME Finance Fund

Sponsor: Tristram Denyer


Mobile: +234 703 414 1827

APM Moeller Terminals has a major port depot in Lagos and is a full logistics company keen on

investing in rolling stock and developing Internal Container Depots (ICD), two of which are on

the LAKAJI Corridor, Ibadan and Kano. They are awaiting an imminent government declaration

giving them dry port status. The main obstacle to major investments on their part is a

reform/recall of the Railway Act of 1956 that maintains railway investments in the monopoly

realm of the Government and thus impedes the formation and implementation of PPPs all along

the rail line. The opportunity lies in providing STTA to try to unlock investments in this arena

by demonstrating to the Nigeria Government what investments could occur with a reform of

the Railway Act of 1956. The reform of that Act would go a long ways to stimulate investments

along the LAKAJI Corridor.

5. Dangote Rice Mills – New Rice Plantation and Mill in Niger State


17

Sponsor: Graham Clark


Mobile: +234 815 098 3260

Dangote announced major investments in rice plantations and mills ($300 million) with one of

the first investments slated for rice production in Niger State in alliance with the Badagra Staple

Crop Processing Zone. The design calls for a large nucleus core plantation surrounded by small

growers all feeding into the same mill. The nucleus farm will provide inputs to the small

growers and guarantee off take for their paddy, at which time the input costs will be deducted.

The opportunities include identifying, supporting and financing the growth of small rice farmers

around the Dangote rice mill in Niger State.

6. Flour Mills of Nigeria – Wide Variety of Agro-Allied Investments

Sponsor: Olusegun Falade


Mobile: +234 809 832 5233

Flour Mills of Nigeria, already a major agro-industrial group in Nigeria, is expanding rapidly with

a Naira 200 billion investment plan aimed at agro-allied business opportunities. The

investments are across various value chains, including many along the LAKAJI Corridor. This

could offer opportunities for NEXTT to support the growth of SMEs and small farmer suppliers

to the larger agro-industrial facilities owned and managed by Flour Mills of Nigeria. Some

investment examples include supplying a new poultry farm in Ogun State, supplying Premier

Feeds in Ibadan, supplying Thai Farms with cassava (case of CDMA) and opportunities

surrounding large new sugar cane and rice farms being planned in Kwara and Niger States.

7. Odu’a Investments – Wide Variety of Agro-Allied Investments

Sponsor: Adebayo Jimoh


Mobile: +234 2 203 1136

Odu’a Investments is a para-statal organization that owns large tracts of land, much of it

irrigable, in 5 states, Oyo, Ogun, Lagos, Osun and Ekiti, three of which fall inside the LAKAJI

Corridor. Odu’a Investments is seeking to establish PPP investments in a number of agricultural

value chains whereby small farmers would be included alongside larger nucleus commercial

agricultural and agro-industrial processing projects. Odu’a Investments is also focused on

training youth farmers whereby our interests would be aligned in supporting small farmers and

SMEs.

8: Leyland Busan Motor Company – Tractor Assembly

Sponsor: Sam Nkposi


Mobile: +234 803 318 0694

Leyland Busan Motor Company took over the UK Leyland Bus Assembly facility in 2005 after

the latter went into receivership. The plant has several huge factory shells that used to

assemble 3-4 ton trucks. Presently only a very small part of the facility assembles SKD 6-7

meter mini buses (23-28 seaters). In 2012, the facility assembled just over 200 units, while the

installed capacity is for 2000 units per annum. The facility is strategically located near the Ibadan

Inland Container Depot and at the entry into Ibadan. There is an opportunity to establish a


18

SKD tractor assembly facility, easily supplied thru the Ibadan ICD, to supply the rapidly growing

agricultural production along the LAKAJI Corridor. Such a facility would also spin off a large

number of SME support facilities.

NEXT STEPS

Though not an exhaustive list of opportunities in NEXTT’s pipeline, these opportunities represent some

of the ‘lowest-hanging fruit’ investment deals that the project is supporting. Next steps to be undertaken

by the NEXTT team and partners are outlined below.

NAME OF

PARTNER:

NEXT STEP(S): PERSON(S) RSPONSIBLE:

Short Term Targets:

1 CDMA Projects Hold media event to announce investment

partnership and state govt support.

Connect with contracted BDS providers.

Follow-up to obtain partnership agreements.

Consider for PDF funding once PDF is

operational.

NEXTT Export and Business

Development Specialist, LAKAJI

Corridor Development

Manager

BDS Providers

2 Lisabi Mills Connect with contracted BDS providers.



operational.




Manager

BDS Providers

3 Wilbahi Industries Connect with contracted BDS providers.



operational.




Manager

BDS Providers

4 A&Shine Honey Connect with contracted BDS providers.



operational.

Hire STTA consultants if necessary.


Development Specialist

BDS Providers

5 Nelsag Connect with contracted BDS providers.



operational.



BDS Providers

6 Strange Industries Connect with contracted BDS providers.



operational.



BDS Providers

7 Dantata Industries Connect with contracted BDS providers.



operational.




Manager

BDS Providers


19

8 DANSA Contract consultant to conduct due-diligence

scoping to identify outgrower suppliers




Manager

Medium Term Targets:

1 Doreo Partners Explore prospects for full scale ERP mobile

application

NEXTT Agribusiness Investment Advisor

conduct follow-up scoping mission

NEXTT ICT Investment

Specialist

NEXTT Agribusiness

Investment Advisor

2 Shoprite Identify ICT applications connecting farmer

groups to Shoprite as a supply chain

management application




Specialist

NEXTT Agribusiness

Investment Advisor

3 Olam Conduct follow-up meetings with Olam to

evaluate how NEXTT can support new

plantations of improved cashew varieties with

coops in the region.

Support the integration of Olam into the

LAKAJI Alliance, and support advocacy efforts

to reinstate/improve the Export Enhancement

Grant

NEXTT Cashew Expert




Manager

4 Multi Trex Connect to BDS providers to facilitate access

to operating capital to expand business.



NEXTT team to investigate needs for

marketing and sales campaign for new

products, in order to connect to appropriate

BDS services

NEXTT Agribusiness

Investment Advisor




Manager

5 Access Mobile NEXTT team to support Access Mobile with

research on the poultry value chain and

potential partners.


Specialist

Long Term Targets

1 Sahel Capital Continued follow-up with Sahel Capital to

share pipeline opportunities




Manager

NEXTT Cashew Expert

2 Legacy

Investments Continued follow-up to share pipeline

development for deal flow throughout the

LAKAJI Corridor.




Manager

NEXTT Cashew Expert

3 Grofin Nigeria Continued follow up to share pipeline

opportunities on the LAKAJI Corridor.




Manager

NEXTT Cashew Expert

4 APM Terminals Support advocacy efforts to reform the

Railway Act of 1956

LAKAJI Corridor Development

Manager


20

Continued follow-up on investment

opportunities.

LAKAJI Alliance

5 Dangote Rice

Mills Continued follow-up with Dangote to discuss

prospects for NEXTT to support integration

and financing of small rice farmers around the

Niger rice mill.




Manager

6 Flour Mills of

Nigeria Continued discussion with Flour Mills of

Nigeria on investment plans, and provide

matchmaking with NEXTT supported SMEs

(For ex., Thai Farms, CDMA, Premier Feeds)




Manager

7 Odu’a

Investments Continued discussion with Odu’a Investments

on PPP investments they are targeting and

provide matchmaking with appropriate

NEXTT supported SMEs.




Manager

8 Leyland Busan

Motor Company Continued discussion with Leyland on

capacity utilization and expansion plans, and

investment matchmaking with possible

international investors (for ex. EXIM)




Manager

Date post:	02-Sep-2021
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

INVESTMENT SCOPING REPORT: ANALYSIS OF PRIORITY … · 2018. 4. 3. · February-April 2013, the...

Documents