igeria has a great potential to be Africa's agriculture

powerhouse. In February 2017, Nigeria's then NActing President Professor Yemi Osinbajo while

speaking at the National Institute for Policy and Strategy

Studies (NIPSS) stated that Nigeria has about 84 million

hectares of arable land, of which only about 40 per cent has

been cultivated.

Nigeria used to be a major player in the global agricultural

market in the past, as the world's largest producer of

groundnuts and palm oil in the 1960s, and the second

largest exporter of cocoa. The country was also self-

sufficient in food production before the emergence of oil in

the 1960s. Notwithstanding the inadequate attention over

the past decades, the sector has continued to produce

major commercial crops such as beans, sesame, cashew

nuts, cassava, cocoa beans, groundnuts, kolanut, maize

(corn), melon, rice, millet, palm kernels, palm oil, plantains

and rubber among others.

Some progress has also been recorded in the sector in

recent years. Between 2011 and 2014, national food

production grew by 21 million metric tonnes and led to a

sharp reduction in food imports. Nigeria's food import bill

also fell from an all-time high of N3.19 trillion in 2011 to N635

billion in 2013; an estimated 403 per cent reduction while

direct farm jobs rose by 3.56million in the period 2012 to

2014.

In June 2016, the Federal Government of Nigeria (FGN)

released a comprehensive agriculture policy titled

Agriculture Promotion Policy (APP) to build on the

achievements of the preceding administration which

implemented its own Agriculture Transformation Agenda

(ATA) implemented between 2011 and 2015 with some

significant results already highlighted above.

D O I N G B U S I N E S S I N N I G E R I A 2

T h i s me mo r a n d u m h a s b e e n p r e p a r e d b y G e o r g e E t o mi & Pa r t n e r s ( “ G E &P ” ) t o g u i d e a f o r e i g n c o mp a n y w i s h i n g t o d o b u s i n e s s i n N i g e r i a .

The focus of the APP is to promote self-sufficiency in food

production and increase foreign exchange earnings

through agriculture exports. The APP also places emphasis

on partnership with private investors across farmer groups

and companies to develop end to end value chain

solutions. This is understandably in line with government's

desire of encouraging private participation in the national

economy through the provision of financial support to

farmers as well as improving the supply of specialised

fertilisers and high yielding seeds.

Aligning with the plans of the FGN for self-sufficiency and

calls for the diversification of the economy from over-

reliance on crude oil sales, a number of private-sector led

initiatives have taken root in food processing including a $20

million tomato processing factory built in Kano by the

Dangote Group while some state governments like Lagos

and Kebbi states have collaborated on rice production and

distribution. These events among others reflect renewed

interest in the agriculture sector and the sector's growth by

3.01 per cent in the second quarter of 2017 contributed

significantly to the 0.55 per cent growth in the national Gross

Domestic Product (GDP) which made Nigeria exit its worst

recession in 29 years.

From the foregoing, it is clear that Nigeria's agriculture sector

holds the potential for more growth and presents a veritable

opportunity for investors to take positions as the economy

rebounds alongside an attitudinal adjustment among

Nigerians as to the potentials of the sector. Potential

investors in agriculture may do well to take note of the

following:

FEDERAL GOVERNMENT SUPPORT:

As can be gleaned from the APP, the FGN intends to boost

system productivity, reduce post-harvest losses and

expand market access related activities. The government

has also outlined plans to facilitate access to finance and

investment development for agri-business in Nigeria. These

efforts will help to address some of the challenges in the

sector such as poor farming methodologies, lack of access

to finance, post-harvest losses due to lack of storage

facilities, unreliable power supply, poor transport

infrastructure and unattractiveness of farming in terms of

return.

FUNDING:

There are a number of funding options now available to the

agriculture sector. These options include the Cottage Agro

Processing (CAP) Fund managed by Nigeria's Bank of

Industry (BoI) to support the establishment of cottage agro

processing plants that will produce food products and raw

materials; the N750bn Agriculture Intervention Fund

provided by the FGN; and the Nigerian Incentive-Based

Risk Sharing in Agricultural Lending (NIRSAL) scheme

facilitated by the Central Bank of Nigeria (CBN) and the

Federal Ministry of Agriculture and Rural Development. The

NIRSAL scheme guarantees 75 per cent of loans provided

by Deposit Money Banks (DPB) to farmers as part of efforts

to transform the country's agricultural sector.

Other sources of funds include the Bank of Agriculture

which is supervised by the agriculture ministry and has a

mandate to provide sustainable agricultural financing

services; social entrepreneurship grants from notable

philanthropic organisations and loans from commercial

banks.

There are certain conditions attached to securing funding

from any of the above-mentioned institutions and potential

investors will need to be guided by legal and commercial

advisers on how best to meet the requirements and

structure the loans to ensure the growth of the business.

LAND ACQUISITION:

Land for agricultural purposes may predominantly be found

in rural communities. The acquisition of such lands may be

done by negotiating with family heads and other identifiable

persons. Section 6 of Nigeria's Land Use Act confers power

on local government authorities to grant a customary right of

occupancy to any person or organisation over non-urban

land within its jurisdiction for agricultural, residential and

other purposes. Where the land to be used is however

located in an urban area, the investor must of necessity

register the transfer of title from the vendor and secure the

consent of the governor upon payment of applicable fees. It

is very important that the governor's consent is sought as the

absence thereof invalidates the transfer of title.

Acquisition of land from the local government is similar to

what is obtainable from the Governor with the exception of

the fee, which may be less than that of statutory right of

occupancy. A customary right of occupancy cannot be

granted to an individual in excess of 500 hectares for

agricultural purposes and not more than 5,000 hectares for

grazing purposes, except with the consent of the Governor.

A possible challenge to securing loans is the difficulty in

using land as collateral as the transfer of title in such lands

D O I N G B U S I N E S S I N N I G E R I A

must be registered with the state government to be

effective. This may significantly delay the process. Under

the FGN's APP however, the agriculture ministry has

undertaken to pursue an amendment of the current Land

Use Act to facilitate the recognition and entitlement of land

ownership by formal or customary means to assist

collateralisation. For foreign investors who are otherwise

precluded from land ownership under the Land Use Act,

such investors may consider the alternative of incorporating

Nigerian entities through which the land(s) can be acquired

or leased.

WATER PERMITS:

Investors need to apply for and secure necessary permits

for the use of ground and surface water resources for

irrigation purposes where applicable. A legal adviser can

assist with this process.

SEED PRODUCTION AND DEVELOPMENT:

The Livestock Breeds and Crop Variety Registration, Testing

and Release Act 1987 and National Agricultural Seeds Act

1992 regulate various aspects of seed production, variety

development and propagation, variety registration, release

and certification of seeds and quality control activities in

Nigeria. Under the National Agricultural Seeds Act, the

Nigerian Agricultural Seeds Council located in Abuja and

headed by the Minister of Agriculture and Rural

Development is the only body responsible for monitoring,

co-ordination, and certification of the production and

distribution of seeds in Nigeria. Where investors in the

agriculture sector intend to undertake activities in this

regard, it becomes necessary to pay closer attention to the

activities of the concerned regulatory body.

TAX INCENTIVES:

The cultivation, production and processing of food crops

among other activities in the agriculture value chain enjoy

the benefit of the Pioneer Status Incentive. The Pioneer

Status Incentive (PSI) is in itself a fiscal incentive under the

Industrial Development (Income Tax Relief) Act designed to

help the benefiting corporate entities cut down on overhead

cost through tax exemption for an initial period of three years

which can be renewed for an additional maximum period of

two years.

Other tax incentives include exemption from paying the 5

per cent Value Added Tax when importing machineries for

agricultural purposes, as allowed under Section 3 of the

Value Added Tax Act; 25 per cent investment tax credit for

companies engaged in the local fabrication of agricultural

equipment, as allowed under Section 28 of the Companies

Income Tax Act (CITA); 10 per cent tax relief granted to a

company in the first year of purchase of plant and machinery

used for agricultural production; rural investment allowance

the percentage of which varies according to the level of

facilities in the rural area where the investment is; and tax

incentives applicable to export processing zones.

Prospective investors will also need the support of

experienced advisers to take maximum advantage of these

various tax incentives available to players in Nigeria's

growing agricultural sector.

CONCLUSION

Nigeria has a fast-growing population already over 180

million people with close to 60 per cent of its arable land yet

to be cultivated. These factors among others present

opportunities for investment in various segments of the

agricultural sector which include crop production; food

processing and preservation; livestock and fisheries

production; agricultural inputs supplies and machinery as

well as water resources development; commodity trading

and transportation; and the development and fabrication of

appropriate small-scale mechanized technologies for on-

farm processing and secondary processing of agricultural

produce.

A number of private investors have already taken the lead in

recent months by going into strategic partnership and

arrangements with state governments to establish rice mills

and other food processing plants close to the source of

farm inputs. Many farmers have also benefitted from the

Presidential Fertiliser Initiative and the Anchors Borrower

Programme of the CBN among other initiatives opening up

the sector for increased participation.

It is our considered opinion that now is a good time for

interested investors to structure befitting entities to invest in

desired segments of the sector which is poised for more

growth. As legal practitioners, we are available to provide

relevant advice and further enlightenment on the

opportunities discussed above.