How to start a farming business in Nigeria

Following Nigeria’s recent economic recession, business emphasis has been shifted from the oil sector to other sectors with the aim of diversifying the economy. Evidence of this shift of emphasis is the Government’s increased efforts to make the agricultural sector more productive and competitive through various  loans, grants and programmes.

Starting a business in Nigeria’s agricultural sector has always been something I’ve been interested in, so I sat down to interview, Uka Eje, a friend of mine who has tried out a number of entrepreneurial ventures in farming. He was kind enough to give me a few tips on how to launch a farming business and I will be sharing those tips with you in this article. Here are four practical steps to help you launch a farming business in Nigeria:

Step 1: Identify a farming problem

The very first step to take when starting a farming business is to identify a problem that people have and focus on solving that problem. A few months ago, Uka launched Thrive Agric, a technology driven agricultural company that crowdfunds from individuals and corporate bodies that have interest in agriculture. The funds are invested in a farm with promised returns after a farming cycle.

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However, before starting this company, he worked with a lot of farmers around the country and during his interactions with them, he identified two key problems that they faced. These key problems involved the supply and demand of farming products.

Supply problems

On the supply side, he noticed that farmers around the country had three major challenges:

• Firstly, they were experiencing low yield from their farms because they didn’t have a full understanding of standard practices in agriculture.
• Secondly, they didn’t have enough money to scale mainly due to lack of financial knowhow. For instance, they did not understand the concept of separating revenue from profit or know that they had to cost their labour and apportion personal salaries from their revenues. As a result, they were spending all their earnings and could not scale their businesses.
• Thirdly, they did not have access to profitable markets, which led them to sell their produce at unfavourable and demotivating prices.

Demand problems

As a result of the aforementioned supply problems, market players who demanded produce from these farmers suffered. For instance:

• People in the nearby villages needed more farming produce than the farmers were able to provide.
• Also, processing companies in Lagos and other parts of the country wanted more raw materials than these farmers were able to supply.

The identification of these problems was the trigger that led to the creation of Thrive Agric. Simply put, Uka wanted to produce enough to meet internal demand for food.

If you can also identify a farming-related problem around you and devise a plan to solve that problem, then you’d have taken the first necessary step to starting up your farming business.

Step 2: Close the knowledge gap

Once you have highlighted a farming-related problem that you want to solve, the next step is to close up the gap between what you know about that problem and what you need to know to be a successful farming entrepreneur.

There are two avenues you can use to hack this:

• Seek agricultural education: You could get knowledge from available material (doing online courses or reading books) on the problem you are looking to solve.
•  You could leverage the knowledge other people have acquired, by consulting experts in the field you would like to venture into; Nigeria has a whole lot of smart people to learn from, the problem is we hardly look out for them.

I would personally advise that you use a mix of these two avenues, because having a good understanding of your farming enterprise is a major key for success. Not having this understanding could prove quite costly, and Uka used a personal story to explain how;

Short story

In 2014, he launched a poultry farm where he reared about 450 chickens. An important part of any farming venture is its individual agronomic practices and for poultry farming, this involves – scheduled administration of vaccines, keeping the birds in a good temperature and generally understanding their behaviour.

He ran this business primarily based on the knowledge he had acquired through numerous hours of online research. Online information, however, is often unstructured which leaves a lot of room for knowledge gaps. The resulting gaps in knowledge of agronomic practices led to him failing to properly administer the required vaccines. As a result, he lost almost 100 out of the 450 birds he was rearing at the time.

Luckily for him, the University of Agriculture is in Benue state and he was able to meet up with a friend who specialized in animal husbandry. His friend was kind enough to organize a schedule training visit for him on what to do to better understand animal behaviour.

So, if you are looking to start a farming business, it is important to firstly, affiliate yourself with the right expertise/knowledge and secondly, be inquisitive and prepared to learn. As much as you will want to hire a specialist, nothing can replace you having a working understanding of the field you are going into.

To help you start reducing the knowledge gap in farming, here are the basic things you will need to know before starting a farming business regardless of what type of farming you are looking to go into:

Right input

The right input refers to healthy animals, quality seeds, fertilizer from a reputable company, pesticides and insecticides. I would advise that seeds for planting are gotten either from seed research institutes or from approved institutions look out for seeds from IAR (Institute for agricultural research).

It’s important to know the source of your inputs because the wrong seed variety or fertilizer mix can lead to poor yield. At Thrive Agric, before deciding their choice for fertilizer and other inputs, they carry out a soil test to determine the nutrient requirement of the soil. It is this information that directs them to what composition of fertilizer to use or input requirement of the soil. This meticulousness is important when launching a farm

Proper management

There is an old saying – “a castle crumbles with poor supervision”. Management is an integral part of any farming business and it involves – proper supervision, knowing when/what your crops/animals need to aid its growth, knowing the soil requirement, water retention, rainfall requirement, signs of disease infestation and also how to solve pest attacks.

At the early stage of growth in your business, it is best you act as the extension/farm manager; and even if you have grown to a level where you can afford extension services, you must still ensure that all these checks are considered. Lack of proper management will kill your farm business before it sees the break of day.

Site Selection

Where your site is to be located is an important part of your farming business. A lot of people don’t know this but there is a difference between land and soil. While land is generic, soil refers to the right environment that favours specific crop production under a right condition.

Some pieces of land in Nigeria were planned for real estate and have lost their topsoil (which is primary for crop farming); it is important to ensure that you always do a soil test analysis before you choose what/where to farm. It is also important to locate your business in a place close to your produce market and consider cost of logistics and accessibility.

Security

Security from pest attack and theft of produce is an important aspect of any farming business, especially when you have a large farm. I also advise ALL farmers to insure their farms after all due diligence is done in order to protect themselves from unforeseen circumstances like fire, drought, floods etc.

Step 3 – Raise capital

After all is said and done, the primary factor that limits a lot of potential farming businesses is the money to start. However, in any business venture, it is important that you start with as little as possible and learn to grow patiently. With that being said, here are three ways you can raise capital to fund your farming business:

Through personal finances: Starting a farming business with your personal finances will typically require you to fund the farm with money that you have saved up for some time. This is the most advisable way to start a farming business because it helps you test out your farming idea, learn valuable lessons and gather useful information before bringing external parties into the business in the form of loans or equity.

This was Uka’s experience when he started Thrive Agric. Initially, he and his co-founder used cash they had saved up (₦60,000 to be exact) to start the business. It was their desire to scale the business and the lessons they had learnt from their previous farming businesses that helped them grow the business sequentially before they got the confidence to bring external parties into their business.

Now at Thrive Agric, they pool funds from their subscribers to buy portions of farms and after the contracted period, the clients are paid back their capital along with their promised returns. You can find out more about how this process works here. Remember, it’s important to start with what you have, to get to where you want to be.

Through partnership/equity funding: This is when a percentage of shares in the farming business are sold in exchange for capital to start your business.

Through loans: Loans from a financial institution or even from close friends and family can be used to fund ideas. However, at this junction, I must strongly advise against starting your business on loans.

It is wiser to save up and use your money to invest in the farm business at the initial stage, test the waters, before considering a loan agreement for your business. There are too many uncertainties when starting a business to add the certainty of paying back a loan.

Step 4: Launch

The last step is to officially launch your business. The version of your farm that you launch may not be where you want it to be, but it is imperative that you take a bold first step and start somewhere, learn from any mistake you might make and scale as you go about your business.

No one ever knows it all when they start, so the fact that you do not have all the information you would require should not hinder you; you must keep learning and keep yourself abreast with current trends in the farming business because this information will help in expanding your business operations.

Well that’s it for now. The four steps highlighted above should provide you with the basic information you need to start a farming business in Nigeria. Now that you have this foundational information, I challenge you to go ahead and start your farming business. Together, we can create economic prosperity across Africa through Agriculture.

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