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The need to feed the country’s large and growing population as well as provide jobs for the over 23 million unemployed Nigerians are the top reasons investors find the agribusiness and power sectors most suitable for impact investments.
According to Wale Adeosun, CEO of Kuramo Capital, there is over $270 trillion worth of global commercial capital out there, and if Nigeria can go where the money is and get 1 percent of the capital, it will be able to address most of the funding needs.
“I think wherever there is a hard problem there is opportunity to make an impact, and so power and agribusiness are a priority,” Mezuo Nwuneli, managing partner at Sahel Agribusiness Managers Limited said at the fourth IIF Annual Convening on Impact Investing.
Nwuneli said his company was largely focused on agribusiness because that is where they make their mark and for many different reasons – food security.
“How do you match the problem with the opportunity – we have a very large population that is going to add close to 70 million people in the next 10 years. How are we going to feed these people?” he asked.
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Nigeria’s post-harvest food loss, estimated to be worth over $1 billion per year, is one of the factors responsible for the country’s food insecurity. In sub-Saharan Africa, the post-harvest losses should be enough to feed at least 48 million individuals, according to a 2019 Food and Agriculture Organisation (FAO) report.
According to the Nigerian government, Nigeria needs at least $1.5 trillion over 10 years to achieve an appreciable level of the national infrastructure stock.
“Power and agribusiness are the top sectors we’ll want to invest in. Food security is key and they both create jobs,” Adeosun said, adding that all the value chains of agribusiness have huge prospects for impact investment potential and “power, which is obviously, where we are big on.”
Explaining that his company invests in Nigeria’s power industry as it creates jobs, Adeosun said during a panel session with the title ‘Identifying and Unlocking Impact Potentials in Nigerian Enterprises’ that his company “provides electricity that powers pretty most of the water consumed in Lagos.”
For Nigeria to lift millions of its population out of extreme poverty, the most populous nation in Africa would need to first fix its power sector that has left about 120 million people with less than an hour’s supply of electricity, according to industry analysts.
An electricity tariff that is cost-reflective and free of any form of subsidy is one of the first steps to achieving a steady power supply, the Nigeria Economic Summit Group said.
According to AIION, an independent company funded by Royal Dutch Shell, about 120 million Nigerians do not have access to electricity or have less than four hours.
This translates to 14.2 million households and 4 million SMEs who do not have access to electricity (currently off-grid) in Nigeria.
“The way I think about it is that there are some basic needs required to be alive and that includes food, water and housing, and the others,” Nneka Eze, managing director of VestedWorld, said while explaining what impact investment meant.
Acknowledging the fact that many areas need impact investment in Nigeria, Eze said “agribusiness is top on the list,” not just “because of my experience but because it is critical for food security.”
According to industry players, the absence of high-quality investment opportunities with a good track record in the country is one of the reasons Nigeria lacks the much-needed impact investments.
Impact investors have diverse criteria for selecting projects. So, failure to meet these criteria might deny a firm of impact investing alliance.
Largely driven by two major criteria, impact investors consider the goals of generating a financial return on investment within a given period, and, realize the stated impact objectives in its field of operations
This suggests that for Nigerian companies and projects to attract the desired level of impact investments, their promoters must be sure those two objectives must be present and sustainable, analysts said.
Another hurdle firms in Nigeria must overcome to get the needed impact investment is to be able to state clearly the problems they are addressing. What exactly is the focus of your investment? Which problem are you trying to solve?
According to the industry players, the ability to pitch the project in clear terms will go a long way to attract impact investors in the appropriate areas.
Impact investors in Nigeria have also been faced with the challenges of finding easy ways to exit their investments across a broad spectrum of sectors. Many factors are responsible for this, which include shallow financial markets for listed firms while several firms are not even listed on the Nigerian Exchange Group.
