Nigeria’s federal government is currently in bilateral negotiations with the Brazilian government for a $1.1 billion agriculture package intended to lift the country’s present subsistence farming and create needed jobs.
The package, proposed by Nigeria’s ministry of agriculture on behalf of the federal government, is for Brazil to bring in agricultural machinery and equipment which will be assembled in the country.
The South American country known largely for tropical agriculture will also import inputs, including fertilizer, seeds, pesticides etc; as well as services like training, project management amongst others to help agricultural output in the Africa’s largest nation.
As contained in the project document prepared by the ministry and seen by BusinessDay, the project will be financed by the Brazilian Exim- Bank (BNDES).
The term of financing will be 13 years including two years of grace period and 10 years for repayment. It was also gathered that the agreement is expected to be signed before the last quarter of the year.
Ricardo Guerra de Araujo, Brazilian new Ambassador for Nigeria confirmed to BusinessDay that talks had advanced on the project and that what is going on presently is basically discussions on the terms of the agreement.
“The package that we are negotiating with the Nigeria side is of $1.1 billion that will be entirely financed by the Brazilian government with credit guarantees by the Brazilian insurance companies. The Islamic Development Bank will also support this financing structure,” Araujo told BusinessDay in an exclusive interview.
BusinessDay leant that the whole project cost will be divided in three tranches, the first one of $380 million, the second one of $310 million and the third $310 million for machinery. But when inputs and services are added, it will amount to the first tranche of $420m; the second tranche, $343m; and the third tranche $343, totaling $1.1 billion for the entire project cost.
According to what is being proposed, the Central Bank of Nigeria (CBN) will make available to the local banks concessional resources to cover the working capital seeds of the services centers for the first two years to ensure sustainability of the project and also aid financial inclusion.
“The idea is to get machineries of course, and provide fertilizer, the seeds, pesticides, training for project managers,” the Ambassador explained. “What we wanted to do in Nigeria is not just export
machines but to help Nigeria develop the whole value chain from the export of the machines to the training, to the maintenance of these machines.
“The idea really is not just to export these agricultural equipment but to assemble these machines here in Nigeria,” the Ambassador who resumed in the Nigerian embassy in June explained.
Confirming that a big Brazilian exporting manufacturer has already located a place in Bauchi state to site the assembly factory, he added, “ The assembly plant will build this CKD Completely Knocked Down, so they will not arrive the Nigeria market already ready to be used.
“It is the Nigerian workers especially young people who will assemble the parts and then sell the final product in the Nigeria domestic market.
Brazil is globally important for both food security and environmental sustainability. It is one of the three largest producers and exporters of sugar, coffee, orange juice, soybean, beef, tobacco, ethanol, and broiler chicken in the world.
The country is notable for tropical agriculture and science-based development of successful tropical agriculture.
Both countries are enthusiastic that the project would create a technological leap for the Nigerian agriculture sector resulting in increased productivity and quality of agricultural products,
particularly as the two countries share almost similar agricultural experiences as well as soil structure, climate and so on.
Specifically, what Nigeria stands to benefit from the project include, permanent training programme for adoption of best agricultural practices for small Nigerian farmers, market access guarantee for the products produced by small holder farmers through purchase agreement
with the service centers,.
It is also expected that there would be a reduction of imports of products of plants and animal origin, by promoting local production; creation of a maintenance system of machinery, equipment and also a spare parts distribution network to optimize their use and reduction of acquisition costs, among other benefits.
Speaking specifically on how the project will be financed, Araujo explained, that the “Brazilians have a development bank, that will provide probably a great part of the finance and then the local banks will come on board to make the financing available for the project.”
The Ambassador whose greatest mission is to deepen bilateral cooperation between his country and Nigeria, especially in agriculture indicated that the most difficult part of the package is to build a
credit guarantee structure for the project which according to him is “another negotiation that is taking place right now between the two governments.”
“There is an insurance bank that is probably coming on board, Islamic bank is going to come on board to provide the credit guarantee,” he stated, as he confirmed that the project has been approved already by the National Economic Council.
“I was invited to come to the economy council two weeks ago which is presided by the vice president, with the ministers, the governors, and the whole bilateral project was approved at that level.
“Now what is going on is getting details, credit guarantees and all that is needed to put the whole package in place in a short time.“
Onyinye Nwachukwu, Abuja
