Founder and Chief Executive Officer, FarmKonnect Agribusiness Nigeria Plc, Azeez Saheed is using innovative alternative financing models to reshape agricultural business. In this interview with reporters in Lagos, he speaks about the opportunities and challenges of new farming systems. TOFUNMI SANUSI was there.
Generally, how would you describe agribusiness in Nigeria and what are the challenges?
Well, there’s only one thing to say about agribusiness in Nigeria, that it is growing maybe not at the pace that it should but I think that it is growing. I also think we have not tapped up to 20 per cent of our potential. This is not based on data but on my assumption and knowledge of the industry. So, the potential is still very huge.
In terms of financing, how do you get your finance?
Great! We have diverse finance. We have a project we call agricultural real estate, which looks at the earning power of agriculture and merges it with the stability of Real Estate and we also practise controlled farming systems whether greenhouses, floating cages, nethouses, chicken and snail pens to give optimal environment for our crops and animals.
These are expensive structures, so we approach commercial scale agriculture through agricultural real estate, we are the first agricultural real estate company in Africa, so people who can’t afford a large scale farm can actually own a part of a large scale farm where the large scale farm is managed under a single unified management system. Simply, people can buy a greenhouse and put it on our farm (for those who don’t have time to do it themselves) or have it in their backyards. So, we will run the farm for them, we will off-take their produce for them, we will sell the produce for them, we’ll share the profit with them, which ranges from 70:30 to 80:20, depending on the type of deal.
We have five management models which include the Mudarabah, the Green Fix 1 and 2, Green Flex 1 and 2 models. The Mudarabah model is Sharia compliant, which also allows the owner to put the farming facility on our farm, we manage it for the person and we share the profit and the loss. One can actually buy any of these farming products and keep either in your farm or in ours. If you want it managed by us, you keep it in our farm and if you want us to help you with training your people, we’ll provide you with input and support including data.
We also have support from banks which include Jaiz Bank, non-interest banking (NIB) arm of Sterling Bank and other banks but Jaiz Bank has been very supportive to us, we also have other financial organisations that have supported us.
As a matter of fact, several banks have approached us to do business. We relate with three banks – Jaiz Bank, Sterling Bank and FCMB but the first two are the banks that have hands in our business. We have gotten a lot of goodwill from Jaiz Bank and Sterling Bank NIB. As a matter of fact, Islamic finance has reshaped my thought and orientation about banking even though many may be religiously biased, Islamic finance is open to all and sundry. Generally, with the way things have been, I’d advise people to consider Islamic finance for their banking especially in the area of agriculture.
How does the financing model work?
We had a financing model that we got from Jaiz Bank, Ijara. What Jaiz Bank does is very similar to agricultural real estate. What we got from Jaiz Bank is exactly what we got from Sterling NIB. They buy you greenhouses and give it to you and use the greenhouse as collateral, some of them have spent two to four years and then as we are working we pay rentals. Gradually you see yourself peacefully paying off the debt while you’re still making profit on the property that had become collateral.
For instance, I need 1 Billion Naira, it is not easy for me to get collateral for 1 Billion Naira but they asked what I wanted to buy. So, we are paying the supplier to supply you 1 Billion Naira worth of this asset, so when the asset arrives, we put an insurance system on it, the bank ensures all of that and then you start operating this. Some even give a moratorium of three months followed by an additional three months of quarterly repayment.
This is a very simple approach to agricultural finance and I will implore more farmers to talk to banks like this, to find out structure that fits their business.
What are the advantages of horticulture and what makes it better than normal farming?
First, we need to define both terms, that is “horticulture” and “normal farming”. Horticulture is simply the practice of garden cultivation and management. However, “normal farming” on the other hand is a very broad term. It includes both livestock and crop and perhaps other services that support all these so I cannot say that horticulture has an advantage over normal farming. Perhaps, the question needs to be rephrased like maybe when you talk about modern farming or climate smart agriculture as against the conventional method of agricultural. Based on this, “modern agriculture” is called modern because it’s an improvement on what we have been doing the crude way. For instance, in Aircraft, we have a lot of improvement in the smartness, agility, efficiency, delivery time and time on task, as well as the safety of these aircrafts. Similarly, in computers, we have super smart computers having terabytes of RAM. The same goes for modern agriculture, we have examined the ways we do things, checked the progress of things and the way we can improve them so normal farming as it were also known as conventional farming can be likened to a poverty programme because you cannot maximise yield or gather data; you have no control over what you can do. However, in the modern approach to agriculture, you are able to monitor the progress of activities on your farm, improvement, challenge, expenditure; you want to have as much insight as possible to know the next step to take; you want to maximise profit and minimise wastages; you want to convert your waste into energy, manure and protein. So, modern agriculture helps us to have quality food rather than just putting seeds to ground and adding fertilizer. It is about doing the best to ensure that there is best yield in whatever we do.
How would you describe the importance of agriculture to the growth of our economy?
Thank you very much. I see agriculture as a critical part of Nigeria’s economy, contributing over 20 per cent to the GDP. We control 2.21 per cent of the world total agricultural land. Over 80 per cent of our land are arable, meaning that we hold a lot of potential especially with a population of over 67 per cent of people who are at the peak of their energy. We only need to understand how we can control and utilise these resources. We are very close to the equator, somehow, we have good sunlight year-round and the water pattern is not as terrible as it is in other places. Yes, I understand the impact of the climate change too, but regardless of that, we hold a huge potential to utilise agriculture. Firstly, agriculture is the only thing that can tackle food security, and food security is the fundamental of all security. If there is no food, there will be violence, there will be crime. Agriculture to me is like a nucleus that we really need to nurture, grow and even protect jealously if we really want our economy to grow.
Are there transformations in agriculture sector that you can share with us?
That’s a super broad question. However, my answer would be in two dimensions – that is livestock and crop farming. Apart from these two, we also have under crop farming like micro-grains, mushrooms etc. Technologies and methodologies are changing very fast in the agricultural space. For instance, methodology covers how to handle the feeding of your fishes; how to handle the feeding composition for your poultry; what additives to use; how temperature should be regulated; how to regulate water; how to house animals; how to remove them and so on. All of these are basics that you need to know in the way things are being managed either in the livestock or crop farming aspect of agriculture. Then we go into other things like science, researches and development. There aremany things we need to put into consideration like cross-breeding to get hybrids which are more resilient or resistant to diseases or certain pests. There have been some breakthroughs in experimentation that have developed crops that fight pests and diseases themselves. In other words, when a pest comes to the crop and eats it, the pest itself dies. That’s a very negative signal because it can also be used as an Agro-bio warfare. So, all these can be the progress we are seeing in agriculture from improvement of seeds to become more disease resistant so that they can have better yield. The real mathematics in crop farming is around yield which is what you get per square meter of your plantation; and then when you’re talking about livestock, you want to improve the food or feed conversion rate (FCR). You are able to improve your FCR so that the lower it is, the more you can get. So, for instance, you may want to increase the FCR of your cattle from 10.2 to 6.7 or that of poultry from 3.2 to 1.8. We are working assiduously by improving the content of the feed, the processes of the food, the ratios of the content of the food, the genetics of the animals, the methodology of administering the food, how they are kept, how they are trained, how they are mated and so on. All of these are things that we must meticulously manage and have adequate data which will give us more insight to what is going to happen in the future. On the introduction of information technology to agriculture, we have the use of satellite imagery to monitor crops, use of drones, use of censors, and irrigation of various kinds as well as hydroponics for water management purposes aimed at efficient delivery of nutrients to the plants, root measurement systems, soil loosening technologies or methodology that help for healthy roots formation. All of these are changes happening in agriculture. In a nutshell, it is expedient that Africans embrace modern agriculture, climate smart agriculture, information technology supported agriculture and modern methodologies in approach to agriculture. These are very important for us to have good yields. We should domesticate some of these knowledges and practices and support youngsters who are into agriculture so that we would not be left behind.
Who are your major customers and what is your next target market?
Well, the major driving force behind FarmKonnect is nation building. We are looking from this angle: manufacture in agriculture locally, create employment, feed ourselves and earn foreign exchange. We have seven value chains (Poultry: we have the poultry value chain although we are well known with snail and greenhouses projects) with the last data that was released, about 529 thousand metric tons of poultry deficit in Nigeria annually. Consumers of chicken are our target and clients, bulk sellers and retailers.
On the horticulture area, we produce leafy vegetables and exotic leaves, herbs and fruit vegetables such as Habaneros, tomatoes, kimchi and capsicum. So all these have different buyers. We are not retailer but bulk sellers but we are working towards branding our products and putting them on shelves for direct consumption as FarmKonnect’s produce. So, most of our produce are not branded, they are sold to bulk buyers who resell to retailers. So every consumer is our customer and so you are our customer.
