With over N100 billion-investment value, the cold chain sector has remained a virgin industry in Nigeria, where over 60 million people are without jobs. The banks do not appear to have clear understanding of the bankability of the cold chain sector, seen as imperative to save the country’s N12 billion worth of agricultural produce wasted annually, while promoters struggle to pull their ideas together, writes SAMSON ECHENIM.
The world population is projected to be 10 billion by 2050. This means more stomachs to be fed. The Nigerian population is also projected to be 401 million by 2050. That is twice the size today. The scary truth is that the country is already challenged with feeding its current 200 million people.
With terror reigning in the rural corners of the Northeast, banditry ravaging the North-west and armed herdsmen sacking farmers in the agrarian villages of the middle belt, Southeast and South-west, more members of the farming population are fleeing from the villages and finding new and safe homes in the cities. Flooding has also proven to be a contending villain for those who have managed to remain in man’s oldest occupation somewhere in the South-south and South-eastern parts of Nigeria, making food security further threatened.
Amidst this worrisome situation, more than half of farm produce, including vegetables and fruits are wasted before reaching the market due to poor transport and haulage systems. Another half of what gets to the market finds its way into the dustbin after completely losing its value and becoming unfit for consumption. Experts report an approximated N12 billion worth of agricultural produce lost to wastage annually in Nigeria.
Cold chain to the rescue
Fortunately, there is a way to end the waste. Cooling the agricultural produce from the farm gate through to the market in a cold truck and storing up in a cold store in the market until consumers buy them up can save the food value losses. The cold chain if developed is a sector on its own capable of employing millions of people, while ensuring the absence of loss in farm produce value and healthy food for the teeming population. Experts say the cold chain is the magic for food safety and sustainability.
According to Jubril Adeojo, a climate change expert, the way Nigeria grows and handles its agricultural produce is not sustainable, as piles of wasted tomatoes and oranges at the Mile 12 Market, Lagos and other markets across the country are common scenes.
“In fact, 95 percent of tomatoes at the Mile 12 Market is sold, but the question is, are they sold at the right and original value? Are they hygienic? There is also threat from flooding and other natural hazards. Sustainable agriculture is the way to go. Other countries are doing it but Nigeria cannot catch up the way we are doing it. About 45 percent of depreciable produce actually go to waste,” he said, while presenting a paper titled “Financing Cold Chain Infrastructure in Nigeria,” at an investment forum in Lagos to push for cold chain financing.
“Farm produce experience loss in value during transportation. About 90 percent of food we produce in Nigeria is actually wasted. With cold chain, the value will not be lost. With a cold storage at the farm gate, the cold truck for transportation and another cold store at Mile 12, the value of agricultural produce is 100 percent preserved. What we have now is that trucks even stay parking around the market for some days before finally accessing the market to offload,” he noted.
Over N100bn investments to save the foods
Stakeholders and investors under the aegis of the Organisation for Technology Advancement of Cold Chain in West Africa (OTACCWA), believe that the cold chain industry present a new investment frontier of over N100 billion for saving Nigeria’s N12 billion worth of agricultural produce wasted annually, while creating millions of jobs and ensuring sustainable production of healthy foods for Nigeria’s teeming population.
Tunde Okoya, vice president of OTACCWA, said a huge investments, reaching N100 billion in value, is needed to build about 200,000 cold stores at major farm gates and markets across the country, as well as acquire cold trucks for moving the produce to markets.
Delivering his speech titled, “Harnessing Renewable Alternative Energy Sources for Off-grid Cold Chain Development in Nigeria,” Okoya said investments were also needed to build alternative energy sources such as Greenchill, which uses biomass—wastes from farm, cow dungs, to power massive cooling and ripening equipment.
He said, “With the support of Global Alliance for Improved Nutrition (GAIN), we carried out mapping of the cold chain infrastructure in Nigeria, and during that mapping for a few local government areas in Lagos alone, we captured a total of 250,000 cubic metres of cold chain space available. India has about 350 million cubic metres of cold chain space. Also South Africa, Kenya and other countries in Africa have capacities that runs into tens of millions of cubic metres cold chain space.
“For a country like Nigeria, considering its size and population, we should have at least 250 million cubic metres of cold chain space and that will translate to about 200,000 cold stores and hundreds of thousands of cold trucks. We are talking about processors for poultry, for milk, for different kinds of fruits and vegetables that need to be preserved to ensure their availability throughout the year.
“With the right support, the right collaboration, this industry is easily about N100 billion and it involves many key players. You have the chemicals industry that will supply chemicals needed for refrigeration; you have the original equipment manufacturers (OEMs) that supply the compressors for the cold stores.”
He said there are many key players in the cold chain sector, adding that the sector would need strategic policies as catalysts to spur up an untapped massive employment creating sector.
“So, we are looking at the cold chain as a sector, not just an industry. It is a sector, just like automobile, manufacturing and the likes. It is when we start looking at it from the perspective of being a sector that we can now be able to come up with the required strategic policies to drive it. Key elements include food safety, food security and improved nutrition,” he told Business a.m on the sideline of the event.
“Why do we have only two or three big poultry processors? Why can’t we have community processors, so that in any part of the country, poultry product is easily available? Our poultry farmers can’t process their product to sell at a later date because there is no storage,” the OTACCWA chief noted.
Green investors and unready banks
Promoters are inviting the banks to bring in resources into the cold chain value industry, but there appears to be a challenge. The banks are not gamblers and they are not going to clear the initial huddles for investors. They need to be convinced about the viability of the sector and the ability of the business to return on investment.
Adeojo, a climate finance and impact specialist and managing director, The Green Place however insists the cold chain sector is bankable.
“Why is this bankable? Banks can help finance the cold chain and earn part of the value that ought to have been lost in waste without the cold chain. Unfortunately, banks want collateral. Again, there is a challenge of being able to articulate a bankable cold chain project by sector promoters and investors. There is need for effective communication between the investors/promoters of cold chain sector and the banks,” he told members of Organisation for Technology Advancement of Cold Chain in West Africa (OTACCWA), who are championing a new dawn for the cold chain sector.
During a technical session, one of Nigeria’s youngest PhD holders in the green and climate financing said, there’s no blaming the bank; the promoters will have to first do the work.
“We are going to pick one bank to start this journey with us, a bank that believes in saving the ecosystem, while earning from it. Of course, banks will say they are lending to agriculture, after all, the Obasanjo Farms and the Dangote Farms are agricultural projects, but the cold chain sector is different. We will need to work first with one bank and we will develop a transaction structure and when we make that first transaction, other banks will join us,” he said.
Victoria Madedor, head Agribusiness and FMCG, Bank of Industry Investment and Trust Co Ltd, however, said as much as banks want to lend to the cold chain, issues of collateral remain a major hindrance.
“We have issues with the banks lending to the cold chain and that is lack of collateral. We really want to see the cold chain come to reality. So we may advise that the cold chain players should come together, pull their grants from donour agencies together to create a collateral. We will be ready to bear up to 20 percent if they can provide 80 percent collateral. BOI is looking for ways to quickly resolve this problem of collateral so that it can lend to more SMEs, which are seen as disenfranchised in the credit system due to lack of collateral,” she said.
Ernest Ihedigbo, head Agricultural Value Chain Finance at the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL), a specialised agency of the Central Bank of Nigeria, stressed that cold chain players must be able to come up with a clear blueprint for its financing need.
“We are a various organisation, and we are still in the business of financing agricultural value chain. It beats my imagination that we will mentioning foreign financiers and we seem to have forgotten our own NIRSAL. However, we will be sounding stupid if we are pushing to finance an investment, which the investors have not been able to prove that it can return on investment in clear terms,” he said.
On banks seeming unwillingness to invest in the sector, Okoya, OTACCWA vice president said, “I will say we are not going to play a blame game. It is about collaboration; it is about convincing them that this is a business that will work. It is about financial hustling. So we have to organise ourselves properly, which is our aim at OTACCWA and then we can go to the banks.”
Frontpage September 16, 2019
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