There are many reasons why a prospective investor should invest in agriculture. Experts say agriculture is a low-risk investment that keeps pace with inflation and increases in value over the long-term.
They describe investment in agriculture as a tangible asset that provides benefit to the community, adding that it can diversify the investor’s portfolio.
Experts say investments in agriculture can guarantee significant revenue for the investor.
They note that depending on the investment and the type of farm, investors can profit through many different ways.
The President, Nigeria Cassava Growers Association, Segun Adewumi, in an interview with our correspondent, says investment in agriculture is a good money spinner, especially when done adequately.
Citing an instance with the processing of agricultural commodities, Adewumi states that investors can make millions of naira in this line of business.
He, however, adds that there is a need for government support in this aspect of the sector. He says in providing finance for the sector, the government should take a critical look at the processing of agricultural products, because this is one major problem confronting farmers.
“It is not only affecting those of us in the cassava value chain, but also impacting adversely on the activities of players in other arms of the industry.
“We spend up to N3tn annually importing products that are generated from processed cassava. This will tell you that if you are a good processor of cassava, you will make commendable income from this line of business. This, of course, tells you that investment in agriculture is a good one,” Adewumi says.
He adds, “For instance, ethanol is derived from cassava and we spend close to N700bn every year importing this product. Pharmaceutical industries, beverage firms and many others use the processed products from cassava. We lack processing industries that can be used to process the amount of cassava produced in Nigeria.
“Nigeria can generate N15tn annually from cassava alone, the Federal Government knows this. The huge amount can be generated if we have the required processing facilities for the commodity and use it more for industrial purposes. It is also important to note that Nigeria is the highest producer of cassava in the world. So providing adequate finance for processing is one key way to support agriculture in Nigeria.”
Experts also explain that the yield from agricultural produce is another reason why an investor should consider investing in agriculture. They say investors can make money from the cash flow of crops that are harvested.
They note that most crops are annual, but in some locations there can be multiple harvests per year, adding that in certain cases, these yields are secured via long-term contracts with tenant farmers or from customers who agree to purchase the crops.
They say it is also important to note that crop insurance, which protects the farmer in the event of a catastrophe, also protects the investor. This, according to experts, means that even if crops are destroyed or their revenue drops due to declines in commodity prices, the farmers will still receive funds with which they can pay their lease.
Experts say farmland is a limited resource. They say lands that can be cultivated upon have been decreasing due to urban sprawl and land development, making the remaining land even more valuable. Because of this, farmlands are appreciating in value, which is beneficial for investors, experts say. They add that residential development can also cause farmlands to increase in value, adding that if the land is located close to a residential area, the land value increases with the potential to sell the land as development encroaches.
Providing more reasons why investors need to look the way of agriculture, experts note that much like in real estate, an investor can add value to his property by making improvements. They note that in agriculture, this can include turning raw land into crops or pastureland.
They also state that swapping out lower end crops such as commodity or row crops to higher end crops like trees, or converting farmland from conventional farming to higher return organic farming can increase the value of the investment.
Experts say equity can also be built by improving the buildings and infrastructure on the land. They say these changes will increase the value of the land and can lead to larger profits when the investor decides to sell it.
Experts say agriculture can effectively serve as the other source of income for an investor. They say there are many different ways to generate income on farmland, and many of them are unrelated to the crops being grown. They note that if the farmland contains a large body of water, water rights can be sold or rented. For a farmland that is located near a major road, experts say there may be an opportunity to generate income from billboards placed on the land or from cell and radio towers that are built. They note that in some cases, it may be possible to sell recreation or hunting leases on timberland or near waterways.
Experts further state that a farmland can naturally accumulate equity in a similar way that real estate accumulates equity as mortgage payments are made. They say if there is a note or debt on the land, income from the farm will be used to pay down the principal, and equity will begin to accumulate.
They say investing in agriculture may not provide immediate returns, but over the long-term, it can pay off greatly. Experts say there is much less volatility in farmland and timberland than in other types of investments, meaning adding agriculture to your investment portfolio can provide continual stability with the potential for an annual income.
Okechukwu Nnodim, Abuja