No rush – agbusiness investment should be with caution!

For a long time to come, oil will remain the major source of revenue for Nigeria and that is not going to change anytime soon. However, given several recent events, broadening our revenue base beyond oil will help protect the economy against further radical currency devaluation, and prolonged recession which all have lasting implications. 

In broadening that revenue base, there is a strong drive towards promoting agriculture especially as a tool to generating FX through exports. The recent fanfare around the exportation of 70tons of yam is a testament to this hysterical excitement. However, here is where I want to throw in the element of caution!

Nigerians have been diagnosed with the most extreme case of FOMO (Fear Of Missing Out) which is why everyone suddenly gravitate toward the reigning thing. We have seen several waves of such: MMM, UK masters, FitFam, Lekki-Ikoyi link bridge jogging, US immigration, (you can add yours to the list). If we understand well the principle of an efficient market, we will see that the market eliminates all arbitrage by a self adjusting demand-supply movement. Hence, more often that not, at the peak of this frenzy, new entrants are mostly already late to the party. 

The new focus of our FOMO is agbusinesses. And many are rushing in without understanding the market, eventually getting their fingers burned. For example, if you are planting cassava, who is your target market? Will the variety you’re growing satisfy the requirement of your target market? Is your location the best for growing such crop? Will the logistic cost to market eliminate your margins? Can you produce competitively? Can you store your output or you want to take market price? Are you realistic with your yield expectations given various unexpected issues? I have seen too many variants of this and many groan under the weight of huge losses. 

We need to first understand that unlike most businesses, agriculture involves nurturing lives – plants or/and animals which comes with various risks which though can be mitigated must be identified and managed.

Agbusinesses indeed present huge opportunities for wealth creation but cannot be done half-heartedly. Hence, please, proceed with caution!