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Exporting Ginger From Nigeria: Businessman Sees Big Potential

Exporting ginger from Nigeria: Businessman sees big potential

Agricorp International specialises in the processing and export of ginger from Nigeria. In September 2021, the company raised $17.5 million in funding to help fund further expansion. James Torvaney spoke to Agricorp’s co-founder and chief executive officer, Kenneth Obiajulu, about how he built the company and why he sees so much potential in the ginger export business.

Tell us why you started Agricorp.

I had done a lot of work in the agriculture sector, for example consulting for the World Bank, and I saw that although Nigeria was blessed with agricultural resources, there were huge unmet needs from farmers, financial institutions, and from the market as a whole.

I felt there was a massive opportunity for any private sector player that could come in and connect the various parties by aggregating from the various smallholders and producing a high-quality product that could be exported globally.

Why ginger specifically?

Almost every state in Nigeria has its own crop of comparative advantage. In Kaduna, one of the areas where I worked, they specialise in ginger. I found that although Nigeria produces a huge amount of ginger – by some accounts 16% of global production – export revenues are comparatively weak. A lot of this is due to inefficiencies in the system, such as wastage or expiration, and produce disappearing into informal, unrecorded channels.

We built Agricorp to address these inefficiencies. For example, we dry the ginger so it can be stored for over two years, and provide support and training for smallholder farmers to increase their yields.

Nigerian ginger is known for being particularly potent and high in oleoresin, which is good for use in both food and certain pharmaceuticals. The demand for Nigerian ginger is about twice what is currently being produced so there is a lot of room for further growth.

Another advantage for many buyers is that ginger farmed in Nigeria tends to be organic, as farmers usually use cow or poultry droppings as natural fertilisers.

What were the early days like at Agricorp?

We purposefully tried to stay under the radar and learn the business as quickly as possible.

Before our recent fundraising, very few outsiders had even heard of us, and fewer still knew the people behind the business. But within the industry I had built up a good reputation from my previous work, and knew a lot of potential buyers before going into business.

In the beginning, there was a lot of raw hustle. We just did everything we could to make those initial sales. From cold calling to attending trade shows, to walking straight into potential clients’ offices and pitching the sale. A lot of international businesses are wary of dealing with Nigerian businesses, so to overcome this we often gave very generous payment terms, allowing our early customers to pay upon delivery. This helped assure buyers that we weren’t simply looking to make quick money.

In 2019, the first full year after we launched, we surpassed our revenue target by over 300%, hitting around 200 million naira (about $500,000) compared with a target of 52 million naira (about $125,000). But 90% of this was still within the domestic market.

Now that the company has scaled, you must spend a lot less time in the field, and more in the office?
Actually, no. I still try to spend 70% or 80% of my time in the field. Every week I am still going out making visits to farmers – I eat, sleep and consume agriculture. I’d much rather be out there with the farmers than here in the office.

From where do you source your ginger?

We buy from over 5,000 smallholder farmers, who we also provide with inputs and agronomic training. We then process and package the products in our spice processing plant in Kaduna. Currently, the production is around 1,500 tonnes annually, though with the new investment we hope to increase this to around 7,000 tonnes within the next 12 to 18 months.

We try to keep anything that contributes to the quality of the final product in-house, as we obviously have high standards to meet for export. One thing we do outsource is logistics, as it is outside our core competencies.

We have also developed our own proprietary platform, Farmbase, to register, aggregate, and pay the farmers for their produce.

You said you are moving more towards exports now. Where are your key export markets?

Our focus now is 90% on exports. There’s still a lot of money to be made domestically, but competition is fierce and there are already a number of established players. Ginger sold locally also tends to be fresh – and therefore more perishable – and subject to price fluctuations.

Some 97% of our exported ginger is sold dried and split in 40kg bags. Our biggest markets are South Africa, India, and Morocco, where we sell directly to domestic food processors, and Dubai, where we mainly sell to international traders.

Everyone is so focused on advanced markets like the United States and Europe, where competition is so stiff. I prefer to look at the low-hanging fruits, where there are fewer barriers to entry and growing demand. The African Continental Free Trade Area is going to be huge in this regard – there is huge potential in intra-continental trade in Africa.

This way, when the time comes to move into the more developed, competitive, markets we will have years of experience and capital behind us.

What are some of the biggest problems you have faced in building Agricorp?

The biggest problems are availability and consistency of product, and the ability to get product to our customers quickly. Logistics can be a nightmare, and there are challenges daily. We transport by road and ship out of Lagos or Rivers State, and delays at the port can sometimes last for months.

You recently raised an investment of $17.5 million. What is the money for?

Finding the market is not the issue, as the demand is there. However, trade finance has always been a big issue. We have left huge amounts of money on the table because we have not been able to pre-finance aggregation, processing, and export.

With this investment we are no longer limited by our working capital. We are no longer limited by the amount of labour we can bring in, the amount of warehouse space available, or the volume of product we can process.

Where does Agricorp grow from here?

There are two main ways we can grow from here: by capturing more of the value chain and by selling to new markets.

On the product side, we started the business by selling fresh commodities to the local market. We built up some capital and moved to primary processed products, such as the dried and split ginger. The next step is moving into secondary processed products, such as ginger powder, and then towards packaged, branded, and differentiated products. Moving up the food chain like this is the natural progression.

On the market side, we are trying to set up operations in southern and eastern Africa, where agricultural systems are very similar. This would increase our total export volumes and reduce reliance on Nigeria. Ultimately we want to be the biggest exporter of spices out of Africa.

That said, we also need to allow the market to speak to us. We don’t have the capacity to break a completely new market like some of the biggest players, so we need to wait for a base level of demand before we move into a particular market.

Highlight some of the other business opportunities you are excited about?

There are so many opportunities in agriculture in Africa over the coming decades, and I think international investors are really beginning to see this. The businesses that are building now are the ones that will have huge pieces of the pie later on.

I think livestock is a massive industry, with a lot of different options. I also think there is a lot of potential in offering ancillary support services, such as logistics and supply chain management, to the growing number of agricultural businesses like ours.

 

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CBN gives fresh guidelines on dormant accounts, unclaimed balances in banks

The Central Bank of Nigeria, CBN, has directed all banks and other financial institutions in the country to transfer all dormant accounts and unclaimed balances and other financial assets to its dedicated account.

The apex bank disclosed this on Friday in a guideline on the management of dormant accounts, unclaimed balances signed by its acting director of the Financial Policy and Banking Regulation Department, John Onojah.

According to the circular, all dormant accounts and unclaimed balances with banks for at least ten years will be warehoused in a dedicated account known as the Unclaimed Balances Trust Fund (UBTF) Pool Account”.

Accordingly, CBN said the funds from Dormant Accounts, unclaimed balances may be invested in Nigerian Treasury Bills (NTBs) and other government securities.

However, the new Guideline which is a review of the Guideline issued in October 2015 exempted dormant accounts, and unclaimed balances under litigation and investigation.

“CBN shall treat unclaimed balances (dormant accounts and financial assets) as follows:

“Open and maintain the ‘UBTF Pool Account’; Maintain records of the beneficiaries of the unclaimed balances warehoused in the UBTF Pool Account;

“Invest the funds in Nigerian treasury bills (NTBs) and other securities as may be approved by the ‘Unclaimed Balances Management Committee’;

“Refund the principal and interest (if any) on the invested funds to the beneficiaries not later than ten (10) working days from the date of receipt of the request and where it is imperative to extend the timeline, a notice of extension shall be communicated to the requesting FI stating reasons for the extension,” it said.

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CBN’s decisive actions has strengthen the economy- Cardoso

The Central Bank of Nigeria (CBN) said in Abuja on Friday that its monetary policies and actions have stimulated growth and stability of the nation’s economy.

 

CBN Governor, Mr. Olayemi Cardoso, said this during an engagement with Senate Committee on Banking, Insurance and other Financial Institutions.

Cardoso said that given the positive indicators, Nigerian were in for better days.

He said: “The spread between official and BDC rates has narrowed significantly from N162.62 in January to N47.22 in June indicating successful price discovery, increased market efficiency and reduced arbitrage opportunities.

“The stock of external reserves increased to 36.89 billion dollars as of July 16, compared with 33.22 billion dollars as at end-Dec 2023, driven largely by receipts from crude oil related taxes and third-party receipts.

“In first quarter 2024, we maintained a current account surplus and saw improvements in our trade balance.

According to him, the nation’s external reserves level as at end of June can finance over 11 months of importation of goods and services or 14 months of goods only.

Cardoso said this was significantly higher than the prescribed international benchmark of 3.0 months, indicating a strong buffer against external shocks.

He said that the banking sector remained robust and diverse, comprising 26 commercial banks, six merchant banks and four non-interest banks.

“Key indicators such as capital adequacy, liquidity, and non-performing loan ratios all showed impressive improvements, underscoring the sector’s growing stability and resilience.

“The equity market has shown impressive performance, with the All-Share Index rising by 33.81 per cent and market capitalisation expanding by 38.33 per cent from Dec 2023 to June 2024, reflecting growing investors’ confidence,” he said.

Cardoso said that while CBN was encouraged by these positive trends, it remained vigilant and committed to implementing policies that support sustainable growth in the financial markets, while maintaining overall economic stability.

He also assured  members of the committee that required measures and strategies had been mapped out to confront emerging challenges.

“To combat inflation, we have implemented a comprehensive set of monetary policy measures.

“These include raising the policy rate by 750 basis points to 26.25 per cent, increasing cash reserve ratios, normalising open market operations as our primary liquidity management tool.

“And adopting Inflation Targeting as our new monetary policy framework,” he said.

Cardoso said in the area of banking supervision, CBN had taken decisive actions to ensure the safety, soundness, and resilience of the banking industry.

He said that key measures included intervention in three banks, revocation of Heritage Bank’s license, increasing minimum capital requirements, and enhancing AML/CFT supervision.

“We also introduced new frameworks for Cash Reserve Requirements and cybersecurity and prohibited the use of foreign currency collaterals for local currency loans,” he said.

Cardoso said that CBN was in the process of reviewing micro and macro prudential guidelines to reinforce the resilience of financial institutions to withstand tightened conditions, thereeby creating a secure and attractive investment climate.

“We have signaled our plans to re-capitalise deposit money banks in Nigeria to improve capital inadequacy and their capacity to grow the economy.

“Our ultimate goal is to create a more stable, resilient, and efficient financial system that can better serve the Nigerian economy, while adhering to international best practices,” he said.

Earlier, Chairman of the Committee, Sen. Adetokunbo Abiru, said the purpose of the interaction was to update the committee on efforts, activities, objectives and plans of the CBN with respect to monetary policy.

 

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Nigeria’s external reserves surge to $35.77bn – CBN

Nigeria’s external reserves increased to $35.77 billion on Thursday up from the $33.09 Billion at the end of 2023.

This is according to Thursday’s data from the Central Bank of Nigeria on the country’s external reserves movement.

The figure represents a $2.68 billion increase in the country’s external reserves in the past six months.

Further data showed that Nigeria’s foreign reserve crossed the $35.05bn on July 8 to the $35.77 mark on Thursday.

Meanwhile, according to the recently released economic outlook by CBN, titled ‘Macroeconomic Outlook: Price Discovery for Economic Stabilisation’, the apex bank had projected a decline in the country’s external reserves in 2024.

The CBN based its assumption on continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service.

The apex bank, however, said, “the expected improvement in crude oil earnings, together with recent reforms in the foreign exchange market and energy sector, however, would cushion the drop in external reserves.”

The outlook also projected a marginal increase to $19.42 billion from $19.17 billion in 2023 for diaspora remittances.

“The external reserves, which stood at $33.09bn in 2023 could reduce slightly in 2024.

“This is on the assumption of continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service,” it said.

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