Agribusiness in Nigeria: The Ground is Set


Peter Nwaobi and Halleluyah Ojo

Nigeria is a key player in the West African region, with an estimated population of about 201million[1]. The country accounts for 47%[2] of West Africa’s population, and has one of the largest youth population in the world. Economists, both home and abroad, have continued to clamor for Nigeria to promote her agricultural sector (the Sector).

According to the World Bank 77.7 per cent of Nigeria’s land is arable and capable of producing key (cash) crops, including beans, sesame, cashew nuts, cassava, cocoa beans, groundnuts, maize (corn), melon, rice, millet, palm kernels, palm oil, plantains and rubber, amongst others. Nigeria also has quality manpower to complement the fertile land mass and drive the Sector, judging from her teeming population of able-bodied youths.

The sector is, however, largely plagued by several limiting factors, such as obsolete farming methodologies, lack of access to cheap finance, inadequate storage facilities, defective power supply and poor transport infrastructure amongst others.

Nevertheless, a cursory review of the fiscal framework for the sector indicates that the Government is keen on developing agribusiness and has backed this up with several incentives, schemes and policies aimed at jump-starting the moribund sector and improving the yield from it.

This article provides an overview of the Agribusiness in Nigeria, Government’s intervention so far, as well as the incentives available to investors in the Sector.

Agribusiness in Nigeria[3] defines agribusiness as:

the business sector encompassing farming and farming-related commercial activities”.

It involves all the steps required to send an agricultural good to market: production, processing and distribution. It is an important component of the economy in countries with arable land and good climate.

Nigeria used to be a major player in the global agribusiness. In the 1960s[4], Nigeria was the world’s largest producer of groundnuts and palm oil, and the second largest exporter of cocoa. The country was self-sufficient in food production before the emergence of oil in the 1960s[5]. Evaluated from both the horizontal and vertical integration perspectives, the sector could potentially be a high revenue generator, from the production of leather, beverages, tobacco, textile, cotton, foot-wear, wood works and furniture, pulp paper, to chemical and pharmaceutical products, plastic and rubber products amongst others. It is therefore no gainsaying that Agribusiness should be a serious business in Nigeria.

According to the National Bureau of statistics’ (NBS) report for Q1 of 2019, the Nigerian agricultural sector’s contribution to the Country’s Gross Domestic Product (GDP) improved by 1.15% compared to the corresponding quarter in 2018.             The sector’s real GDP in Q1 of 2018 and 2019 was 21.66% and 21.91, respectively. This result suggest that the sector is growing, though marginally, with potential for further development if given more attention. There is therefore no better time for the Government and private investors to tap into the enormous opportunities in the Nigerian agricultural sector other than now!

Government’s Involvement in the Sector


Since the discovery of crude oil in 1956, Nigeria has been overly dependent on oil to drive the economy. However, the plunge in the global crude oil price experienced in 2014, as well as new developments, such as discovery of shale oil in the United States (US), introduction of electric cars and global drive towards clean energy amongst others, have seen several countries whose livelihood depended on natural resources such as oil (Nigeria inclusive), going back to the drawing board. For example, one of the levers of the Federal Government of Nigeria’s annual budget pronouncements since the advent of the current administration is diversification. This popular mantra has caused a renewed focus on growing the non-oil sector of the economy, particularly, agriculture.

This sector is experiencing a revitalisation with deliberate government policies geared towards encouraging farmers and investors.

In furtherance of this agenda, the government has made tremendous efforts towards supporting and promoting Agribusiness in the country. For instance, the Central Bank of Nigeria (CBN) established the Anchor Borrowers’ Programme (ABP) in November 2015, to create a link between anchor companies involved in the processing segment and small holder farmers (SHFs), of the required key agricultural commodities. The main objective of the ABP is provision of farm inputs in kind and cash (for farm labour) to SHFs to boost production of these commodities and stabilize inputs supply to agro processors (the anchors) in Nigeria. One other key objective of this programme is to increase banks’ financing to the agricultural sector.

One of the levers of the ABP, and the other programs rolled out by the current administration is the CBN’s recently approved disbursement of loans to farmers in the 36 states and the Federal Capital Territory (FCT) under the Nigerian Incentive-Based Risk Sharing in Agricultural Lending (NIRSAL).

The loan guarantee scheme, which was jointly initiated by the CBN, the Bankers’ Committee and the Federal Ministry of Agriculture and Rural Development, is a public-private sector initiative set up to transform the country’s agricultural sector by improving access to finance for both existing and potential players. Essentially, the Bankers’ Committee and the Federal Ministry of Agriculture and Rural Development guarantee 75 per cent of the loans provided by Deposit Money Banks (DPB) to farmers as part of efforts to transform the country’s agricultural sector.

In addition, the country launched a new agriculture promotion policy which is aimed at ensuring the protection of local and foreign investments. The country has in place, the Agricultural Credit Guarantee Scheme Fund (ACGSF), Agricultural Credit Support Scheme (ACSS), and Commercial Agriculture Credit Scheme (CACS) among others. These schemes are majorly set up to provide easy and cheap access to funds, as well as to encourage participation in the Sector.

There is therefore a need for more sensitization on the available schemes and existing incentives, as this will foster active participation and go a long way in making the sector more attractive. This will in turn ensure that the Government’s objectives are ultimately achieved.


Fiscal Incentives


Most incentives are conditional motivators. They are designed to encourage participation in an economic activity. There are several fiscal incentives available to players in the Sector, most of which are discussed below.


Companies Income Tax Act (CITA)


The CITA is the basis for the imposition of income tax on companies doing business in Nigeria, except for companies operating in the upstream sector of the oil and gas industry. The incentives under this Act are summarized below

  • Exemption from the payment of minimum tax. Generally, where, in any tax year, a company is in a tax loss position (i.e., no tax payable) or where the company’s tax payable is lower than the minimum tax (as computed), such company is expected to pay a minimum tax to the Government. This provision does not apply to any agribusiness.

  • No restriction to loss relief i.e. tax losses from a year of assessment (YOA) can be carried forward indefinitely to offset future taxes.


  • Accelerated capital allowance claims of 95% in the first YOA on capital expenditure incurred in respect of plantation equipment and plant & machinery. This allows investors to quickly recoup a major part of their capital outlay in the same year.

  • No restriction on the quantum of capital allowances (CA) claimable on capital expenditure incurred in any YOA. Typically, CA claim in any YOA is restricted to 662/3 of the assessable profits of a company.

  • Companies that incur capital expenditure for the provision of facilities such as electricity, water or tarred road for the purpose of a trade or business in rural areas located at least 20 kilometers away from such facilities provided by Government, can enjoy up to a 100% rural investment allowance on such expenditure, subject to certain conditions.

  • Companies with turnover of less than 1million naira are assessed to corporate tax (CIT) at a reduced rate of 20% for the first five years of operation, to encourage small scale farmers and other investors.

  • Interest on any loan granted by a bank to a company engaged in Agribusiness is exempted from tax, subject to certain conditions. This is to facilitate access to cheap funds by farmers from deposit money banks.

Value Added Tax (VAT) Act


VAT is levied on the supply of goods and services at the rate of 5%. However, in line with the VAT Act (VATA), there are certain transactions that are exempted while some others are zero-rated. The second schedule to the VATA provides that tractors, ploughs, agricultural equipment and implements purchased for Agribusiness are exempted from VAT.  This is to encourage large scale farming and mechanization, as the gesture will ultimately reduce the overall (landing) cost of such specialized plant and machinery.

The VATA also provides that all non-oil exports are zero-rated i.e. VAT at 0% is charged on all agricultural produce exported out of Nigeria. This should ordinarily make it cheaper for foreigners to source their agricultural products or inputs from Nigeria.


Industrial Development


The IDA provides the basis for granting pioneer status (tax holiday) to qualifying companies or products.   A company can apply for its product or service to be granted pioneer status where such product or service is not in existence, it is required for economic development, or is in existence, but has not been developed to a scale suitable for economic development. Pioneer status confers tax exemption for a three-year period in the first instance, which can be extended for another two (2) years i.e. a maximum of five years in total.

Qualifying industries for pioneer status incentive include: cultivation and processing of food crops, vegetables and fruits, manufacture of cocoa products, processing of oilseeds, integrated dairy production, mining, manufacture of cement, glass and glassware, lime from limestone, ceramic product, rubber, leather textile and other areas of industry that are of economic benefits to the country.

The other incentives available under the IDA include the following:

  • Dividends paid out of profit earned during the pioneer period are tax-free.

  • Losses incurred during the pioneer period can be carried forward to offset post-pioneer profits before tax is paid on the latter.

  • Capital expenditure incurred during pioneer period is deemed to have been incurred at the expiration of the pioneer period, for CA purposes, post-pioneer.

The Road Infrastructure Development and Refurbishment Tax Credit Scheme

In January 2019, the Federal Government of Nigeria (FGN), signed the Executive Order No. 007 on Road Infrastructure Development and Refurbishment Tax Credit Scheme (“the Scheme”). The Scheme guarantees participants a minimum recovery of 100% of the project cost incurred in constructing or refurbishing any identified road designated by the FGN as an eligible road under the scheme. Under the Scheme, a participant will be entitled to a tax credit of 100% of the cost of constructing the road, in addition to an uplift equal to the monetary policy rate (MPR) +2%. Participants in the Scheme are also able to sell or transfer the whole or part of the unutilized credit to a third party.

This new order seems to be strategic for the development of our comatose road infrastructure, to spur economic growth, as it should encourage the private sector generally (and ”agripreneurs” specifically) to, on their own, construct roads leading to their farms and / or production sites while recovering the full cost + uplift through the tax due to the FGN.

It is expected that where a company claims the incentives under this scheme, such a company would not be entitled to claim the incentives under the CITA (mentioned above), to avoid double claim, and particularly, as the incentive under this scheme is more beneficial than those under the CITA.

Moving to the Next Level

From the forgoing, it is evident that the Nigerian agricultural sector presents a vast array of viable investment opportunities for investors to explore, as the Government has indeed set the right tune for the development of Agribusiness.   However, there are still some unfinished business. Critical issues for the Government’s intervention to realize the lofty objectives behind those incentives are those around utilities, power and transportation. The current reality in Nigeria today is that substantial portion of agricultural produce is damaged/spoilt due to delay in evacuation, occasioned by the poor haulage/transport system for conveying them from agric settlements where they are harvested to urban areas where they are needed/consumed.

Furthermore, the effects of climate change and variable weather patterns in Nigeria accentuate the need for the Government to also focus on providing reliable weather forecasts as well as effective irrigation / watering systems for crop production, livestock production and fisheries. This will ensure that agribusiness thrives in every part of the country.

The growing demand for agricultural products necessitates that farmers improve on their level of plant cultivation and animal husbandry for improved yield. A paradigm shift in approach and methodology is therefore crucial at this point. Information and Communication Technology (ICT) will play a vital role in addressing this concern. Government should seek to integrate ICT application into the agricultural sector to ensure prompt access to current information, such as the release of new crop varieties, the emergence of new pests / diseases and their control, ideal fertilizers for specific crops, and the availability of harmless genetically engineered crop species or animal breeds, amongst others. Government can also embark on agricultural transformation programmes aimed at training farmers on the effective utilization of ICT for their operations.

Agriculture is rapidly growing as one of the key industries on both local and global levels with the increased global responsiveness to food security and sustainable food production in the face of population growth.

Hence, given the current economic realities, there is no better time for investors to seize the opportunities and proactively take advantage of the available schemes and incentives. The authors wish to align with a quote by Jawaharlal Nehru that: “Most things, except Agriculture, can wait!”. The time to invest in agribusiness is now!