AFDB approves N2.8bn equity investment for agric SMEs

The African Development Bank has approved a $9 million (N2.8 billion) equity investment in the Fund for Agricultural Finance in Nige­ria (FAFIN) to provide expansion cap­ital to agricultural small and medium-sized enterprises (SMEs).

FAFIN is a first-generation private eq­uity fund that provides financial, capac­ity-building and technical assistance to commercially viable SMEs in the Nigeri­an agribusiness sector, through a unique value chain-centric approach, and us­ing a combination of equity, quasi-eq­uity and convertible loan instruments.
The Fund is jointly sponsored by the German KfW Development Bank and the Government of Nigeria, through the Federal Ministry of Agriculture and Ru­ral Development (FMARD).
A statement released by the AFDB said the project is expected to deliver strong development outcomes from house­hold benefits and employment through the creation of a large number of jobs and the provision of certain agricultur­al products; positive gender and social effects through the implementation of out-grower schemes and supporting ru­ral development; and private sector de­velopment through alleviation of finan­cial constraints faced by agribusinesses and enhancing agricultural value chains.
The project’s contribution to inclusive growth is expected to be significant, giv­en the large number of jobs to be creat­ed and out-growers to be reached at the level of sub-projects. Its contribution to green growth is expected to be low, be­cause the Fund targets the agribusiness sector with some expected negative ef­fects on the environment.
The Fund’s primary focus will be on SMEs across the agricultural value chain with crop value chain and geographic di­versification. It aims at fixing broken val­ue chains to increase efficiencies, reduce post-harvest loss, and increase small­holder farmer incomes and SME agri­business profitability.
Investment instruments will be pri­marily quasi-equity (convertible bonds, preference shares and structured roy­alties) and direct equity. The ticket size ranges from $500, 000 to $ 5 million.
The Fund is aligned with the Bank’s Ten Year Strategy focusing on inclusive growth, strengthening agriculture and food security, and access to local SME finance; which is encapsulated in the Bank’ High Five Development Agen­da for Africa, specifically Feed Afri­ca and Industrialise Africa. It is also in line with the Bank’s Strategy for Agri­cultural Transformation in Africa (2016-2025), Strategy on Jobs for Youth in Afri­ca (2016-2025) and the Bank’s Country Strategy Paper for Nigeria (2013-2017), which supports an enabling environ­ment for agriculture.