Data and Access to Finance for Agriculture

An abiding view of agriculture as a high-risk sector unsuited for numerous traditional methods of financing persists across most economies. In Nigeria this view is compounded by some salient factors:

• 80% of the country’s food production is achieved by smallholder farmers who are stuck in a vicious cycle of poverty
• Systems for data collection and analysis on the sector are slim to non-existent making the value chain for most agricultural commodities opaque
• Key infrastructure requirements for production and trade in agricultural commodities such as storage and transport networks are missing.

Considering these factors, derisking and consequently attracting the financing that can strengthen the country’s food security position as well as deliver value to the players involved becomes a tall order.

In sectoral terms, the financing gap for agricultural MSMEs in Nigeria is substantial, estimated at US$183billion. This gap accounts for about 80% of the sector’s financing gap, including informal smallholder farmers. The total credit demand by agribusinesses stands at US$200 billion, while the credit supply is only US$17 billion.

This gap is not just a barrier to agricultural development but also a missed opportunity to achieve broader social and environmental objectives. Bridging this deficit through agricultural investment is one of the ways to promote food security and reduce poverty. Studies have shown that investments in agriculture can achieve a four-fold reduction in poverty compared to other sectors.

The Role of Data in Enabling Access to Finance

In an earlier version of this newsletter, we have argued that data collection and accessibility is critical to addressing food security challenges, and that one of the ways that it does this is by enabling access to finance for the agriculture sector.

Lack of data on the sector affects cost and availability of capital, reduces productivity, and deters research and innovation, due to an inability to assess and manage risk and plan ahead.

For years it was true that agricultural data at granular levels that can help assess and manage production and price risk for the sector was generally unavailable in Nigeria, and it continues to be a huge gap that the sector needs to address. This gap dictated our focus on developing a structure and network that supports data gathering and analysis through our warehouses and the deployment of our outreach structure in key grain production areas. This enables us to be part of the data solution as we utilize our tech-enabled processes to gather data on industry and business-related activities.

We just released the fifth edition of our Annual Commodities Review and Outlook Report, which provides a comprehensive analysis of global and regional agricultural markets, tracking price movements, production performance, and projections for the year ahead. It offers valuable insights into the agricultural value chain, highlighting key challenges and opportunities while delivering our forecast for prices and volumes in the coming season following from the available data and trends.

Ensuring that Nigerians have access to safe, affordable, and nutritious food is a huge task. Tackling the challenges that hinder that reality requires the crowding in of funds to innovate and close the gaps across the value chain from production to eventual consumption. Being able to build and deploy structures that help to gather and report data and insights on the sector is a necessary step in improving access to capital and enabling us to boost and maintain food security for the continent.

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