Photo Courtesy of Babban Gona
Although agriculture is the mainstay of Nigeria’s rural economy—and an important contributor to Nigerian economic growth and food security—most of the nation’s “agro- preneurs” still encounter significant difficulties to accessing the financing they need to increase the profitability and sustainability of their businesses. These hurdles have persisted even in the wake of decades of government and donor-funded agricultural development initiatives.
To address this challenge, the USAID-funded Feed the Future Nigeria Agribusiness Investment Activity supported Babban Gona, a Nigerian agricultural social enterprise, to overcome these hurdles.
The Activity—implemented by Cultivating New Frontiers in Agriculture (CNFA) —helps to broaden agribusinesses’ access to finance and investment by mitigating the risks they face when seeking funding to expand and scale up operations. For Babban Gona, the Activity provided expertise to review the legal articles, financial projections, and contractual agreements to meet the expectations of all parties. As a result, Babban Gona was able to successfully negotiate the offers and conclude agreements with the financiers.
The new funding equated to $18 million for Babban Gona. This was processed in two transactions —an equity investment from KfW Development Bank, based in Germany, and a subsequent debt facility from the Agriculture Financing Initiative (AgriFI).
“It is a true privilege to welcome KfW as a Babban Gona shareholder and board member,” said Adaeze Usoh, Babban Gona’s Corporate Finance Minister. “This partnership would not have been possible without the support of the USAID Agribusiness Investment Activity.”
Babban Gona provides four key services to its farmers, or “outgrowers” — innovative financial services; agricultural input services at competitive prices; training and capacity development to establish strong farmer groups; and access to markets to generate increased profits. Babban Gona will primarily use the new funds gained to add new storage capacity as well as expand the locations and number of the firm’s outgrowers.
“I am impressed with the Babban Gona business model and am confident that the lives and businesses of their smallholder farmer out-growers will greatly improve through the financial and extension support being provided,” said Dr. Adam Saffer, the Activity’s Chief of Party and Managing Director.
Over the next four years, the Activity will continue to support Nigerian producer groups, aggregators, processors, and other services within the agribusiness value chain in gaining access to affordable finance and attracting investment. Saffer also said, “The social and economic potential of the agriculture sector is one of Nigeria’s greatest competitive and comparative advantages, and we aim to help producers, off-takers, and financiers alike realize this through a better mutual understanding of each other’s expectations.”
Additional details of the Activity can be found here