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Crowdfarming: Platform-Enabled Investment in Nigerian Agriculture

20 November 2018 Leave a comment

Crowdfarming is fast becoming the easiest means of investing in agriculture in Nigeria. On one hand, we have smallholder farmers who have agricultural skills and farmland but lack sufficient finance.  On the other hand, there are individuals who have money to invest but lack agricultural skills and access to farmland. Intermediated by digital platforms (Figure 1), crowdfarming entails sourcing funds from several individuals (the crowd) to invest in smallholder agricultural enterprises. In some cases, investors receive returns in the form of agricultural produce, while in other cases returns are financial – that is, investors receive their initial investments plus profits [1].

Figure 1: Snapshot of a Nigerian digital platform-enabled crowdfarming webpage (source: Thrive Agric, 2018)

There are currently at least seven active (indigenous) digital platform-enabled crowdfarming agribusinesses in Nigeria. These are: Thrive Agric, Farmcrowdy, Growcropsonline, Growsel, Farmkart, eFarms and Agropartnerships. Drawing from research carried out with Thrive Agric, it is understood that investors (also called ‘farm subscribers’) are considered part-owners of farms they invest in. The contractual agreement between the crowdfarming platforms and farm subscribers provides details on the returns on investment per farm enterprise, length of the production/investment cycle (e.g. see Figure 1), insurance cover on funds invested, and secure online payments. Farm subscribers also receive regular information on the farm’s progress through email alerts and notification of final payments at the end of the production cycle. Subscribers can also apply to visit the farms they invest in.

In Nigeria, crowdfarming platforms are tapping into a large pool of financial investors who are mostly educated individuals, located in urban areas in Nigeria or in the diaspora. Thrive Agric’s model has attracted over 3500 investors, located in 10 countries (Figure 2), who have invested in nine agricultural value chains, directly supporting the livelihoods of over 12,000 farmers (Figure 3), since its inception in 2017.

Figure 2: Geographic spread of Thrive Agric’s crowdfarming subscribers investing in smallholder agricultural production across Nigeria (source: author’s field research, 2018)

Figure 3: Geographic spread of Nigerian states where crowdsourced funds are invested by Thrive Agric (source: author’s field research, 2018)

Despite its growing recognition as a means of investing in agriculture, some factors still constrain the scaling-out of the crowdfarming model beyond its current scope. These factors include:

  • Low level of awareness and trust issues: according to the Chief Technical Officer of Thrive Agric, not many people are aware of crowdfarming and its benefits to both investors and farmers in Nigeria. As such, there is still the potential for more people to invest but getting the word out there, cost effectively, remains a challenge.
  • Currency and bank transaction issues: currently, investing in Nigeria’s agriculture through crowdfarming can only be carried out in Nigeria’s currency (the Naira) due to fluctuations in foreign exchange rates. As a result, investors are required to have a Naira account to participate in this space.

Looking ahead: what does the future hold for Nigeria’s agricultural growth through crowdfarming?

Investing in Nigerian agriculture has been described as key to driving the growth of the sector and Nigeria’s economy in general [2][3]. However, the growth of Nigeria’s agricultural sector has been constrained by a myriad of factors especially those relating to low financial investments in infrastructure, agricultural research, high yielding inputs and information delivery [4]. As agricultural production in Nigeria is still largely rain-fed, the issue of timely access to finance, ahead of the rainy season, remains a reoccurring constraint to the socio-economic growth of farmers (ibid). Figure 2 shows that digital platforms are breaking down barriers to agricultural investments in Nigeria by bridging the gap between investors (both home- and diaspora-based) and smallholder farmers.

However, there is still a lot to understand in terms of the long-term impact of investing in agriculture through digital platform-enabled models like crowdfarming. Research is also needed to ascertain the nature of interaction between these platform models and the existing institutional forms that govern agricultural value chains. This will help broaden our understanding and the broader implications for the distribution of value among stakeholders along agricultural value chains that are platform-enabled.

References

[1] Flynn, P. (2015) What is Crowdfarming, Hazel Blog http://blog.hazeltechnologies.com/article-27-what-is-crowdfarming

[2] Izuchukwu, O. (2011) Analysis of the contribution of agricultural sector on the Nigerian economic development, World Review of Business Research, 1(1): 91-200

[3] Udoh, E. (2011) An examination of public expenditure, private investment and agricultural sector growth in Nigeria: bounds testing approach, International Journal of Business and Social Science, 2(13): 285-292

[4] Phillip, D., Nkonya, E., Pender, J. and Oni, O.A (2009) Constraints to Increasing Agricultural Productivity in Nigeria: A Review (Vol. 6). International Food Policy Research Institute, Washington, DC

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Is Digital Transformation in Nigerian Agriculture a Myth or Reality?

31 July 2018 1 comment

There is a lot of hype about digital agriculture as the ‘next big thing’ after crude oil in Nigeria. Currently, there is hardly any debate on agricultural development in the Nigerian news and on social media platforms without the use of buzz words such as ‘digital disruption’ or ‘digital transformation’ in describing the future of Nigerian agriculture. But what are these digital innovations causing all the hype? They are digital platforms, developed over the past five years by start-ups, established by young Nigerian entrepreneurs. While some start-ups are self-funded, most have benefited from international funding and incubation programmes provided by the growing number of tech-hubs across Nigeria (see Figure 1) [1] [2].

Figure 1: Number of active tech hubs in West Africa. Source: GSMA (2018a)

The digital platforms currently mainstreamed into the Nigerian agricultural sector mainly utilise mobile applications, web applications and short messaging service (SMS). These platforms are used to provide a range of transactional and information services which can be grouped into four main business models:

  1. Crowdfarming: A venture capital model that sources investment capital to fund several farm enterprises [3].
  2. Agricultural advisory service: This model uses mobile apps, SMS and Unstructured Supplementary Service Data (USSD) to provide tailored information to farmers in all stages of the value chain.
  3. Online farm management information system: This offers a platform for farm owners to provide data about their farms and receive location-specific recommendations.
  4. Online agro-trading: These platforms serve as an avenue for farmers and other value chain actors to advertise their agricultural products to potential buyers.

As research on agro-digital platforms in Nigeria is still at a nascent stage, the magnitude of impact relative to platform usage is still unclear. However, some assumptions are currently driving the perception that these innovations would digitally transform Nigerian agriculture. Two of these assumptions are:

Assumption 1: With the widespread adoption of mobile devices in Nigeria the rural population, who make up the largest share of stakeholders in agriculture, can now participate in the emerging digital agricultural platform economy. In reality, mobile network infrastructures in rural Nigeria are weak or non-existent in some cases. Actively engaging with these platforms requires strong mobile network and reliable internet connection to download apps or access web platforms. 2G remains the predominant mobile network broadband in Nigeria while 3G coverage is centralised in big cities, especially Abuja, Lagos and Port Harcourt (see Figure 2) [3]. Also, the signal strength of both 2G and 3G networks ranges from medium to weak as we move from the urban centres to rural areas – where most farmers are located. This discrimination in mobile network coverage further reinforces the digital divide between the rural and urban population [4], and also shows what groups are more likely to benefit from the growing platform economy in Nigeria.

Figure 2: Mobile network coverage maps (Nigeria) for 2G and 3G respectively. Source: GSMA (2018b)

Assumption 2:  If we assume that farmers have reliable mobile networks and internet access which allows them to download mobile apps or access web platforms, the second assumption is that farmers have the technical skills to use these platforms. Yet most farmers are not ‘tech-savvy’ and some of these digital platforms tend to be different from the conventional voice and SMS platforms with which farmers are more familiar. Not only does this serve as a constraint to fully actualise the affordances of these platforms, it has also resulted in the emergence of ‘digital intermediaries’. These digital intermediaries either help farmers to gain access to digital platforms by performing more skill-intensive tasks such as downloading apps and creating user profiles, or they perform the functions of traditional agricultural intermediaries such as: aggregating produce, standardising and marketing produce on digital platforms, independent of farmers’ involvement on the platform itself. While this is not a bad thing, it is important to understand the role and impact of digital intermediaries in influencing value capture and value sharing along digitally-enabled agricultural value chains.

Transformation is a process and there is great potential for digital transformation in Nigerian agriculture. However, it is said that the apps won’t plough the field [4]; neither would the apps build roads to connect farmers to markets. While the digital tools to facilitate the transformation process already exist, poor infrastructure and digital skill gaps still serve as constraints to actualising the transformational potential of digital innovations in agriculture [5]. To move from ‘potential’ to ‘actual’ transformation requires investment in ICT infrastructures, road networks, electricity, and digital literacy; as well as an enabling policy environment which supports upcoming agro-digital entrepreneurs [6].

Reference

[1] GSMA (2018a) The Mobile Economy: West Africa. GSMA, London https://www.gsmaintelligence.com/research/?file=e568fe9e710ec776d82c04e9f6760adb&download

[2] David-West, O., Umukoro, I.O. and Onuoha, R.O. (2018) Platforms in Sub-Saharan Africa: startup models and the role of business incubation, Journal of Intellectual Capital, 19 (3): 581-616 https://doi.org/10.1108/JIC-12-2016-0134

[3] GSMA (2018b) Mobile Coverage Maps. GSMA, London https://www.mobilecoveragemaps.com/africa

[4] Naruka, P.S., Verma, S., Sarangdevot, S.S., Pachauri, C.P., Kerketta, S. and Singh, J.P. (2017) A study on role of WhatsApp in agriculture value chains, Asian Journal of Agricultural Extension, Economics & Sociology 20 (1): 1-11

[5] Deichmann, U., Goyal, A. and Mishra, D., 2016. Will Digital Technologies Transform Agriculture in Developing Countries? The World Bank, Washington, DC

[6] Akanbi, B.E. and Akanbi, C.O. (2012) Bridging the digital divide and the impact on poverty in Nigeria, Computing, Information Systems & Development Informatics, 3 (4): 83-85

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