Agriculture | Nigeria | Test and Transition
The development problem: The health of the agricultural sector in Nigeria is critical to the country’s economic wellbeing, accounting for 22% of GDP and employing an estimated 58% of the country’s active work force. The sector is predominantly made up of smallholder farmers, who produce over 70% of the nation’s food and own over 80% of all agrarian land – however, in the face of challenges such as low economies of scale, lack of finance for key inputs, poor knowledge of best farming practices, low yields, limited storage capacity and restricted access to formal markets, many smallholders continue to live on less than $2 a day.
The innovation: An innovative and comprehensive agriculture franchise model that seeks to sustainably improve the lives of smallholder farmers through the provision of end-to-end farming services. BG operates in rural northern Nigeria, where it provides farmers with all they need to thrive, be it inputs, know-how, harvesting services or storage. This enables smallholder farmers to increase yields, lower their production costs and gain a higher price for their crop. Through Babban Gona’s model, each farmer receives a net income of $542, which is 3.8 times greater than that of the average smallholder. Over the last four years the model has dramatically increased its reach and currently supports approximately 9,100 smallholder farmers. GIF’s investment will help Babban Gona in its ambition to reach 20,000 smallholder farmers by 2017 and 190,000 farmers by 2021.
GIF’s investment: An innovative $2.5m subordinated debt agreement that firstly, will enable BG to sustainably improve net incomes for more farmers. Secondly, it includes a financial incentive to create more impact for farmers. Thirdly, its subordinated position plays an important role in helping BG to attract larger amounts of investment.
Why we invested:
- An intervention that tackles multiple constraints in smallholder farming, with promising increases to farmer net incomes
- Operations in an extremely poor region of Nigeria, where few interventions have managed to generate sustainable impact.
- End-to-end engagement with farmers allows for robust data collection and quantification of outcomes.
- Significant pace of growth to date suggests an efficient and replicable model.
- Strong Nigerian social entrepreneur and all-African national staff.
- Opportunity to play a catalytic role in unlocking DFI capital.