The Nigerian private sector: bridging social impact and profitability
February 7, 2020
ABUJA, Nigeria –The recently launched West Africa Trade and Investment Hub aims to create 40,000 new jobs, bolster trade between the U.S. and West Africa and foster innovation through co-investments in key sectors. Though a number of obstacles have hindered sustainable economic development, the Trade Hub’s mission is to empower the private sector to meet those challenges.
The Trade Hub, implemented by Creative Associates International and funded by the U.S. Agency for International Development, believes that freeing up capital and investing it in private companies dedicated to finding solutions and promoting growth is the most powerful way to elevate lives and create lasting impact.
“The key to success is partnership,” said Ekenem Isichei, the West Africa Director of the Corporate Council on Africa, during a discussion with group of businessmen and women after the Hub’s formal launch event. “The companies here on the ground know the story, they know the African story.”
In the spirit of partnership as the West Africa Trade and Investment Hub moves forward, Creative spoke to a range of Nigerian business representatives and government officials who shared their perspectives and knowledge. Some companies interviewed and cited in this article may participate in the program, though their comments are independent of the process.
Food security: demand exceeds the supply
Using the slogan “healthy foods only,” Olu Awolowo founded Distrifoods Nigeria with the intent to make nutritious snacks available to the country’s most disadvantaged residents. But after developing his flagship product, a peanut-based snack rich in protein, he hasn’t been able to get its price low enough for the mass market. The costs of production, packaging, distribution and other regulatory fees are too high to make a lower price economically viable.
“Healthy snacks are not affordable for the poorest, those who need it,” Awolowo says.
A Feed the Future initiative, one of the Trade Hub’s overarching goals and perhaps its most urgent is food security. Africa is projected to reach 2.5 billion people by 2050. Nigeria is Africa’s most populous country, and its population growth is expected to follow the rest of the continent. Exponential population growth compounded by climate change will seriously diminish the land’s productive capacity.
“Our mission at AFEX is to help Africa feed itself,” says Ayodeji Balogun, the CEO of AFEX, a Nigerian commodities exchange company working to change food systems in Africa. “Food production capacity is flat in some places and with climate change and urbanization the land size will decline… If we don’t unlock capital, we will be in trouble.”
Balogun said he hopes that investment partners like the Trade Hub will bring the right private capital to solve some of the most complex agricultural problems the region faces… and make them scalable.
“We hope [the Trade Hub] will catalyze new investments,” he says.
Access to capital
Balogun touched on one of the most limiting factors facing West African entrepreneurs across nearly every industry: lack of access to capital. It is especially difficult for mid-size firms—companies that are too large to qualify for microfinance and not big enough to catch the wealthiest donors—to attract investments and loans at reasonable interest rates.
“We have a lot of Nigerian startups without the financing [needed] to bring them to the next level,” said Adebayo Idowu, board member and chairman of the Nigerian-American Chamber of Commerce.
The Trade Hub will administer $60 million in co-investment grant funds and expects to attract a projected $300 million in new private sector investments. Since the project started in September 2019, more than 125 grant applicants are in the pipeline by companies of all sizes. But access to capital is only one side of the coin, says Awolowo of Distrifoods.
“It isn’t just about getting cash, it’s about talking to the company to figure out what exactly they need,” he says.
Awolowo needs strategic consulting to find ways to streamline the different stages of the production process to cut costs, as well as access to the right manufacturing machines. For startups like Distrifoods, the Trade Hub will offer technical assistance to meet these needs. Recognizing that innovation will be critical in helping these producers grow, the Trade Hub will also offer research and development grants for new agricultural technologies, and work to transform all levels of production and distribution.
Making companies sustainable and scalable
Mira Mehta learned a curious fact about Nigeria’s tomato production: Although 65 percent of West Africa’s tomatoes are grown in Nigeria, the country is the world’s largest importer of tomato paste. That prompted the entrepreneurial spirit in Mehta to launch Tomato Jos.
Based in Kaduna and registered as a social enterprise, Mehta says that Tomato Jos’s mission is “local production for local consumption.” She’s opened a tomato paste factory and a model farm to teach Nigerian farmers best practices.
This encompasses one of the Trade Hub’s core goals: To help firms scale sustainably to respond to an international trade environment while meeting local needs. While a lot of companies have tried to address the gap in local production and costly imports, Mehta says few have succeeded. She attributes this to an unwillingness “to do the work with the farmers, to teach farmers to become commercial producers.”
The Trade Hub targets firms that have plans to grow sustainably and create meaningful jobs. Mehta hopes that a possible partnership with the Trade Hub will help the business expand her company’s training school, allowing more farmers to attend and become commercial producers.
“We see a strong alignment with what the Trade Hub is doing. We are touching the same kind of farmer.”
She defines success as seeing subsistence farmers become independent and profitable.
“I want to work with farmers who are growing their land sizes and specializing.”
Fostering a culture of equality
While Nigerians are known for their entrepreneurial spirit, women frequently face cultural and other barriers that limit their ability to launch and grow scalable businesses.
One major hurdle arises when they seek financing for their companies, no matter how viable their businesses may be. Societal expectations surrounding gender roles have kept many women out of the formal market and a systemic lack of representation at the highest levels of governance perpetuates this cycle.
To this end, the Trade Hub’s goals are to target female-owned businesses with financing and to work with companies to ensure they are creating jobs for women. Chioma Ukwuagu, the Trade Hub’s gender specialist, will work with grantees to set specific milestones for gender equity and offer technical support to meet them.
“It is our job to explain [to potential partners] that it makes economic sense for women to be more involved,” said Ukwuagu.
Elevating women’s role in the economy will help address many of West Africa’s challenges, from poverty to security.
“When you invest in a woman you invest in a nation,” says Martha Iyoo, a representative from the Nigeria Diaspora Investment Summit.