By Omodele Adigun

“Anybody who is serious should not go for commercial funding for agriculture.” That is the advice of Mrs Yemisi Iranloye, the Managing Director of Psaltry International Limited, Iseyin, Oyo State. As a beneficiary of the Commercial Agriculture Credit Scheme (CACS) of the Central Bank of Nigeria (CBN), she beleives the interest charged by the banks is not business friendly. Hear her: “You can imagine running (business) at 27 per cent interest. You can not compete. I will advise that anyone going for serious agriculture should go and get CACS from the CBN. Go to your bank, put pressure on them to give you CACS. You can go for NIRSAL (Nigerian Incentive-based Risk sharing System for Agriculture).    NIRSAL is working ,if you don’t have collateral, NIRSAL can derisk it.” In this interview, she shares her experience and give insight into how a start-up can scale the hurdles of funding. Excerpts:

Start up budget

There are scales, Every industry has a different entry point, it depends on what entry point you are looking at.In our own industry, we have cassava flour, chips, starch, fructose etc. The higher you go, the higher the cost. If you want to go the real low scale of just a simple processing and little farm around it, maybe, from N20 million to N50 million, that bracket. That is a real low scale where you have good garri processing, packaging, well-labelled with NAFDAC number. If you want to go upscale and say I want to produce cassava flour, small scale also; about N70 million to N100 million. When you are now looking at big scale, where you can supply the multinationals, you will be looking up to N500 million and above. So it depends on what scale you want, you have not been in the business before , I would advise you study it for two years; farm first. You have so many things to learn because it is an agricultural product. So you start by first understanding the product. You could spend one year learning how to farm cassava or tomato, you spend another year learning how to produce before you can combine the knowledge. Then you are ready to have a small scale industry but if you don’t learn and just jump into it, you will make so many mistakes. There will be frustration, and along the line, if care is not taken, you may just back out.  I will always encourage the young ones to start small have a very big dream and learn.

Challenges

In case of agro-processing industry,the challenges facing us are many. It was so because you have to provide all your basic infrastructure, especially those of us who have chosen to put factories in the rural environment , you have to deal with , first of all, accessibility to the environment where you want to put your factory. So you can start from the land clearing and accessibility. The second thing is power. For us in psaltry, we have to bring power from over 50km away before we could have power. We have to actually take a loan to be able to give ourselves power. Prior to that time, we have to run 2,000 KVA generator to power the factory before we could access power. So also you have to provide your own water; you have to either dam a close river or provide industrial boreholes which you must continue to change from time to time because their volume always goes down. That is amid other challenges. Of course, there is raw material challenge because you are in a rural environment where the product is being cultivated. You can actually have a plan to increase your raw material as the time goes on. But those basic infrastructure you have to provide, and those are the really major challenges of industrialisation in Nigeria presently.

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Policies

I belong to the sector that produces raw materials for companies like Nestle, Nigeria Breweries, Unilever, Coca Cola. etc. I believe these companies should be taking more than half of the total forex for importation (of their raw materials). And one of these imported inputs should be produced locally. One of them is starch. And starch can be produced from any carbohydrate source. For us in Nigeria, cassava is chief ((source) because it is an easy crop; it is an available crop; it is a desert crop.So we in Psaltry produce grade starch for all the top ranking companies in the country. Now because of starch, we are using cassava.We decided not to grow the cassava by ourselves.So we have a business model that uses small holder farmers to produce the cassava.It is difficult because we have to work with about 2000 smallholder farmers.And as at the time we started, it was not the in-thing because farmers were not used to taking money and paying back. But some government policies brought some improvement in our activities, to say the truth. It gives us some soft landing. For example, the policy of the banned 41 items has enabled us to compete better.  Our production cost is far higher than that of our competitors from China. China is really our enemy, So the production cost in china is far lower than what we produce. With the lack of forex to import some of the Chinese commodities has stifled their dumping here. That has helped us to compete favorably, with those imported commodities. Also there are many other policies like the tax holiday, which we enjoy as a company. For instance, we have not been paying tax for about a year now. Whatever we were to pay as tax was used to do better road, used to improve power supply. It has also assisted us in helping our farmers to grow more for us to increase capacity. We are rushing to get stable before the year is over, when we will start to pay .The three years (of tax holiday) are not enough especially when the factory is 100 per cent rural based. The problems are many. If the factory were in Lagos, the problems would have been few because they have gas. You can just buy one acre of land because it is already in a city. But the factory that is rural based has more problems, more time to get structures. If a city factory gets two years to get structures, a rural-based company takes three to four years because you have to provide so many things by yourself. Be that as it may, I think the policies are beneficial and has helped us to go faster than we would have if all these policies are not there.

Funding

Anybody who is serious should not go for commercial funding for agriculture because of all the challenges; you can imagine running at 27 per cent interest rate. You will be finished, you can not compete. I have just told you that the production cost of the country of our competitors is very low. So when you are now asked to compete with all those items at 27 per cent rate. The business will collapse. I will advise that anyone going for serious agriculture should go and get CACS (Commercial Agriculture Credit Scheme) from the CBN. Go to your bank, put pressure on them to give you CACS. You can go for NIRSAL (Nigerian Incentive-based Risk sharing System for Agriculture).    NIRSAL is working. If you don’t have collateral, NIRSAL can derisk it. Even if you do commercial bank loan and change to NIRSAL, you can get 40 per cent refund. We call it drop back. You can get 40 per cent drop back. That can also drop your interest because when you pay 24 per cent, CBN will give you 40 per cent of what you have paid. They are there. It is just that it takes time to get it, I must say, you need to be patient to get it. Many people complain that they can’t access the fund, Why? The banks themselves, sometimes, may not be willing to take customers down that road. Don’t forget, it pays the banks to give you their own money than for you to take CBN fund. I am not sure, but I think they make more profit. That is the kind of attitude there.But if you insist that you want it, and you persist on it, you will get it. It takes time, it takes patience. I will always advise that for a young entrepreneur, when you start, open an account and tell them this is my dream. And I want to get there in 15 months. Share it with the agric desk of your bank. Take them through it. Don’t just open the commercial account, that account would be treating you as a commercial customer. When you open a commercial account, go and find out the Agric Desk of your bank. So you ‘ll be interfacing with the Agric Desk. It is the agric desk that will do the paper work and present it to the bank management asking for CACS loan for a customer. Otherwise, if you say I just want loan, the commercial manager would give you a commercial loan. So most people don’t have the knowledge of what to do? Where do I go? How do I access the CBN funding? For me, I think the CBN should take a step further to publish how people can get its loan. You can’ get the CBN loan without going through the agric desk of your bank.

Labour

For us, we just wait for the youth corpers. We have a policy of employing young people, those of you who came to my factory last year were amazed at the young Nigerians who are running that plants. For the past five years, I have not brought any expatriates to run the plant. Why? It is my belief that there is no big deal about it, they are engineers, they can run it. It is just to train them and they would work on it. What we do?. We just go to the NYSC camp, write letter to the Camp Director that we want to do interviews for engineers, biochemists or agronomies .And they come in thousands for the interview. that is it or we throw it open in our website and we get the people. Forex restriction for 41 items It has given us positive impacts. For us, cassava starch is not among the 41 items. it, nonetheless , gives us a little protection.Let me take a commodity among the 41 items, let me take tomato or rice as an example. Because of protection for that industry, the ripple effect is that people, beleive that very soon, they are going to ban rice.  Every Nigerian behaves that in the next one year rice is going to be banned. Subconsciously we behave that the way we are going they would soon ban it and we would not be eating imported rice again.  It has increased local production of tomato, of rice or cassava, it has increased local production; entrepreneurship has increased more and small factoris have gone up; more medium entrepreneur have come up that have given more….A raw material that are dealing with people. If you look at the list, everything on that list is a raw material we can actually produce in the country.Tootpicks from bamboo; Meat, we have cow; chicken, fish etc. Everything on that list we can actually produce and we must produce. The position of CBN created an increased production down the value chain, down to the level of the farmers. Today , we have doubled cassava production, rice production and green house. The normal green house that we have in Nigeria today is enormous.We are even now exporting tomato. I can mention a number of factories coming up just to produce tomato and pepper for export. It got to do with protection.[The mindset of our people now is] Oh! Now that I am being protected a little, these guys before they can get that amount of money to come here and compete with me, it will take some time. S let me take advantage of the situation now. If you do research, you will see that there is more than 200 per cent growth in some of the 41 items now. For me, the policy is wonderful, It is fantastic for those of us who are entrepreneurs and we are growing vertically.