Get Guardian on GoogleIn a deliberate effort to expand access to affordable finance for SMEs in the agricultural sector, the National Agricultural Development Fund (NADF) has signed a Memorandum of Understanding (MoU) with Sahel Capital Fund Manager Limited.
The aim of the partnership according to the Executive Secretary of NADF, Muhammed Ibrahim is to shift from simply financing agriculture to building an investment ecosystem capable of attracting sustainable capital into the sector.
He explained that NADF would leverage its catalytic and development mandates, as well as its understanding of national agricultural priorities, while Sahel Capital would contribute its investment expertise, market knowledge and experience across different agricultural value chains.
“We are bringing our catalytic and development mandates, alongside our understanding of national priorities, to work with an investment partner that has the market expertise and experience across different agricultural value chains.
“Our goal is to create an investment ecosystem that combines public-sector capital with private-sector expertise to unlock more financing opportunities for agribusinesses”, he said.
According to him, the collaboration would combine public-sector and concessionary capital with private investment expertise to establish a financing structure capable of attracting additional investors into agribusiness.
He said the objective was to create an ecosystem where capital could flow into viable agricultural businesses and generate returns that would encourage further investments.
Ibrahim noted that although agriculture was often perceived as a high-risk sector, it also offered significant investment opportunities that could be unlocked through appropriate financing structures and partnerships.
Also speaking, Managing Partner of Sahel Capital, Mezuo Nwuneli, said the collaboration would help reduce the cost of borrowing for agribusiness SMEs by combining funding from NADF with capital managed by the investment firm.
He explained that many agribusinesses currently access loans at interest rates ranging between 24 and 27 per cent, making it difficult for them to expand their operations and invest in growth.
According to him, the partnership would enable both institutions to provide capital at a lower blended financing cost, thereby improving the financial viability of businesses and allowing them to channel more resources towards expansion.
“One output we expect is that when we’re providing capital to SMEs in the space, that blended cost for them would be much lower than what it would be,” he said.
Nwuneli added that the collaboration would also enable both institutions to identify critical challenges within the agricultural ecosystem and jointly deploy their expertise and resources towards addressing them.
He said Sahel Capital was attracted to NADF because of its deliberate efforts to address major challenges in Nigeria’s agricultural sector, including interventions in ginger production, farmers’ access to inputs and irrigation.
He described NADF as an institution committed to solving critical problems in the agricultural ecosystem, adding that its team had demonstrated the capacity and willingness to drive meaningful interventions.
Nwuneli disclosed that Sahel Capital had undertaken 45 investments across eight African countries over the past 15 years, providing growth equity and private credit to SMEs with annual revenues ranging from N500 million to N20 billion.
Under the MoU, both institutions will explore the feasibility of blended financing arrangements through which NADF may provide funding alongside capital managed by Sahel Capital, including the Sahel Agribusiness Private Debt Fund (SAPDF).
The proposed arrangement may incorporate risk-sharing mechanisms, concessional financing and other funding structures designed to improve access to capital for eligible agribusinesses.
Sahel Capital is also expected to provide investment structuring, fund management and technical expertise, identify eligible agribusinesses and develop monitoring and reporting frameworks for the proposed facility.
Other areas of potential collaboration include information sharing, developing a pipeline of bankable agribusiness projects, technical assistance and capacity building.
