Before, Gulf countries favoured investing in Sudan and other African OIC member states, while China favoured Zambia, Angola and Mozambique for such investments.
Investors are primarily private sector. Now, governments and Sovereign Wealth Funds are also involved in providing finance and other support to private investors in agriculture. Major current international investors are the Gulf States, China and Republic of Korea. Private sector investors, usually investment or holding companies like HADCO in Saudi Arabia are involved in such investments. Such investors have the expertise to manage large-scale investments in agriculture.
Current involvement of Sovereign Wealth Funds, investment funds and institutional investors is limited but the magnitude of the funds at their disposal make them potentially important sources of investment funds in the future. Some FDIs often favour joint ventures such as contract
farming.
To be meaningful to Nigeria, FDI in agriculture must maximise benefits and minimise inherent risks for all involved. Foreign investors from countries with food security concerns or requiring flows of agricultural raw materials for processing have also seen profitable opportunities for portfolio diversification into food production investments, especially as returns on other investments become less attractive. Others have been motivated by the prospects offered by bio-fuel developments. A number of dedicated investment funds – the Africa Transformational Agriculture Fund, for example – have recently been established to invest in African agriculture.
FDIs in agriculture provide developmental benefits through technology transfer, employment creation and infrastructural developments. Under contract farming or out grower schemes, smallholders can be offered inputs including credit, technical advice and a guaranteed market at a fixed price, although at the cost of some freedom of choice over crops to be grown. Mixed models are also possible with investments in a large-scale core enterprise at the centre and out growers under contracts to supplement core production.
Benefits accruing to Nigeria from FDI in agriculture include capital inflows, technology transfer leading to innovation and productivity increase. Others include upgrade of domestic production, quality improvement, and employment creation, backward and forward linkages.
Other benefits include multiplier effects through local sourcing of labour and other inputs and processing of outputs and an increase in food supplies for the domestic market and for export. This is in addition to other benefits like technology transfer, employment creation, upstream and downstream linkages.
