How to Invest in Farmland in Nigeria
I know what you are thinking. But, how do I invest in farmland if my knowledge of agriculture and farmland is limited?
Buying a farm and doing the actual work of raising crops and livestock isn’t the only way to invest in farmland. There are other ways you can support them.
Investors can see significant benefits from investing in farmland as opposed to commercial or residential property, depending on where and what type of farmland you purchase.
Due to the rising global demand for food, farmland is often seen as one of the best long-term real estate investments out there. People still have to eat, whether the economy is in a recession or blooming.
Therefore, investing in farmland is an investment you will not regret. Agriculture has, and will always be, a sector characterized by a rewarding return and general progressiveness, provided it has all the requirements needed.
This post will guide you on the steps you need to take to invest in Farmland in Nigeria, and I will also discuss ways you can benefit from it.
What is Farmland Investment?
Farmland investment is best described as a type of real estate investment that deals with farmland and supports the agribusiness industry (agribusiness is any business that sells agricultural products or services necessary for farming).
Farmland is referred to as arable land, cropland, or cultivated land.
Farmland is a real estate investment that has been overlooked for a long time in Nigeria until recently. Investors have seen significant benefits from investing in farmland over commercial or residential.
A farmland investment is one of the best real estate investments you can bank your money on. As such, you can use farmland as a land banking strategy.
Is Farmland a Good Investment?
Because agriculture is an essential part of our lives, from the food we eat daily to alternative fuels, people rely on Agriculture. Hence, Farmland investments can be lucrative for so many reasons.
Farmland is undoubtedly a good investment because of its various benefits. These include high returns on investment; diversification; hedges against inflation; tax benefits; minimum risk; and a positive environmental impact through sustainably focused companies.
Why Do You Need to Invest in Farmland?
Agriculture Is Always Needed.
Agriculture is all the processes involved in producing food, fiber, feed, and other products humans need, either by growing different crops or raising livestock. Both livestock and crops contribute to the global need for nourishment.
Additionally, scientists are finding new ways to create fuel from plants and other ways to use vegetables. The global population is growing, and so is the need for sustainable agriculture.
Suitable agricultural land is needed. To practice agriculture, you need this; without this, you cannot raise animals, and crops cannot be grown in enough quantities.
Thus, as an investor, you can buy fertile land, wait and sell it as prices rise in the future, or lease it out to farmers and collect yearly rental income.
Farms Are Becoming More Productive
Farms are growing and producing more constituent yields with the use of technology. Information Technology makes everything from the supply chain to finance farm management uniform and less risky by leveraging data.
Automation has made farms more efficient and can break down data to improve production cycles. In addition, robotics and drones fertilize, and autonomous driving capabilities allow tractors to self-drive.
How does this benefit you? You can employ and pay a farmer to manage your farmland while you make money from selling the produce. You can even enter into a long-term agreement with your buyers to buy the final product at a fixed price.
Farmland has Produced Substantial Investment Gains.
There is significant evidence that farmland has not only turned positive results over the last few decades but has even outperformed more traditional investment asset classes.
An article on Nigeria’s top 10 agricultural exports shows that Nigeria’s agricultural exports rose to N152.3 billion in the first six months of 2019. This is reflected in the foreign trade reports released by the National Bureau of Statistics (NBS) covering the first and second quarters of 2019.
As the usual disclaimer goes, past performance does not indicate future returns. But since the past is all we have to go on, the results speak very well for Nigeria’s farmland.
It makes a strong case for clearing at least a small space in your investment portfolio for a position in farmland.
Farmland is a “Fixed Asset.”
Some investors like to hold physical assets, like gold and silver, as “portfolio insurance.”
Since precious metals are not someone else’s liability, they often retain value or increase when paper assets collapse.
Farmland is a similar type of fixed asset. Its value isn’t tied to the financial, residential, or commercial real estate markets.
And it has a significant advantage over precious metals in that it produces food.
Food will always have economic value, but it may be worth even more in a severe crisis.
“Buy land. They ain’t making any more of the stuff.”
This quote is credited to Will Rogers, and though the statement seems painfully simple, it is right on the money.
Not only is the supply of land fixed, but as noted above, Nigeria’s population and the world’s continue to increase.
That means the amount of land required for human occupation is also growing. The world’s great cities and metropolitan areas are built mainly on what was once highly productive farmland.
That’s the main reason why many cities came into existence in the first place. And as they expand, they consume more land, including farmland.
So, even if you decide to stop farming for some unknown reason, your farmland can still be helpful as land you can sell for higher profits.
How to Invest in Farmland? A Step-by-Step Guide
Although farmland investments are safe and profitable, you need to know a few essential things before entering the industry. Therefore, I have compiled a guide to farmland investment with five well-defined steps you should follow.
Using this guide, you can conduct in-depth research on your target farmland offering, choose the right opportunities, and reduce investment risks. So let’s dive right in.
Step 1 – Prepare Yourself for Long-Term Investment
It would help if you first remembered that these investments work with long-term targets. So, you can’t expect a return on your investment within the first month.
You must be prepared to put your investment away for at least a year or two. As such, the usual turnover time for farmland investments is around 1–7 years before you get your first sizeable return on investment.
In addition, when you try to invest in farmland, you should diversify your portfolio as much as possible among different asset classes; that way, you build and have multiple income streams to survive while waiting for the returns.
Step 2 – Broaden Your Investment Approach
Diversification is the key to making safe investments and reducing potential risks. You should look into multiple geographical commodities and invest in various crop types.
This geographical diversification and crop insurance will protect your investment from risks and ensure good returns.
Step 3 – Evaluate the Soil and Water
Is the soil fertile? Is there enough water available for irrigation? You should pay close attention to these deal factors to make sure it’s the right property for you.
For example, when you want to buy a piece of land, you will check to see if it’s in a good environment and has easy access to the living conditions around it. Also, what is the future of the location? Is it going to be a big area in the next two decades, or will it just be abandoned by society? All these facts help you see whether the property will double its value or not.
Similarly, when you invest in farmland for rental income, assess the soil and water to know whether the farmland is a profitable investment.
For reference, the soil is categorized into three classes, with Class 1 being the best quality. The soil quality also hinges on the crops that grow on the farmland, as soil requirements differ for every crop.
The availability of water is determined by checking whether the farmland has one of three primary water sources. These include rainwater, wells, and surface water from nearby water bodies. If your farmland ticks all three boxes, it is an ideal investment for a recurring passive income.
Step 4 – Aim at Getting Sustainable Farmlands
Choosing sustainable agricultural land is another important factor. Even if your target farmland has abundant water sources and fertile soil, it should be appropriately maintained to ensure maximum profit.
This includes habitually adding nutrients and organic matter to maintain the ideal soil.
Step 5 – Acquire Multiple Properties
You shouldn’t depend on just one farm property for profit. For passive income, try investing in other properties (as mentioned above regarding geographic and crop type). As with any additional investment, farmlands are prone to various risks, including droughts, weathering, and pest infestations.
Owning several properties and hosting various crops can help you create a hedge against these potential risks and safeguard your investment returns.
LIST OF FARMLANDS INVESTMENT PLATFORMS IN NIGERIA:
Looking through the return on investments in farmland, investment and high yields will always be a positive trend. In addition, investing in agriculture is a viable way to make a passive income while changing people’s lives.
The farmers access capital to access technology to help with efficiency, while the investor gains investment.
Here is the list of these platforms that you can use to invest!
Farmcrowdy – http://www.farmcrowdy.com/
This platform was the first to launch in Nigeria. As the name implies, this platform raises funds through “crowdfunding” for farmers.
The concept is relatively straightforward; sometimes, a lack of capital may prevent some farmers from sowing in time for harvest. This platform raises funds for these farmers, with a return on investment of between 6% and 25%.
Products offered: The products available for investment on this platform are Maize, poultry farm, cassava, soybeans, and rice.
Thrive Agric – http://www.thriveagric.com/
Thrive Agric launched this platform in 2016 with the primary purpose of crowdfunding investments for farmers. This investment occurs in market access and tech-driven advisory. Like Farmcrody, the return on investment is between 6% and 25%.
The types of products available for finance on this platform are poultry farms, maize, groundnut, sorghum, cassava, cowpea, soybeans, and rice.
Grows – www.growsel.com
This platform connects farmers with global investors to ease poverty. This platform is different because farmers declare the investment needed, and investors provide a minimum of 10% of the capital until they raise the total amount. As a result, the return on investment is between 5% and 20%.
Products offered: The products available for finance on this platform are Ginger, Maize, potato, tomato, cassava, soybeans, and rice.
FARMS – www.efarms.com.ng
Initially incorporated as FoodBank GrowMore LTD, this platform is determined to transform Sub-Saharan Africa into a central hub. A hub is so vast that it feeds the world by linking investors and farmers. Return on this platform is between 15% – 35%.
Products offered: The products available for investment on this platform are Maize, poultry farm, cassava, pineapple farm, catfish farm, snail, and soybeans.
AGRECOURSE – www.agrecourse.com
Agrecourse’s focus is to turn small farmers into commercial farmers. They do so by pulling investments from individuals and corporate bodies. The return on investment on this platform is between 15% and 40%.
Products offered: The products available for finance on this platform are maize, poultry farm, and catfish farm.
There are a lot of other investment platforms you can utilize to achieve your goal. The list is endless, but the main point you should take home with you is how beneficial farmland and agriculture can be.
Investing in agriculture by way of procuring farmland can be very profitable.
However, you must: Know what you are investing in, get a suitable Farmland, and be patient.
Ticking all three of these boxes will see investors making good profits.
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