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Monday, July 17, 2017

Top 5 Most Profitable Crop Farming Businesses to Start and Run in Nigeria

If you are looking to start a crop farming business in Nigeria and wondering just where to start looking for ideas, there are a few I would share with you in this article. In fact they are the most profitable crop farming businesses to do in Nigeria as at 2017 based on their return on investment. 

Interesting thing about these farming businesses is that they can be started on a small scale with as little as N100,000 and you can be sure of getting your money back within a very short period of say a few months. But let me warn, while they are profitable they are also very risky businesses to do and I will explain the risks involved in these businesses.

Challenges of running a Farming Business in Nigeria

Firstly you must consider certain things first before looking to go into farming.

  • Farming is a very tedious and labour intensive business to do in Nigeria. Mechanized farming which would have removed the labour intensive part is very expensive to setup and is out of the question for many small scale investors seeking opportunities in Agriculture.
  • There are regulatory and policy challenges to deal with. There are not enough policies to support farming as a business and the few policies in place are not well implemented.
  • There are marketing issues like how will you evacuate your farm produce to the market? How will you secure the best price for your produce? If you want to export your farm produce how will you locate international buyers or if you want to sell locally how will you get reliable processors and traders who will pay meaningful amounts for your produce? Even joining a farmer’s cooperative may not solve all these problems.
  • There is problem of optimal production which involves having the right farming mix, techniques and input that will maximize yields from your farm. How will you get affordable and fertilizer, extension services, quality seed varieties, pesticides? etc
  • There is the problem of storage of your produce. At least 20% of harvested farm produce gets wasted due to poor storage facilities. This must negatively affect your profit potentials.
  • Pest and diseases can ravage your crops whether those on the field or the ones you have harvested and stored in your barns and farm storage. In 2015, more than 80% of tomato crops in Nigeria were destroyed by a farm pest called ‘Tula Absoluta’ which many nicknamed “Tomato Ebola”.

But even after all these, farming can be profitable once you learn the right approach and build a reliable business to identify and overcome your business challenges.

The 5 most profitable farming businesses to do in Nigeria

These are the most profitable farming businesses to do in Nigeria in 2017 because there is a huge local market for them and they also offer farmers attractive profit margins. Let’s set the ball rolling with;

#1 Soya Beans or Soybean Farming
Soy bean farming is the most lucrative farming business to do in Nigeria. Farmers in this business make at least 106% - 200% return on investment for each planting season. That means if you invest N100,000 into small scale soybean farming, you should make at least N 106,000 profit after selling your produce, what’s more there are always ready buyers willing to take your produce once you have your harvests ready for evacuation.

#2 Rice Farming
Rice farming makes between 60-150% return on investment for each planting season. Rice can be produced twice yearly and the market demand for rice has always been on the increase since independence. There has never been a year in which annual demand for rice declined compared to the previous year and Nigeria is the second largest importer of rice in the world.

#3 Maize Farming
Growing maize is becoming increasingly more lucrative than previous years. This is because many large scale buyers of maize now approach farmers directly through their cooperatives to source for their products at much higher prices than the farmers would get if they sold directly to middlemen traders. These large scale farmers include; poultry farms, Animal feed mills and food processing companies. Also government has recently supplied many maize farmers with improved seed varieties which yield more and are more resistant to diseases. 40-120% return on investment on every planting season.

#4 Tomato Farming
Tomato farming is volatile but still profitable. It isn’t suitable to do in the southern part of Nigeria because the best varieties grow in the North were the right soil, temperature and rainfall are present. With the advent of local production of tomato paste and with huge investment by Dangote and Erisco foods who have both invested over N8 billion in 3 years in processing local tomatoes into paste you can be sure of making quick sales. But there are two catches. First you must be located within the right planting zone where these companies can reach you and you must join the right farmers’ cooperative. The return on investment is 30-100% for each planting season.

#5 Cotton Farming
Cotton can be processed into animal feeds, crushed to produce oils, is useful in the pharmaceutical industries, textile industries for making khaki, underwear, fishing nets, book covers and more. Even if there is no local market for it, the international market demand for cotton is huge and Nigeria even if it can produce 3 times is current level would not be able to meet its own quota of existing global. The return on investment is between 20 to 80% for every planting season.

I wish I could go on but this article must have an end and unfortunately it is at this point but you can learn more about farming techniques and marketing plans you can pursue for each of these farming businesses if you intend to do any of them.

Give me a call or send me an email if you need a business plan on any of these businesses. My phone number: 0803 206 4106 and email: paulonwueme@gmail.com

Sunday, July 9, 2017

How to Setup a Baby Products Retail Store in Nigeria

Nigeria has a huge market for sale of baby products ranging from diapers, to baby clothing to baby shoes, baby toys and other products that can be associated with children under 18 months of age – those that can reasonably be breast fed or still growing little teeth. 

In all Nigerian homes I know, babies are the darlings of everyone. They can possibly do no wrong but they are the most destructive, restless, playful and distracting members of many households. They have needs and the loving parents know this very well.

Socially Nigerians tend to celebrate with their family member, friend, colleague, church member or neighbor who just put to bed. Guess how they choose to celebrate with them – by buying baby products as gifts presented to the parents as a way of showing their love for the new child. It is a very common

The Opportunity in Selling Baby Products in Nigeria
There are many opportunities in Nigeria to sell baby products in Nigeria. Let us start with the population of new born babies. In 2016 an estimated 5.2 million babies were born in Nigeria with over 2 million of them born to parents who reside in many Nigerian towns and cities. The main customers of baby products reside in the towns and cities of which an estimated 40% of Nigerians are resident in. The big towns and cities include state capitals, transit such as towns, trading towns and other densely populated commercial areas etc

Nigeria’s Population is growing very fast
Nigeria’s population is growing at an alarming 3.2% per annum which would make Nigeria the 3rd largest country in the world - by population - by the year 2050 when our population would reach 400 million. This is because family planning is not widespread in Nigeria. Most homes have at least 4 children even among educated middleclass families. There is also the issue of early marriages. In Nigeria women get married as early as 21. Combine that with our high fertility rate of 5.7% - this means most Nigerian women between the ages of 19-39 will bare at least 5 children which is the 10th highest in the world. Nigeria will keep producing millions of babies every year.

Huge Pool of Customers in Nigeria
There is a huge market pool of over 38 million customers to consider (parents with children less than 2 years). About 15.2 million of them reside in state capitals and cities such as; Lagos, Port Harcourt, Abuja, Benin, Jos, Kano, Ibadan, Ilorin to mention a few. This population keeps increasing year after year meaning that by next year we should be expecting a higher population of parents with children less than 2 years of age.

Products are affordable to the Nigerian Middle Class             
Thirdly baby products are relatively affordable for the middle class who are 23-30% of total population according to the World Bank. In Nigeria middle class families consist on average two parents and 4 children with gross household income of N120,000 and above. Most middle class families can afford to buy this range of products and they reside mostly in the urban centers. 

There are few Specialist Baby Product Shops
There are a lot of shops that sell baby product but very few of them are specialist stores. This means they can only stock their shops with the most common baby products i.e diapers and baby food but not on baby clothes. Most people buy their baby products from corner shops and Supermarkets in Nigeria. Secondly they are not likely to source quality baby wares and products at the best available price.

Family Planning is not widespread           
Nigeria is one of the least compliant countries in the world when it comes to the use of contraceptives and other family planning methods. Our cultural, religious and social practices encourage larger families compared to European and Asian households. 

Low Marketing Costs                                                             
Being a retail product that cuts across many social and economic divides, the cost of reaching potential customers is relatively low compared to many other products. There are marketing strategies that can achieve good results in a short time with a small budget that fits into this business. This offers a chance for investors to realize quicker sales if the marketing approach used is cost effective

High Profit Margins                                 
Baby products also carry a higher profit margin than many fast moving consumer products. Some baby products such as diapers can attract 10% or more in sales margin compared with other kinds of consumer items.

The Challenges
There are many things that could affect your business negatively or prevent you from achieving your business goals. In Nigeria I have identified at least 9 for baby product range of businesses but I will only explain 3 in this article;

Counterfeiting of Baby Products
One thing common in the Nigerian landscape is how soon a fast moving product is counterfeited or produced using substandard ingredients in order to make a quick buck. It cuts across drinks, to clothing to bags, shoes and a lot more and certainly baby products are not excluded. The unfortunate thing is that consumers often don’t know better. This can actually discourage some people from buying from your store. 

Strategic Shop locations are expensive                                                       
To have a strategic location to drive sales to your business is very hard to come by because the available spots are usually very expensive and can contribute to your already high operating cost

Stiff Competition
A lot of people already know about this business and there is no way they will sit back and allow others profit from it. Since there are many alternatives to the products you will be selling you will likely lose some potential customers so long as people can order for the same product from someone else. But this shouldn’t discourage you as aggressive marketing works well when there is stiff competition

How to Find Customers
There are at least 15 different ways I know you can find new customers for your business. There is word of mouth, targeted internet marketing, social media marketing, use of a strategic shop location, online shopping malls among other methods many of which are low budget and effective.

Startup Requirements for Baby Products Retail Store in Nigeria
  • 2 years’ Shop Rent – 1,200,000
  • Inventory – 3,000,000
  • Adverts and Marketing – 600,000
  • Working Capital – 600,000
  • 3 months salaries – 300,000
  • Contingency – 600,000
  • Total – 6,300,000
NB: required staff; 2 sales girls and 1 marketing executive

1st Year Financial Summary
  • Gross sales = 18,000,000
  • Gross Profit = 5,400,000
  • Net profit before tax = 3,240,000
  • Taxation = 972,000
  • Net Profit after Tax = 2,268,000
  • Return on Investment = 36%
  • Breakeven period = 9th or 10th month if sales target is met
  • Payback period = 3rd year
Assumption used in this projection is daily sales of N60,000, gross profit margin of 30% and 300 business days in a year.

Do you wish to setup a baby/children’s store in Nigeria and need a professionally written business plan for it? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com to get one prepared professionally for you.

Sunday, July 2, 2017

What will be Africa’s Biggest Untapped Business Opportunity from 2017 to 2030?

In this article I’m going to be referencing facts and data from the World Bank, Africa Development Bank, National Bureau of Statistics, McKinsey global, KPMG and USA today in analyzing Africa’s biggest untapped business opportunity. I won’t be using citations - so you don’t feel you are reading an academic essay. 
This topic asks a question and I personally didn't have an answer till I read McKinsey Global services market report on this earlier this year. The highly respected marketing research company particularly mentioned an industry as Africa’s biggest business opportunity by 2025 – but I emphasized untapped. 

KPMG also reports that this business opportunity will thrive as more Africans start earning above $1,000 per annum - which is the minimum amount required to be classified as middle class in Africa by ADB and World Bank criteria.

I call it untapped because as of 2014 only 8% of Nigerians patronize them. Nigeria being Africa’s largest market (by population) is still lagging behind South Africa and Egypt by sales volume in this industry. Unlike other business opportunities in Africa, this one isn’t seasonal, short term or adversely affected by harsh economic conditions except by inflation and declining purchasing power. The irony though is that even so the industry still grows even with inflation and declining purchasing power.
  • Africa’s Biggest Business Opportunity would be worth over $400 billion in sales per annum by 2020
  • Over 420 million customers would patronize the industry by 2025
  • Less than 40% of the entire market would be captured by 2025
  • The growth of this industry would also involve massive economic growth (over 5% per annum) for many African countries.
  • Internet technology would be a major driver of sales for this industry
  • Increasing annual purchasing power from customers is projected for this industry
  • The industry is expected to create many new age millionaires (less than 40 years of age) in Africa by 2030

What industry am I talking about? Let me tease you a bit. It is an industry that grows on average at 7% per annum in most African countries. It sells everyday items, is associated with the middleclass, it rarely experiences negative growth in Africa even during recessions except during civil wars and severe famine. 

I am talking here about the formal retail industry which comprises registered, taxable and regulated supermarkets, grocery stores, boutiques and clothing shops, food markets, online retail shops and any business involved in selling consumer items directly to consumers at retail prices. I am not referring to kiosks and informal petty trading although they also fall under retail albeit the informal sector. 

There has been a massive growth in population of most African cities due to rural-urban mass drift as young school leavers in rural communities migrate to towns and cities in search better economic opportunities. 

Many African cities especially national and regional/state capitals are growing at an alarming 3-5% per annum from rural-urban migration which puts pressure on domestic food security and increases local demand for consumer items and consumables.

Add the cosmopolitan lifestyle of most city dwellers and you begin to see why going to the supermarket or grocery store is more convenient that storing food supplies in barns or why maintaining a home garden isn’t feasible for them.

People can’t produce their own food items, design their own clothes, make their own makeup kits etc but they have needs for these things and the population of these people keeps rising every year in many big towns and cities in Africa. Currently less than 300 million Africans live in towns and cities but the story will change in another 8 years when their population will reach 420 million with at least 156 million of them being middleclass as against the current 60 million plus middleclass city dwellers. Nigeria in particular would have over 40 million middleclass urban residents by 2025.

Factors that will ensure the rapid growth of the retail industry in Africa
  • Rural-Urban drift [Urbanization]
  • Online Social Media influence on Millennials
  • Westernization of the growing youth population
  • Rapid growth in middl eclass population
  • Large number of white and blue collar jobs in African towns and cities
  • Improved enactment and enforcement of urban and town planning laws [Urbanization]
  • Rising influx of foreign investors
  • Increasing government spending on infrastructural projects
  • Africa’s extractive and consumer based economy isn’t likely to transform into a more productive one even by 2050 giving room for the retail boom to thrive
What does this mean for Investors and Retail Entrepreneurs?

  • There is a fast shifting trend observed among retail shoppers and consumers in Africa. Many of them now have access to mobile and internet banking, they have rising tastes for modern gadgets and products
  • There is a rapidly growing population of millennials who are gaining purchasing power to buy and pay for goods and services. Most of these people would be looking online to purchase their preferred items
  • Financial institutions in Africa are increasing their funding of consumer spending with tailor made services to their customers
  • Africans are now going cashless which makes shopping; easier, safer, faster and cheaper
  • More people will be able to spend cash on the go whether at the airports, schools, hotels, restaurants, at car parks etc
Conclusion for African Entrepreneurs and Investors

Investors and retail entrepreneurs should be looking to setup formal retail marts at strategic places in cities in Africa. Shoprite, Park ‘N’ Shop, Ebeano, SPAR and NEXT are not sufficient to meet these growing demand. More players should join and serve this market

Looking to write bankable business plans in Nigeria? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com