As I work in agriculture, I have learnt one thing: Nigeria’s agricultural paralysis is not solely due to low productivity but making sure our little production capacity is optimized from farm to table. We waste a lot of food in this nation. Yes, a nation where excess of 87 million are classified as being extremely poor is still wasting farm produce. You can argue that the waste is really the reason why we have that level of poverty in the land.

At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million

Today, a commissioner narrated how few years ago, Bauchi farmers were forced to sell baskets of tomatoes for N300 (~$0.89) per basket because no one could buy them. And when the government brought in consultants to help, they told them that the most strategic roadmap was to allow the tomatoes to waste as the cost of harvesting and transporting them will exceed any value derivable.

Yet, the next year, do you know what happened? Government doubled down on more incentives on growing tomatoes. Interestingly, no one got the memo that even the little produced last year was largely wasted. We think that has to change.

Next year, under the pioneering engineering of Kobo360, a category-king logistics company in Nigeria, together with Zenvus (my agtech company via the zCapital services), a pilot will be launched in a northern Nigeria state. We are exploring how to ensure that no single produce would be wasted, post-harvest.

Kobo operates under the principle of Aggregation Construct which depends on network orchestration where it works as an arbiter for many partners and customers. With this model, the customer experience becomes a key part of its business. It does not have ships, planes and trucks delivering services from U.S. to Nigeria and beyond. But it has a technology to simplify trade and commerce. It has got happy customers who do think its services are even better than firms like DHL.

If you have access to a governor or commissioner in your state, please reach out. We can put you in this pilot. Our vision is to micro-aggregate all produce from farms to cities and factories, and deliver generation-shaping productivity boost anchored mainly by reducing wastes. It goes beyond building expensive warehouses and cold rooms to deploying the best logistics operating system in Africa to move things out as quickly as possible. Kobo engineering is supremely solid in fixing logistics friction and is on call to help farmers.

In a piece on how to invest N10 million (about $28,000) in Nigeria, I explained that financing trade could be very lucrative. Largely, returns of 40% have been recorded within four months.

Put 40% to finance trade. In Aba and Onitsha, some people put money to finance trade. Some men mop cash and travel to China to bring containers. The return can be close to 40% with my recent data in four months. It is a solid business outside the banking sector run by some Igbo men. Say someone needs to import something of N220 million, they pool money and once the items come in, they sell wholesale and balance the people that funded them. This is the real investment and can technically make you whole. But it has risks if you do not know the person. You would not like to give money to someone you do not know.

Someone followed up and commented as follows

Thanks for the clarity of your write up and of course the well researched content. One question though; why would traders be willing to offer up to 40% returns in as few as 4 months while rejecting bank loans which typically hover around 21% per annum. Is it just the interest rates or more about the quality of their collaterals.?

This is my response (edited for clarity)

I am not a trader but if you work with these guys, they can mobilize cash in 72 hours. I am not sure any bank can achieve that in Nigeria. Also, banks most times will ask you to import in their names or something like that, holding the assets until you have cleared the loan. But here, the trader is in control. People do not go to payday loans because there is no bank; people go there because they are more convenient with lesser frictions.

So, people do give away 10% of their salaries for immediate cash in America even though a bank will do it largely free. But the problem is that a bank will ask for many things while a pay day master does not ask for anything.  Convenience matters to the people who patronize payday lenders.

The payday loan in U.S. is like fiction until you see people queuing to give out 10% of their salaries to get cash about 3 days before the cheque is due. So, you have a cheque of $1,000 and you collect $900 today for someone to cash that cheque and keep $100 in 3 days. It is a big business in U.S.

Sure, government does tell people to stop that. But the reality is that the ease of walking into a small office and coming out in 10 minutes with that $900 without filing any major form or going through background check seems to be better option for some people than trying to save the $100 by going through the vetting process of the banking system.

It is that philosophy that drives traders. Banks will need you to submit all kinds of materials and waste 3 months to mop that cash. Members can help you move money in 72 hours. Even if bank is offering 21% interest per annum, that is irrelevant because of the friction involved. Payday masters could make 10% in 3 days and yet people go there! It is unfortunate on that level of margin but it happens.

In Nigeria, companies like Lidya which are focusing on SME lending can fix some of these frictions by finding better ways to engage traders and businesses. The requirements in the formal banking system remain a huge burden to most traders. But you cannot blame the banks because they need to meet financial ratios set by the regulator while making sure they are not tripped into bad loan paralysis.

Lidya, the digital financial services platform focused on improving access to credit for micro-, small-, and medium-sized enterprises (MSMEs) in Africa, today announced that it has raised $6.9 million in a Series A investment round, one of the largest in Nigerian tech history.

Of course financing trade will remain challenging until Nigeria builds a top-grade credit system. With a credit system, the risk will drop and banks can easily offer loans and credits without demanding onerous collaterals.

The numbers are not looking good for companies looking for bank credits: In H1 2018, total credit by banks to companies dropped by N855 billion or 5.7% from N14.9 trillion compared to H1 2017. Within the same period, bank’s investments in government securities – bonds and treasury bills- rose by 2.6% to N6.87 trillion.

Businessmen and intending entrepreneurs should note that the Nigerian economy at present requires every support to rebound fully and ensure improved economic and social welfare of the citizenry.

In the first half of this year, total credit by banks to businesses reduced by N855 billion or 5.7% from N14.9 trillion in the corresponding period of year 2017.

Also, while banks’ credits to businesses were reducing, their investments in government securities – bonds and treasury bills- rose by 2.6% to N6.87 trillion.

The implication: banks are expecting that many companies will struggle going forward. Simply, by moving the money from the private businesses into the public sector via bonds and treasury bills, they will avoid potential bad loans.

If you run a business in Nigeria, please watch your cashflow. It is going to be harder getting any decent credit from now till Q2 2019.  Investment is already dropping as foreign investors are fleeing. Election is always a bad season for business in Nigeria. That is very unfortunate. It is adding another huge factor to an already challenging business climate.

More so, I expect bank profits to drop in 2019, primarily because they are over-hedging as they move money to government where gains are smaller compared to the private sector lending. But this could be a moment for startups like Lidya to step forward and meet clear market needs in the market: companies want credits and banks are not interested, so, if you can handle the heat, you can have your moments.