Nigerian Entrepreneur and businessman, Kenneth Obiajulu has identified a big profit potential in the processing and export of Ginger from Nigeria, as he explained how he built his agro business, Agricorp.
Agricorp International specialises in the processing and export of ginger from Nigeria. In September 2021, the company recently raised $17.5 million in funding to help fund further expansion.
Almost every state in Nigeria has its own crop of comparative advantage. In Kaduna, one of the areas where I worked, they specialise in ginger. I found that although Nigeria produces a huge amount of ginger – by some accounts 16% of global production – export revenues are comparatively weak. A lot of this is due to inefficiencies in the system, such as wastage or expiration, and produce disappearing into informal, unrecorded channels.
We built Agricorp to address these inefficiencies. For example, we dry the ginger so it can be stored for over two years, and provide support and training for smallholder farmers to increase their yields.
Nigerian ginger is known for being particularly potent and high in oleoresin, which is good for use in both food and certain pharmaceuticals. The demand for Nigerian ginger is about twice what is currently being produced so there is a lot of room for further growth.
Another advantage for many buyers is that ginger farmed in Nigeria tends to be organic, as farmers usually use cow or poultry droppings as natural fertilisers.
We purposefully tried to stay under the radar and learn the business as quickly as possible.
Before our recent fundraising, very few outsiders had even heard of us, and fewer still knew the people behind the business. But within the industry I had built up a good reputation from my previous work, and knew a lot of potential buyers before going into business.
In the beginning, there was a lot of raw hustle. We just did everything we could to make those initial sales. From cold calling to attending trade shows, to walking straight into potential clients’ offices and pitching the sale. A lot of international businesses are wary of dealing with Nigerian businesses, so to overcome this we often gave very generous payment terms, allowing our early customers to pay upon delivery. This helped assure buyers that we weren’t simply looking to make quick money.
In 2019, the first full year after we launched, we surpassed our revenue target by over 300%, hitting around 200 million naira (about $500,000) compared with a target of 52 million naira (about $125,000). But 90% of this was still within the domestic market.
Actually, no. I still try to spend 70% or 80% of my time in the field. Every week I am still going out making visits to farmers – I eat, sleep and consume agriculture. I’d much rather be out there with the farmers than here in the office.
From where do you source your ginger?
We buy from over 5,000 smallholder farmers, who we also provide with inputs and agronomic training. We then process and package the products in our spice processing plant in Kaduna. Currently, the production is around 1,500 tonnes annually, though with the new investment we hope to increase this to around 7,000 tonnes within the next 12 to 18 months.
We try to keep anything that contributes to the quality of the final product in-house, as we obviously have high standards to meet for export. One thing we do outsource is logistics, as it is outside our core competencies.
We have also developed our own proprietary platform, Farmbase, to register, aggregate, and pay the farmers for their produce.
Our focus now is 90% on exports. There’s still a lot of money to be made domestically, but competition is fierce and there are already a number of established players. Ginger sold locally also tends to be fresh – and therefore more perishable – and subject to price fluctuations.
Some 97% of our exported ginger is sold dried and split in 40kg bags. Our biggest markets are South Africa, India, and Morocco, where we sell directly to domestic food processors, and Dubai, where we mainly sell to international traders.
Everyone is so focused on advanced markets like the United States and Europe, where competition is so stiff. I prefer to look at the low-hanging fruits, where there are fewer barriers to entry and growing demand. The African Continental Free Trade Area is going to be huge in this regard – there is huge potential in intra-continental trade in Africa.
This way, when the time comes to move into the more developed, competitive, markets we will have years of experience and capital behind us.
The biggest problems are availability and consistency of product, and the ability to get product to our customers quickly. Logistics can be a nightmare, and there are challenges daily. We transport by road and ship out of Lagos or Rivers State, and delays at the port can sometimes last for months.
Where does Agricorp grow from here?
There are two main ways we can grow from here: by capturing more of the value chain and by selling to new markets.
On the product side, we started the business by selling fresh commodities to the local market. We built up some capital and moved to primary processed products, such as the dried and split ginger. The next step is moving into secondary processed products, such as ginger powder, and then towards packaged, branded, and differentiated products. Moving up the food chain like this is the natural progression.
On the market side, we are trying to set up operations in southern and eastern Africa, where agricultural systems are very similar. This would increase our total export volumes and reduce reliance on Nigeria. Ultimately we want to be the biggest exporter of spices out of Africa.
That said, we also need to allow the market to speak to us. We don’t have the capacity to break a completely new market like some of the biggest players, so we need to wait for a base level of demand before we move into a particular market.