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Overview of the business
Farmways Enterprise will be a farm-input supplier serving Katsina state in Nigeria. The start-up intends to target farmers in the low to middle-income level. Moreover, Farmways anticipates to sell a wide variety of farm products ranging in the sphere of dairy, horticulture and poultry. These products will include: agrochemicals, seeds, supplements, fertilizers, farm equipment, and allied products. Furthermore, the agrovet intends to partner with the Nigerian Bank of Agriculture (BOA) to grant loans to farmers to purchase farm inputs being sold. Therefore, farmers will be able to buy agro-supplies in-store using loans obtained from BOA. This will give Farmways Enterprises a competitive advantage against its competitors. Consequentially, its customers will be able to enjoy high-quality products and services at affordable prices. Occasionally, as a way of giving back to society, Farmways will be teaming up with a local veterinary organization to organize open field days through which farmers will be educated on crop and livestock production.
Market summary
Crop and Livestock Production
The recent slump in oil prices, coupled with the global economic recession, has considerably hampered Nigeria’s oil and gas sector (Adefila, 2014). Therefore, the country has shifted its focus to agricultural production. Consequentially, with Katsina being one of the major states practicing agriculture, it is seeking to partner with investors to facilitate the establishment and improvement of value addition practices that can significantly improve agricultural production. Katsina is a state in Nigeria covering a land area of approximately 24, 192km2 and lies within North latitude 12°15 ′ and East longitude 7°30′. It borders Kano, Zamfara, Kaduna, and Jigawa (Federal Republic of Nigeria, 2019). The state’s citizenry constitutes about 6.50 million people. Furthermore, it is made up of thirty-four local governments (Federal Republic of Nigeria, 2019). The state has a climatic and geologic environment which is suitable for farming.
Agriculture is the key to Katsina’s potential growth and development. It is estimated that 1.6million ha of land is dedicated to crop cultivation. Farmers in the region grow several varieties of crops which include rice, sugarcane, cowpea, soybeans, cotton, sunflower, cassava, potatoes, peanuts, fruits, vegetables and fodder (El-ladan & Saminu, 2018). However, according to El-ladan & Saminu (2018), crops farmers are challenged with the unavailability of farm inputs. For instance, as of 2018, farmers required 23, 000 MT of assorted blends of NPK fertilizers out of which they received only 50% which was supplied via open market channels. On the other hand, livestock production in the region is also gaining momentum. The state has a capital asset of approximately two million sheep, 1 million cattle, and three million goats (El-ladan & Saminu, 2018). Furthermore, there are about 200, 000 rabbits, 2 million fish, 3 million poultry, 30, 000 camels, 160, 000 donkey, and 25, 000 horses. Moreover, Katsina is considered to be among the top five centers of livestock production in Nigeria.
As per the last population census held in Nigeria, Katsina state comprised of approximately 5.8 million individuals in which 2.7 million people are involved in crop farming (National Population Commission, 2006). Crop and livestock farming is the primary source of food and income to the vast population of both Katsina and the nation at large (Nigeria Data Portal, 2014). Therefore, this elucidates the magnitude of opportunities available in the state, considering its comparative reliance on agro-allied business enterprises (Obasi, 2015). However, agribusiness in the state is characterized by several factors that impede the growth of the sector. These include the presence of low-level technology, prevalence of subsistence farming, poor farm organization, high input costs, low quality of inputs, difficulty in accessing loans by farmers and decline of cash crop production (El-ladan & Saminu, 2018).
Agricultural funding
As to any other industry, finance plays a major role in Nigeria’s agricultural sector. Consequentially, over time, the Nigerian government has been coming up with ways through which funds can be continuously invested to revive and develop agriculture in the country. To achieve this, the government has formed several schemes, for example, the Agricultural Guarantee Scheme (ACGS) and the Agricultural Credit Support Scheme (ACSS) to serve the purpose of providing financial support with respect to loans awarded by any banking institution for agricultural purposes (Famogbiele, 2013). The BOA is presently the leading financial institution used by the government to facilitate this objective. The BOA is the principal rural development and agricultural finance provider. It is wholly owned by the Nigerian federal government, and its mission is to offer affordable financial and advisory services to underserved groups of the society who have minimal access to conventional banks (Bank of Agriculture, 2019). However, according to Muhammad, Sheng and Hosain (2017), the bank does not adequately fulfill its objectives. Farmers in Katsina are complaining that the bank has relatively few branches in the area, for instance, the BOA Funtua serves six local towns.
Farm-input suppliers
Farm-input suppliers in Katsina operate either on physical stores or on the digital platform. Some of the common physical stores in the region include the Farmfields agro-allied services, Niyya Agrovet Services limited and the Naskada Agrovet. On the other hand, Verdant Agri-tech is among the main agro-suppliers operating on the digital platform that serves the region (Unah, 2018). Moreover, unlike other mentioned suppliers, Naskada Agrovet explicitly focuses on offering services relating to poultry farming.
The before-mentioned statements theoretically depict the possible success of a properly established farm-input supplier business start-up. So long as the enterprise attends to the needs of farmers, that is, provide farm inputs and financial assistance at a community level, the business is likely to be profitable. Nevertheless, to have a more in-depth and comprehensive understanding of the feasibility of the farm-input supplier business start-up, it was necessary to conduct market research.
Pilot Study
Research objectives
The primary aim of this pilot study is to gauge the feasibility of a farm input supplier start-up in Katsina. The following research questions steered the study:
- What is the market potential and concentration of the farm input supplier market segment in Katsina?
- Which are the best avenues for access to the farm input supplier market segment for the start-up?
Method
Study design
The research adopted a case study design. The respondents were randomly selected from the population. They were then given a semi-structured interview that contained a series of 10 close-ended questions.
Participants
The study sample comprised of 200 individuals who were randomly selected from Dankama Farmer’s market in Nigeria. Dankama Farmer’s market was chosen as it considered to be one of the most popular markets in Katsina state. Random selection was carried out to eliminate any limitations of bias. Furthermore, all these individuals were farmers involved in various agricultural activities in Katsina State, that is, crop and livestock farmers. The participants were adequately informed on the procedures of the study, and informed consent was obtained.
Procedure
Each participant was given a semi-structured questionnaire containing 10 close-ended questions. The questions collected information regarding the participants’ socio-economic characteristics, needs, and demand for farm input supplies and loans. Eighty-three usable responses were received, therefore, eliciting a response rate of 42%. For a pilot study, the response rate was deemed acceptable.
Data analysis and Discussion
Descriptive statistics was used to analyze the information presented in the questionnaires.
Socioeconomic characteristics of the farmers
The study evaluated the socio-economic characteristics of the respondents, and the results are illustrated in Table 1. The age-group of 21-30 that could be regarded as to comprise of able-bodied individuals constituted of 31.5% of the sampled population in Katsina. Comparatively, this is a good indicator for the potential labor force in relation to agricultural development. Moreover, the study evaluated the annual income of farmers. The results illustrated that 31% of the farmers receive an annual income of more than N150, 000, while 18% had an income of less than N50, 000. This indicates that income earnings provided by agricultural cooperatives are still insufficient for meaningful development.
Farming experience was evaluated in regards to the years spent on agricultural practices. For example, most (35.5%) had 11 – 20 years of experience, while the least (6.5%) had more than 30 years of farming experience. Experience goes hand-in-hand with skill acquisition, which is essential to effectiveness and efficiency in various operations. The results suggest that farmers, especially those with considerable experience, are more probable to adopt innovative techniques that function to increase productivity.
On the other hand, the results regarding the level of education indicated that a majority of the respondents (40%) had a maximum of primary education, followed by secondary education with 29%, then non-formal education with 24%, and lastly tertiary education with 6.5%. Furthermore, 46% of the farmers practice crop cultivation.
Table 1: Socio-economic traits of the farmers.
Challenges facing agriculture
There are several challenges affecting agriculture in Katsina. However, based on the results, the primary challenges include fluctuations in market prices, inadequacy, and high cost of agrochemicals and insufficient funds. Taking into account the objective of the pilot study, that is, the demand for farm inputs, inadequacy and high cost of agro-chemicals was considered as the main challenge. For instance, farmers complained that a bag of fertilizer is sold for N2, 000 at a controlled price from the government, and it reaches to the farmer in the village at an average price of N5, 000.
Table 2: Challenges facing agricultural development.
Factors affecting purchasing
Based on the results of the survey, farmers viewed price as one of the main factors affecting their purchasing characteristics (70%). This was followed by quality with 23%, then distance with 5%, and lastly reliability with 2%.
Factors affecting loan acquisition
41.5% of the respondents viewed inadequacy of banks to be the major problem affecting loan acquisition. This is further mirrored in literature in which the Bank of Agriculture, Funtua has been identified to serve almost 6 towns. Therefore, it is incapable of efficiently attending to the needs of farmers in Katsina. More so, the study discovered that farmers residing far from the bank possess limited information on the bank and the types of loans provided. 33.5% of the participants complained about the stressful loan acquisition procedures, and the least challenge was disbursement delays, with 4.5% of the participants complaining so.
Conclusion
In conclusion, Farmways Enterprise has the potential to become a real and profitable business. The market research results of the pilot study showed that agriculture in the region was dominated by crop farmers. This suggests that for a farm input supplier business to be profitable, it should be majorly tailored for the crop farming audience. Secondly, the results have shown that although the farmers mostly use cash in their transactions, they are very willing to use alternatives such as loans obtained from banking institutions. Thirdly, majority of the farmers in Katsina state fall in the middle and lower class, hence this suggests that commodity prices have to be set at a relatively affordable standard. Moreover, the potential clients value price over reliability, distance and quality, therefore, it would be best to stress Farmway’s products based on the affordable pricing module. Last but not least, as compared to its competitors, Farmways Enterprises is the only business that allows farmers to purchase agro-supplies using loans provided by Banks thus, this gives it a competitive advantage.
References
Adefila, J. O. (2014). Pattern of Agricultural Development in Southern Parts of Katsina State, Nigeria: Notion for Rational Planning. IOSR Journal of Agriculture and Veterinary Science, 7(1), 14-20.
Bank of Agriculture. (2019). Products and services. Web.
El-ladan, I., & Saminu, D. (2018). Katsina Region: Agricultural production systems. Web.
Famogbiele, A. (2013). The challenges of agricultural finance in Nigeria: Constraints for sustainable agricultural and economic revival. International Journal of Business and Social Research, 3, 234-244.
Federal Republic of Nigeria. (2019). Katsina state. Web.
Muhammad, A., Sheng, G. Z., & Hossain, S. A. (2017). Performance Review of the Bank of Agriculture in Katsina State, Nigeria. Asian Journal of Agricultural Extension, Economics and Sociology. 17(3), 1-9.
National Population Commission. (2006). National results: Population by state and sex. Web.
Nigeria Data Portal. (2014). Socioeconomic statistics. Web.
Obasi, P.C. (2015). Evaluation of the performance of agricultural lending schemes in Nigeria. European Journal of Agriculture and Forestry Research, 3(2), 52-63.
Unah, L. (2018).Agritech startups aim to lift Nigerian smallholder farmers out of poverty. Web.
Appendix: Questionnaire
Age of respondent in years:
- 0 – 20
- 21 – 30
- 31-50
- >50
Level of education of respondent
- Non-formal
- Primary
- Secondary
- Tertiary
Income of respondent
- N0 – N50,000
- N51,000 – N100,000
- N101,000 – N150,000
- >N150,000
What type of farming are you practicing?
- Crop cultivation
- Livestock farming
- Mixed farming
For how many years have you been farming?
- 0 – 10
- 11 – 20
- 21 – 30
- > 30
What do you consider as the two main challenges affecting crop and livestock production?
- Weather changes
- Inadequacy and high cost of agrochemicals
- High transport costs
- Fluctuations in market prices
- Insufficient funds
How often do you make agricultural and livestock related purchases?
- None
- Twice a month
- Once a month
- Once in two months
- Three times a year
- Twice a year
- Once a year
What is the main factor you consider when purchasing a farm input?
- Price
- Reliability
- Distance
- Quality
Do you make your purchases based on cash or credit?
- Cash
- Credit
Are you willing to partner with a banking institution to provide loans for agricultural purchases?
- Yes
- No
What are the two main problems you face when acquiring loans?
- Inadequate banks
- Stressful loan acquisition procedure
- Lack of collateral
- High interest rates
- Delays in disbursement
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