Lagos Rice Mill and others: Opportunities for local business investments

Lagos Governor Ambode
Lagos State Governor Akinwunmi Ambode
  1. Rice, rice and more rice everywhere. I woke to read my daily retinue of news sites and all that was recurring was the newly ordered 32 metric tonnes per hour capacity rice milling plant by the Lagos state government.

Firstly, I would like to commend the state government for taking the initiative to promote agriculture even when the state is always largely overlooked in agricultural matters for its neighbouring cousin states of Ogun, Oyo and sometimes Osun states.

The state focused on its major comparative advantages of urbanisation and market proximity by establishing a processing plant. Kudos to Ambode.

However, what was missing from all the rice chatter was the opportunities the rice mill presented to the average individual looking for an economically viable opportunity in the agricultural sector.
I am talking about the various individuals that call me on a weekly basis (sometimes odd times) seeking to invest in agriculture with limited or no capital.

No analysis of the opportunities was done, so I am deciding to beat you guys (the callers) to the punch by providing some business opportunities across the value chain.

 

*Land Rental Services*
For the plant to work for one 8-hour shift daily for about 300 days per year; milling 32 metric tonnes per hour, it would need 76,800 metric tonnes of raw rice paddy to keep the plant working most of the year.

The land size needed for a single season cultivation of the Paddy requirement is 19,200 Hectares (that’s 288,000 plots); assuming yield of 4 metric tonnes per hectare.

Lagos definitely does not have access to that much agricultural land, so this creates opportunities for land owners outside lagos to rent land for rice cultivation.
The average price of land rent is N15,000/ha/year. So this is a N288,000,000 naira opportunity.

*Rice Paddy Cultivation*
The current cost of rice cultivation stands between N200,000/ha to N240,000/ha while the current purchase price of rice Paddy is N90,000/Mt at 4Mt/ha expected yield equals N360,000/ha expected revenue.
N360,000/ha minus N240,000/ha gives a profit if N120,000/ha.

This provides a N2,304,000,000 naira rice paddy market opportunity for a 19,200 ha land size.

*Rice Paddy Aggregation*
The purchased rice paddy needs to be stored in a dry environment with adequate ventilation until it reaches the ideal moisture content. The cost of storing rice per annum is between N3500/mt – N5000/Mt per annum basis.
This provides a N384,000,000 naira opportunity.

*Rice Distribution & Marketing*
As a distributor, an individual can invest in wholesale or retailing the finished rice products.

The current price of a high quality long grain rice is about N18,500 and the rice mill is expected to produce over 1.2 million 50kg bags of rice.

This is a N22.2 billion naira market opportunity.
The listed opportunities is worth over N25 billion naira; so there’s opportunity for everyone to benefit.

An off – taker contract with expert professional assistance will help facilitate efficient implementation of the investment.

Happy investing in agribusiness.

 

Deji Rotimi is the MD of Hills Harvest (Strategic Implementation Partner to Fed. Min. Of Agric on School Feeding Program)

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