Regulating Nigeria’s Agritech Platforms
How to prevent the next multimillion naira Ponzi scheme
Nigeria’s President Muhammadu Buhari recently admonished “able-bodied” young people to go into agriculture; unemployment in the country has risen to 27.1%, the president views agribusiness as the most viable way out.
While we can debate the merits of agribusiness as a cure-all, it’s certainly not feasible for every Nigerian to get involved.
Thankfully, agritech provides a brilliant opportunity for more people to get in on the action without ever having to lift a hoe.
Unthriving Agric
In recent years, Nigeria has seen a proliferation of agritech companies.
They have two primary objectives:
- To address the challenges faced by smallholder farmers through better access to inputs, credit, assets and markets.
- To give the average investor an opportunity to make fixed-term investments on specific agric products.
Recently, reports of agritech platforms defaulting at the end of investment cycles have been on the rise, but the latest and arguably the highest-profile case happened last week with Thrive Agric.
After being accused of fraud, the Abuja-based agritech company claimed that their operations were disrupted by COVID-19.
They then promised that all outstanding payments, some of which have been due since May 2020, will be settled next year.
Guardrails over a heavy hand
While investors must be aware that every investment carries a risk, leaving agritech platforms to their own devices is surely one risk too many.
Earlier in the year, Nigeria’s SEC drafted crowdfunding regulations where it recognized agritech companies as digital commodities investment platforms (DCIP).
If the draft in its current form becomes official policy, it could signal the end of crowdfunded-agritech as we know it.
Equally worrisome is the fact that certain stipulations of the draft seem contradictory.
I propose an amendment, the only part of the commission’s draft regulation that should be non-negotiable is increased oversight, but in order to get the most value from agritech platforms, they should be regulated as investment trusts, similar to REITs.
However, unlike REITs, the companies should continue to do business on their own platforms, again with strict supervision.
That way, the government can create a more sanitized environment for the Nigerian agritech equivalent of, say, a Fundrise to operate.
There’s an opportunity for agritech to dovetail with President Muhammadu Buhari agribusiness agenda, while the ecosystem continues to grow. Hopefully, SEC is able to recognize it.
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