Profit-making idea: Import substitution of fish in Nigeria
In an earlier interview, How we made it in Africa asked Danladi Verheijen, managing partner of private equity firm Verod Capital Management, to identify the agriculture sub-sectors in Nigeria he is most enthusiastic about from an investment perspective. Here is his response.
“Nigeria has a very large domestic market for food products. The government has made a number of very helpful policy changes over the years to dramatically increase the amount of local production of agricultural products and encourage the establishment of more agribusinesses. For example, Nigeria used to be the world’s largest importer of rice, but that has changed.
“At Verod, we don’t invest in primary agriculture – we would avoid growing rice, soya beans, maize, guava or mango, for example. We don’t think we are the best at primary agriculture and mitigating the risks those types of businesses face. However, we do invest in agriculture businesses that have a processing angle, i.e., their end product is a branded consumer product that can be sold to a large consumer base.
“An example of this is Shaldag, which is a fish farm we invested in. It grows fish at over 40 times the density of other local fish farms by using modern technology in their operations. The company produces processed, smoked catfish under the Shaldag brand. Nigeria imports over $600 million of fish a year, so this investment is also an import substitution play. There are villages in Norway where the entire economy is based around growing a particular type of fish (stockfish) that is sold to Nigeria, and used in sauces and soups. Trawlers from Southeast Asia also fish in the waters outside Lagos and Accra, process the fish in their own countries and then sell the same fish back into Africa. Obviously, this is inefficient and creates an opportunity for African businesses.”