Agricultural Investment Opportunities in the Alape Staple Crop Processing Zone, Kogi State

Agricultural Investment Opportunities in the Alape Staple Crop Processing Zone, Kogi State Federal Ministry of Agriculture and Rural Development May 2014 Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria

Executive Summary Investment Opportunities Nigeria s economic growth and agricultural potential make it an attractive place to invest in agribusiness The Nigerian government is establishing Staple Crop Processing Zones (SCPZs) in order to create a competitive operating environment for agribusinesses across the country and address key investment challenges The Alape SCPZ will help investors capitalize on Kogi s favorable conditions for agribusiness, and will provide very promising investment opportunities: Cassava: Rising demand, strong government support, and Kogi s status as one of the highest-producing cassava states make it an attractive location for a cassava farm and starch and sweetener processing Rice: Investors can capitalize on Nigeria s domestic rice production gap by investing in a commercial rice farm, mill, or integrated farm and mill Infrastructure: SCPZs offer a reliable regulatory environment for investors, and there are numerous opportunities for investors to provide power, water, and site management infrastructure to the SCPZ Enabling Environment The Alape SCPZ is an agro-processing cluster located in a high-food production area that integrates production, processing, and end markets, while providing investors a competitive operating environment Cargill will act as an anchor investor for the SCPZ with several other major investors demonstrating interest There is abundant land and labor for agricultural development, with 75% of agricultural land currently farmed and over 75% of the state s population engaged in agriculture Both the Federal and State governments have pursued multiple initiatives to incentivize private sector agricultural investment in Kogi, which is already home to several large industrial investments Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 1

Contents Investment Environment Overview Staple Crop Processing Zones (SCPZs): Unlocking Agricultural Investment Opportunities Investment Opportunities in the Alape SCPZ Contact Information Appendix Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 2

Investment Environment Overview Nigeria s Investment Opportunities, Challenges, and Solutions Rwanda Kenya Botswana Zambia Tanzania Ghana South Africa Mozambique Nigeria The Government of Nigeria is implementing Staple Crop Processing Zones (SCPZs) to unlock Nigeria s agricultural investment potential 160 Nigeria s strong economy and natural conditions make it an attractive investment destination Nigeria is the largest economy and biggest FDI recipient in Africa, reflecting its open environment for foreign investors 1 259 293 1,066 2012 FDI Inflow (USD Millions) 1,707 3,295 4,644 5,238 7,101 The Government proactively surveyed the private sector to understand agribusiness investment challenges 2 % of Private Sector Survey Respondents that Cited Investment Challenge 72% Infrastructure 56% 55% Financing Securing Supplies 53% Policy & Regulatory Nigeria has all the necessary natural conditions for robust agricultural development 84 million ha of arable land, 60% unutilized Large population of 177 million, 60% farmers Wide range of agro-ecological zones Humid tropical climate conducive for a variety of crops Potential irrigable area of 3.14 million ha 279 billion cubic meters of surface water To unlock Nigeria s investment potential, the Government is implementing SCPZs SCPZs are agro-processing clusters where investors enjoy: Attractive location in the middle of dedicated highproduction areas called Agribusiness Investment Regions (ABIRs) Infrastructure and services to connect investors with producers and end markets A competitive cost advantage that can reduce costs by 14-36% and provide IRRs of 25-50% 3 for both farming and processing Source: 1 IMF World Economic Outlook; National Bureau of Statistics; World Bank; 2 Data from survey of 75 investors; respondents cited all challenges applicable to them ; 3 Cost reduction and IRR figures calculated for rice and cassava value chains. The 14% cost reduction is relevant to farming and the 36% to processing Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 3

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities SCPZ Overview The Federal Ministry of Agriculture and Rural Development (FMARD) proactively surveyed agricultural investors and initiated Staple Crop Processing Zones to resolve their challenges % of Private Sector Survey Respondents that Cited Investment Challenge Key Investment Challenges 72% 56% 55% 53% Infrastructure Financing Securing Supplies Policy & Regulatory SCPZs Standard Offer Interventions 1 Access to Land, Infrastructure, and Real Estate 2 Subsidies, Fiscal Incentives, and Affordable Financing 3 ABIRs and Growth Enhancement Support Scheme (GES) 4 Shared Services and Administrative Incentives Expected Outcomes for Investors Complete on- and off-site infrastructure Affordable access to prepared land and buildings Lower start-up costs and higher rates of return Greater access to affordable financing Guaranteed supply, aggregation, and storage from highproduction ABIR Subsidized, improved inputs for outgrowers through GES Improved ease of doing business Access to operating, business, and agrospecific services Note: Data from survey of 75 investors; respondents cited all challenges that are applicable to them Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 4

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities Incentive Package for SCPZ Investors Every investor located in an SCPZ will receive a standard offer SCPZ Incentive Package, creating a competitive operating environment for agribusiness located in the Zones Standard Offer Incentive Package for Investors Located in SCPZs 1 2 3 4 Land, Infrastructure, and Real Estate Security of investment for the life of the investment Affordable lease of prepared, bare land and standard buildings in the SCPZ Government facilitation to access land for production in the ABIR Affordable access to on- and off-site infrastructure (roads, energy, water, gas) Subsidies, Fiscal Incentives, and Affordable Financing Financial subsidies to address key start-up costs (e.g., one-off training costs for local employees) Fiscal incentives (e.g., tax holidays, duty exemptions) Affordable financing and subsidies (e.g., NIRSAL 1 ) Supply Security Facilitation Contract farming support in the ABIR, including subsidized, improved GES inputs for inclusive growth Raw material aggregation and linkage to storage infrastructure Facilitation of commercial farming in the ABIR Incentives for agro-supplies traders to locate in SCPZs Preferential terms on imported inputs to cover supply shortages (where necessary) Shared Services and Administrative Incentives One-stop shop providing administrative services for increased ease of doing business Operating services (e.g., facilities management, transport, housing, banking) Business services (e.g., recruitment support, customs services, business center) Agro-specific services (e.g., health controls and certification, trading center) Together, these incentives and services create competitive cost advantages for agribusinesses that locate in the Zones Note: 1 Nigeria-Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL) Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 5

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities Illustrative Case Study: SCPZ Services Throughout the Value Chain (Cassava) SCPZs will provide services and interventions to mitigate risks at every step of the value chain by linking players from inputs to end markets to streamline the process for investors Cultivation Aggregation & Logistics Processing Marketing & Distribution Agro-Services and Infrastructure Provision of agroservices and infrastructure: Land preparation Improved seeds Fertilizers Access to mechanical equipment Irrigation Large Commercial Farms 500+ Ha 12 farms Medium Commercial Farms Smallholder Farms 50% of supply 6,000 Ha total 50-200 Ha 40 farms 30% of supply 3,600 Ha total 5-10 Ha 300 farms 20% of supply 2,400 Ha total Starch Factory 75,000 Mt of starch p.a. End-state consumption of 300,000 Mt of cassava p.a. Plant will be built for initial 12K ha Sweetener Factory 75,000 Mt of sweetener p.a. Plant will be built in a second phase of the project Domestic and International Markets Provision of processed products to domestic and foreign companies, across sectors, e.g.: Food and beverage Pharmaceuticals Textile Agribusiness Investment Region (ABIR) Staple Crop Processing Zone (SCPZ) Note: Figures are illustrative; Source: Alape, Kogi Integrated ABIR and SCPZ Master Plan; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 6

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities Staple Crop Processing Zone Locations and Value Chains Master Plans have been completed for 7 of the Model SCPZ sites/corridors across five value chains, with further sites/corridors and value chains to be added Ogun Oyo Lagos Kebbi Kwara Osun Ondo Sokoto Niger Ekiti Zamfara Edo Delta Bayelsa FCT Kogi Katsina Kaduna Imo Abia Rivers Enugu Anambra Kano Nassarawa Ebonyi Akwa Ibom Benue Cross River Jigawa Bauchi Plateau Taraba Yobe Gombe Adamawa Borno Model SCPZ State Locations Priority SCPZ State Locations with Completed Master Plans Potential Additional SCPZ State Locations for Livestock Anambra/Enugu Bayelsa Benue Borno Cross River Kano Model SCPZ State Locations Rice Kogi Kwara Lagos Nasarawa Niger Ogun SCPZ Value Chains Cassava Fisheries Rivers Taraba Kebbi/Sokoto Horticulture Sorghum Livestock (To be added) Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 7

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities Alape SCPZ: Overview The Alape SCPZ will be largely focused on providing a conducive business environment for the production and processing of cassava and additional crops Focus Crop Cassava Additional Crops Maize Soya Cowpea Rice Sorghum Total Area SCPZ: 258ha ABIR: 412,127 ha 1 Infrastructure Road: 15.14 km Water: 20,622cum/day Power: 59.43 MVA Kogi State Alape SCPZ Lokoja Additional Amenities Specialized agriinfrastructure, including: Collection centers Silos / primary processing hub Reefer vans Quality assurance and control labs Packing and labelling, and finished goods storage R&D center with market intelligence center Social infrastructure (health areas, residential) Projected Outcomes 2 Processing Capacity: 2,339,760 MT/year Note: 1 ABIR size to be finalized; 2 Long-term projections for four years or more; Source: Alape, Kogi Integrated ABIR and SCPZ Master Plan Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 8

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities Alape SCPZ: Progress to Date The SCPZ Master Plan has been completed, and land has been earmarked the Zone is expected to be operational by the end of 2015 Progress to Date The Alape SCPZ Mater Plan has been completed, detailing the development process for both the Zone and the surrounding Agribusiness Investment Region (ABIR) highproduction area Cargill, one the world s leading food companies, will serve as an anchor investor with plans to build a 75,000 MT p.a. starch plant, as well as a sweetener plant, in the SCPZ The State Government has already committed land and acquired 10,000 ha for the SCPZ 200 ha has already been cleared and planted with cassava and clearing for another 9,000 ha is in progress FMARD and other Federal ministries are working together to identify critical infrastructure needs in the SCPZ area Improved, subsidized inputs are already provided to farmers in the area through the Growth Enhancement Support scheme Source: Alape, Kogi Integrated ABIR and SCPZ Master Plan Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 9

Staple Crop Processing Zones: Unlocking Agricultural Investment Opportunities Alape SCPZ: Location Details The Alape SCPZ is located just adjacent to the Obajana-Kabba major road Location Highlights SCPZ is adjacent to an unsurfaced road which connects to the A123 Federal Highway, 25 km from Obajana town where Dangote owns the largest cement factory in Africa The site is surrounded by cassava farms Kogi state houses a gas powered station at Gerugu with a capacity of 434 MW Electricity can be delivered from the Obajana sub-station situated 15 km from the site River Ohin is a seasonal rain fed water system which will provide water to the site Source: Alape, Kogi Integrated ABIR and SCPZ Master Plan Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 10

Investment Opportunities in Alape SCPZ Kogi State Investment Environment Kogi State has favorable natural conditions conducive for agricultural development Leading Natural Resources Agriculture is the main economic activity of the state The State has a total land area of 30,354 sq km, of which around 75% of the potential agricultural land in the State is unfarmed, leaving huge potential to expand farming The alluvial soil from the Rivers Niger and Benue and tropical climate provide fertile ground for growing a variety of crops Strong value chain linkages already exist, particularly in the cassava value chain Abundant Demand and Labor 75% of the state s 3.6 million inhabitants are farmers, which cultivated 7,000 ha of rice in the 2013 dry season Well endowed and literate workforce, which is benefitting from further capacity building, including a 200 ha mechanized demonstration farm for cassava recently built by Cargill Over 96,000 farmers in Kogi are registered with the Growth Enhancement Support (GES) scheme, collectively redeeming 432 MT of improved seeds and 3,7000 MT improved fertilizer Investment-Ready State Kogi is an investors haven, with a number of industrial ventures include Dangote s Obajana cement factory (the largest in Africa), Ajaokuta iron and steel complex, and several iron ore companies The presence of huge mineral resources has made it home to the largest iron, steel, and cement industries in Nigeria, which supports other economic activity Geographic proximity to the capital Abuja allows it to reap economic benefits and be close to large centers of demand and export opportunities Supportive Government and Anchor Investor Kogi State Government is committed to helping boost the agricultural output of the state and expects $950M in agricultural investment by 2016 The state already has substantial agricultural infrastructure existing or in progress, including 9 irrigation dams, 6 strategic grain stores, and 3 silos Cargill has plans to build a $100M cassava starch and sweetener factory in the Alape SCPZ, which would anchor the development of a strong cassava processing cluster Source: Alape, Kogi Integrated ABIR and SCPZ Master Plan; GEMS Agronomy Report for Kogi State Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 11

Investment Opportunities in Alape SCPZ Investment Opportunities Overview SCPZs help investors unlock major investment opportunity areas in Kogi, including cassava Cassava In addition to rising demand and strong government support for cassava products, Kogi is one of the highest-producing states for cassava, making it an attractive location to invest in a $2.8M commercial cassava farm, $29M starch processing facility, or $32M sweetener processing facility Rice Rice is a valuable cash crop in Kogi, mainly in the river valleys. Investors can invest in a $7.8 M commercial rice farm, $6.6 M commercial rice mill, or $14.3 M integrated farm and mill to capitalize on the 8 million MT projected demand for high-quality rice in Nigeria by 2020 Infrastructure Investors can capitalize on SCPZ development and take ownership of the Alape SCPZ by investing $5.44M in power distribution and $3.26M in water infrastructure, as well as investing in various site management and agriinfrastructure projects Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 12

Investment Opportunities in Alape SCPZ Cassava: Value Chain Overview The government has made promotion of the cassava value chain a high priority and has focused on stimulating local capacity to produce processed cassava products High Production Low Processing Capacity 50 40 30 20 43 Raw Cassava Production in 2010 (MT) % of Cassava Used in Industry Processing in 2010 100 85 95 80 25 55 24 60 22 40 10 20 10 0 Nigeria Brazil Indonesia Thailand 0 Nigeria Brazil Indonesia Thailand Government Activities to Support Cassava Value Chain Tariffs on imported wheat to support local production of high-quality cassava flour Campaign to scale up production of high quality cassava flour to substitute imported wheat in the baking industry has been largely successful and well received by both bakers and retailers throughout the country Financing of over $200 million for 18 large scale cassava flour processing plants with 1.3 million MT capacity Procurement of 3.2 million MT contract orders from China for export of dried cassava chips for ethanol production Provision of 30 million bundles of improved cassava cuttings free of charge to farmers through the GES scheme Source: Agricultural Transformation Agenda; FMARD; Industry Interviews; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 13

Investment Opportunities in Alape SCPZ Cassava: Investment Opportunity Investors have a variety of investment opportunities in the Alape SCPZ, including a commercial cassava farm, starch processing facility, or sweetener processing facility Investment Opportunity: Commercial Cassava Farm, Starch and Sweetener Processing Facilities Investment Opportunities Initial Investment Highlights of Investment Opportunities Commercial Cassava Farm Starch Processing Facility $2.8M $29M $32M Farm Size 2,000 ha N/A N/A Yield 25-30 MT/ha N/A N/A Processing Capacity (p.a.) Sweetener Processing Facility N/A 75,000 Mt 50,000 Mt / IRR 19-69% 23-84% 21-53% Payback Period ~3 years >2 years 2 years Gross Margin 51-73% 36-72% 52-79% NPV $3M $51M ~$29M Current and Prospective Investors Cargill has committed to establishing a 75K Mt p.a. starch factory in Kogi, which will also feature conversion of starch into sweeteners. Cardinal Stone Partners is also exploring a cassava investment in Kogi Two smaller mills have been built in Ogun State (Greentech; 12K Mt p.a.) and Oyo State (Psaltery; 6K Mt p.a), while a few SME gari manufacturers operate in Kogi To raise production of cassava, the government is aiming for a 25% rise in overall cassava production, and has plans to distribute nearly 90 million stems of improved cassava varieties to farmers Note: All figures are illustrative; additional analysis should be completed prior to investment finalization Source: Staple Crop Processing Zones Strategic Framework, ATA Scorecard; Industry Interviews; FMARD; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 14

Investment Opportunities in Alape SCPZ Rice: Value Chain Overview Rising, unmet demand for high-quality rice and a substantial profit opportunity reflect a significant opportunity for local rice processing Rising Demand for Quality Rice Demand for rice is projected to grow to over 8 million MT by 2020, requiring Nigeria to increase current production by >2x to meet demand 1 8.1 5.0 Opportunity for Local Production and Processing There is significant opportunity for local processing, with almost half of rice consumption serviced by the import market in 2012 Imports (Thousand Tonnes) 5.2 1.6 1.5 2.5 Unmet Demand 2.7 Domestic Demand 2010 Per Capita Consumption Growth 2010-2020 Population Growth 2010-2020 Domestic Production Must Grow Domestic Demand 2020 To meet demand, domestic production must grow by 10% per year by 2020 8.1 10%/year improvement in production 3.7 3.2 2006-09 2010 2020 Domestic Productions (Millions MT) Production Imports 2011 Production (Thousand Tonnes) Consumption Factors to Address to Grow Domestic Production Consumers select imported rice over domestic varieties because of the following factors: Production Yield: Nigeria has few of the large-scale mills required to meet demand Processing Capacity: Nigeria s yield lags behind other leading rice producers Product Quality: Small and medium mills cannot satisfy demand for quality rice Note: All figures are illustrative; additional analysis should be completed prior to investment finalization; Source: Industry Interviews; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 15

Investment Opportunities in Alape SCPZ Rice: Investment Opportunity Investors have three main rice investment opportunities in the Alape SCPZ: commercial rice farming, commercial rice milling, and integrated rice milling Investment Opportunity: Commercial Rice Farming, Rice Mills, and Integrated Rice Mills Investment Opportunities Initial Investment Highlights of Investment Opportunities Commercial Rice Farm Commercial Rice Mill Integrated Rice Mill $7.8m $6.6m $14.3m Farm Size 3,000 ha N/A 3,000 ha Yield 4-8 MT/ha N/A 4-8 MT/ha Processing Capacity N/A 30,000 MT / year 30,000 MT / year Current and Prospective Investors Rice is a valuable cash crop in the state, mostly grown in the river valleys. Several projects have been developed which should boost production, but currently Kogi is not a major center for rice processing. Substitution for imports presents a large opportunity, particularly as the government is committed to reducing import dependency IRR 23-51% 23-54% 52-68% Payback Period ~3 years 2 years 2 years Gross Margin 76% 24% 62% Small, local mills do not currently have the capacity to meet the volume or quality demands of Nigerian consumers NPV ~$16m ~$10m ~$46m Note: All figures are illustrative; additional analysis should be completed prior to investment finalization; Source: Industry Interviews; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 16

Investment Opportunities in Alape SCPZ Rice: SCPZ Cost Advantages Integrated rice mill investments located in SCPZs offer investors a cost advantage relative to rice investments made in non-scpz locations Rent of land Land Preparation Planting & Inputs Harvesting Direct Labour FT Salaries Depreciation Interest expense Cost structure of 30,000 MT rice mill and a 3,000 ha farm in USD Thousands, Year 5 (Ramp Up Completed) Key Assumptions: Rice Farm Taxes Taxes Land clearing costs 1 Financing costs Other costs Cost Structures for a Rice Farm and Rice Mill in SCPZs versus Non-SCPZs 5,673 225 281 1,065 375 563 356 1,160 223 1,426 Non-SCPZ supplier 30% $1500/Ha Supplier to SCPZ Rice Farm 18% interest Constant assumptions 3,656 225 281 1,065 375 563 356 710 0 82 0% -36% $0/Ha 9% interest Cost of raw materials Transportation costs Energy costs Repairs & Maintenance Packaging Wages 133 Professional fees Miscellaneous Depreciation Interest expense Key Assumptions: Rice Mill Taxes 374 Taxes Financing costs Other costs 20,220 14,692 1,784 1,029 566 169 Not in SCPZ 30% 675 50 608 139 18% interest In SCPZ Rice Mill Constant assumptions 17,372 13,643 1,784 121 566 0% -14% 169 192 169 50 608 69 0 Energy $30/MT $7.50/MT 9% interest Note: 1 Land clearing costs refers to amortization charge of in Y5 (i.e., 10 year useful life, straight line depreciation) and assumes that 70% of land clearing costs are debt-financed (i.e., same CAPEX debt/equity ratio in both cases); These figures are illustrative. Additional analysis should be completed prior to investment finalization; Source: Industry Interviews; Team Analysis Note: 1 Land clearing costs refers to amortization charge of in Y5 (i.e. 10 year useful life, straight line depreciation); 2 Assumes that 70% of land clearing costs are debt-financed I.e. same CAPEX debt/equity ratio in both cases; Source: Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 17

Investment Opportunities in the Alape SCPZ Infrastructure: Investment Opportunity Overview There are investment opportunities available in power, water and site management infrastructure as part of the development of the Zone Infrastructure Investment Opportunity: Zone Development Combined SCPZ Development Investment Opportunity 1 Enabling Environment Investment Opportunities Initial Investment Investment Over Four Years Profit After Tax Site Management: Utilities, roads, specialized agri infrastructure Power: Generation from bioenergy and coal and power distribution Water: Supply, treatment, distribution; storage $30.41 million $52.29 million IRR 17.13% Payback Period Year 1: $10.74 million Year 2: $6.44 million Year 3: $4.90 million 4 years + 5.4 months for phase I investments The Federal and Kogi State governments have been working together to establish the Ikorodu-Epe Corridor SCPZ and have prioritized infrastructure investment, actively seeking publicprivate partnerships (PPP) Federal and State Government jointly plan to invest $126.6 million in Zone development in addition to any investments through partnerships with the private sector The Kogi State Government has already initiated several projects to attract agricultural investment and about $950 million in agriculture-related foreign investments by 2016 In 2013, the government pledged to establish a PPP Bureau to attract private investors interested in infrastructure opportunities Kogi State offers a variety of tax incentives, infrastructural support, and business liaison services to investors and recently pledged to provide investors with state tours, resource data, and a high-level of responsiveness Note: 1 The data presented here is reflective of the SCPZ development opportunity in aggregate. It does not include ABIR development costs. For more granular financial data and the complete list of specific opportunities, please reach out to FMARD; Source: Alape, Kogi SCPZ Master Plan; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 18

Investment Opportunities in the Alape SCPZ Site Management Infrastructure: Investment Opportunity Investment opportunities exist for management of the site in aggregate, or for individual investment opportunities related to site management Site Management in SCPZ Sample Investment Opportunities 2 Day to day management activities to ensure timely and thorough attention to agribusiness investors interests The SCPZ Law set up a Staple Crop Processing Zone Authority (SCPZA) as the principal agency of the Federal Government for the promotion, implementation and regulation of SCPZs. They are represented at the zone level by an Executive Management Committee (EMC) 1 Site management will be carried out by Special Purpose Vehicles (SPVs) set up between EMCs, State or Local Governments, and private investors Why Invest? The total cost of SCPZ phase I development is about $314.75M, with projects at various levels of risk and return Opportunities for private investors to be actively engaged in shaping and defining the operations of an SCPZ Kogi State was recently selected by the Federal Government as a pilot state for the LR Group of Israel to explore and develop an agro-industrial town fashioned in line with the Israeli Moshaf concept A non-exhaustive list of site management projects available to investors includes street lights, municipal solid waste, and roads Utilities Electricity connections, street lighting, and fire fighting Favorable Environment for Investment $1.31 M Roads Approach road II development $3.38 M Approach road I development $65.25M Roads, culverts and drainage $12.14 M Specialized Agri Infastructure R&D center, collection centers, silo complexes, primary processing hub, reefer vans, etc. Combined investment $11.37M The Nigerian government has set up a PPP legal framework and is actively courting partnerships with willing investors in all areas of site management The SCPZ offers a reliable legal and regulatory environment The government will complement the site management infrastructure built by the private sector with other supporting SCPZ infrastructure projects Note: 1 This law will derive from the SCPZ Policy already in place ; 2 For more granular financial data, please contact FMARD; Additional analysis should be completed prior to investment finalization; Source: Alape, Kogi SCPZ Master Plan; Industry Interviews; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 19

Investment Opportunities in the Alape SCPZ Power Infrastructure: Investment Opportunity In order to meet the industrial needs of the Alape SCPZ, significant investment in the power supply and distribution to the area is needed, creating an opportunity for private sector investors Demand for Power Total estimated power demand is 59.40 MVA. The power demand will be met from Obajana substation, connected to the national grid and about 25 km from the SCPZ site 60 40 20 0 Power Demand (Load in MVA) 59.40 47.50 11.90 Why Invest? Processing Area Non-Processing Area Capitalize on growth opportunities in a sector where demand far outstrips supply and strong growth is likely Establish a strong presence in West Africa, using Nigeria as a platform for acquiring further assets in the region. At least 311 investors have already expressed interest Kogi has an ideal natural environment for power investments, with the Benue and Niger rivers offering opportunities for hydropower generation, and an abundance of coal resources in the state Investment Opportunities 1 A nearby substation will serve as the power source for the SCPZ, but connectivity infrastructure is needed Bioenergy 5 MW rice-husk-fired power plant ~$6 M Generation 2 1 MW rice-husk-fired power plant ~$1.6 M Distribution 132 KV line running 29 km to provide power from Obajana substation to the SCPZ site Favorable Environment for Investment Nigeria has pledged a $300M partial risk guarantee to encourage power sector investment Benefit from a Multi-Year Tariff Order that accounts for the operating cost and capital recovery, incentivizing efficient operations The Kogi State government successfully partnered with an American firm to start an independent coal-fired power plant to improve power supply in the state 2 Note: 1 For more granular financial data, please contact FMARD; 2 Investment sizes are illustrative based on similar investments in another Nigerian states; Additional analysis should be completed prior to investment finalization; Source: Alape, Kogi SCPZ Master Plan; Industry Interviews; Team Analysis $5.44 M Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 20

Investment Opportunities in the Alape SCPZ Water Infrastructure: Investment Opportunity Significant potential and growing demand make investment in the water supply, treatment and network for the Alape SCPZ a viable opportunity High Demand for Water in SCPZ Investment Opportunity 1 The Alape SCPZ has a high anticipated daily demand for water. The demand will be met from the proposed infiltration gallery and pump house at River Ohin, 8 kms from the SCPZ site 20,000 19,767 Demand (cum/day) Attractive investment opportunities exist in Kogi s water sector Water Intake Water intake system comprising of infiltration gallery, master balancing reservoir, water transmission mains $1.64 M 10,000 0 Potable 856 Non-Potable 160 Fire Supply, Treatment, Distribution, & Storage Decentralized water supply, treatment and distribution and 4 tanks for potable and non-potable water and elevated level service reservoir $1.62 M Why Invest? Favorable natural resources exist to support water infrastructure projects. River Ohin is a seasonal rain fed fresh water system nearly 30 m wide and elongated in the NW-SE direction An infiltration well, collection well and pump house built near its basin about 7 kms from the SCPZ site along the Apaa Bunu road could meet the water demands for the integrated ABIR and SCPZ Favorable Environment for Investment The SCPZ offers a reliable legal and regulatory environment Through the State Millennium Development Goals, Kogi State Government has made the provision of good drinking water a crucial area of intervention Several successful state water interventions were carried out in 2012 including in the areas of reticulation, cap drilling of productive bore holes, and the provision of several overhead tanks across the state 1 Note: 1 For more granular financial data, please contact FMARD; Additional analysis should be completed prior to investment finalization Source: Alape, Kogi SCPZ Master Plan; Industry Interviews; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 21

Investment Opportunities in the Alape SCPZ Liquefied Natural Gas Infrastructure: Investment Opportunity Significant potential and growing demand make investment in the water supply, treatment and network for the Alape SCPZ a commercially viable and attractive opportunity High Demand for LNG in SCPZ Investment Opportunity 1 The Alape SCPZ has a daily demand of at least 100 million cu.m. for gas. There is an existing gas corridor nearby that is currently untapped Attractive investment opportunities exist in Kogi s gas sector. The state houses a gas based power station at Gerugu with capacity 434 MW for phase I and 414 MW for phase II. There is a gas corridor passing through Obajana that can be tapped for LNG Distribution 29 km pipeline from Obajana, tapping gas corridor for establishing gas based captive power plant for ABIR and SCPZ $48.94M Why Invest? As part of power sector reform, the Nigerian government is encouraging the construction of independent, privately-owned gas power plants to boost supply and distribution of power Nigeria has among the largest reserves of gas in the world, but these are underutilized ongoing gas transmission programmes could commercialize up to 80% of LNG, and the private sector is critical to realizing this target Natural gas-based power plants are a key source of power generation for Nigeria s economy Favorable Environment for Investment The SCPZ offers a reliable legal and regulatory environment Investors in other industries within Kogi state seek natural gas resources and power for their operations. For example, Dangote Cement houses the largest cement plant in Africa in Obajana, using a 90 km gas pipeline to supply the cement plant and their gasbased power plant Ughelli, Nigeria s largest gas-fired power generation facility, has been implemented by Transcorp thanks to enabling policies from the Ministry of Petroleum Resources Note: Additional analysis should be completed prior to investment finalization; Source: Alape, Kogi SCPZ Master Plan; Industry Interviews; Financial Times; Team Analysis Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 22

Zone Development Components Investment Opportunities in Alape SCPZ On-Site SCPZ Infrastructure: Detailed Cost Breakdown Investors can take ownership of Alape SCPZ by investing in various components of the Zone development effort, which will cost a total of $52.29 million Cost of Land 0.81 Land Development 0.63 Compound Wall & Fencing 0.66 Roads, Culverts, Drainage 12.16 Water Infrastructure 1 2.95 Misc. Utilities 2 Communication Systems Sustainable Infrastructure 1.31 1.21 0.08 Waste Management 3.25 Industrial / Business Buildings 0.8 Commercial Buildings 0.25 Residential Buildings 8.64 MEP Buildings Social Infra. Buildings Agri-Infrastructure Facilities Misc. Fixed Assets Manpower 3 Company Formation 4 Project Consultancy Marketing & Project Launch Pre-Operative & Other Contingency Interest during Construction These components of on-site Zone development represent investment opportunities for investors, with further offsite and ABIR connectivity and infrastructure investment opportunities available 0.12 0.01 7.75 1.56 0.11 0.32 0.63 0.95 0.95 4.22 2.95 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 Cost (USD Millions) Note: 1 Water Supply, Treatment, Distribution; 2 Includes electricity, street lighting, and fire fighting; 3 During pre-operative period; 4 Includes preliminary expenses Source: Alape, Kogi SCPZ Master Plan Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 23

Investment Opportunities in Alape SCPZ SCPZ Long-Term Revenue Breakdown Total Revenue over 15 Years (USD Millions) These infrastructure investments will generate $190.94 million in revenue for SCPZ developers over 15 years, with $28.72 million generated in the first year of operations 200 150 It is projected that the revenue generated during the first two years of Zone development will pay in full for the costs of subsequent years of development 2.99 72.35 100 59.78 50 13.46 0.85 15.87 10.02 0.93 14.68 0 Developed Land Sales Developed Land Long-Term Lease / Sales Developed Land Monthly Lease Built-Up Space Sales Built-Up Space Long- Term Lease Revenue Streams Monthly Lease Rental Facility Management 1 Other Income Direct Operation of Specialized Agri- Infrastructure 2 Note: 1 Includes operation and maintenance of SCPZ utilities and facilities; 2 Includes income from operation of agri-infrastructure, including R&D hub, warehouses, procurement centers, packing and labelling, grading and sorting, etc.; Source: Alape, Kogi SCPZ Master Plan Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 24

Contact Information For more information about these and other investment opportunities available in Nigeria, please contact the representatives below FMARD s Agribusiness Investment Unit Our team on the ground has extensive private sector experience The team is fully conversant with the investment process and has already engaged with many investors to facilitate the successful roll-out of investments in Nigeria Points of Contact Dr. Niyi Odunlami Senior Technical Advisor, Infrastructure & Head of the SCPZ Team Email: todunlami@yahoo.com Telephone: +234 809 500 5555 Ada Osakwe Senior Investment Advisor Email: ada.osakwe@fmardnigeria.org Telephone: +234 706 617 3098 Engr. Olubusayo Afowowe Desk Officer, SCPZ Team Email: olubusayoafo@yahoo.com Telephone: +234 813 121 2771 Dr. Tony Bello Senior Technical Advisor, Agribusiness Email: tonybello@ymail.com Telephone: +234 803 809 4979 Engr. Daniel Udo Agribusiness Investment Unit Desk Officer Email: danudo63@yahoo.com Telephone: +234 803 540 5201 Professor Olugbemiro Jegede Secretary to the Government, Kogi State Email: jegedeo@gmail.com Telephone: +234 803 411 6363 Engr. Badams Jatto Director of Agro-Processing Marketing Email: b.jatto@yahoo.com Telephone: +234 803 553 0731 Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 25

Appendix Overview of Nigeria s Investment Environment Additional Government Interventions Infrastructure Financing Supply Security Policy & Regulatory Staple Crop Processing Zone Partners Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 26

Overview of Nigeria s Investment Environment Nigeria s Economic Growth Rwanda Botswana Mozambique Zambia Tanzania Ghana Kenya South Africa Nigeria Rwanda Kenya Botswana Zambia Tanzania Ghana South Africa Mozambique Nigeria As the largest economy and FDI recipient in Africa, Nigeria s strong economic environment makes it an attractive investment destination Robust GDP Rising FDI Inflows Large Internal Market Africa s largest economy and one of the fastest growing globally at 7% yoy in 2012 Biggest FDI recipient in Africa, demonstrating open investment environment for foreign investors Increased consumption demand driven by a growing population and rising income per capita 2013 GDP (USD Billions) 510 2012 FDI Inflow (USD Millions) Total Annual Food Consumption (USD Billions) 350 5,238 4,644 7,101 44,9 48,7 +12% 53,9 62,6 3,295 1,707 33 44 45 1,066 7 14 15 22 160 259 293 2010 2011 2012E 2013F Source: IMF World Economic Outlook; National Bureau of Statistics; World Bank Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 27

Overview of Nigeria s Investment Environment Nigeria s Agricultural Potential Nigeria has all the favorable natural conditions necessary for agriculture Solid Land and Weather Conditions 84 million hectares of arable land 60% of arable land is unutilized; only 10% is optimally utilized Humid tropical climate is conducive for a variety of crops Large Labour Force Large population of 177 million 60% of the population are farmers, providing a large labour base with agricultural experience Low average wages that are beneficial to agricultural cultivation work Agricultural Potential Abundant Water Resources 279 billion cubic meters of surface water Potential irrigable area of 3.14 million hectares, enabling cultivation during the dry season 3 of Africa s 8 major river systems Strategic Export Location Strategically positioned to export through 6 ports North America South America Europe Source: Federal Ministry of Agriculture and Rural Development; National Bureau of Statistics Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 28

Additional Government Interventions Additional Government Interventions and Impact FMARD and the Government of Nigeria have undertaken various interventions under the Agricultural Transformation Agenda (ATA), in addition to SCPZs, to address investment challenges % of Private Sector Survey Respondents that Cited Investment Challenge Key Investment Challenges 72% 56% 55% 53% Infrastructure Financing Securing Supplies Policy & Regulatory Corresponding Government Interventions 1 Power, Road, and Market Infrastructure Projects 2 NIRSAL, FAFIN, Tax and Other Incentives 3 Growth Enhancement Support (GES) Scheme 4 New Institutions and Policy Reforms Outcomes Local and international investors committed a total of $8 billion in agricultural investments over two years The agricultural sector contributed an additional $3.7 billion to the national GDP 1.4 million agriculture-related jobs were created in eight commodities 1 Total food production grew by 15.5 million MT in two years Nigerian farmers net income grew by $2.1 billion across five key value chains 2 Note: Data from 75 investors; respondents cited all challenges that are applicable to them Source: 1 Eight commodities are cassava, rice, maize, oil palm, cocoa, cotton, soybean and sorghum; 2 Five value chains are cassava, rice, sorghum, maize and cotton Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 29

Additional Government Interventions 1 Infrastructure Interventions: Power, Road, and Market Infrastructure Projects In addition to SCPZs, the Government of Nigeria has undertaken key infrastructure projects to ease investment challenges Power Government Interventions Presidential Action Committee on Power finalized transmission expansion blueprint and committed $2.86B to develop transmission infrastructure from 2013 to 2017 The Government of Nigeria privatized the Power Holding Company of Nigeria Nigeria Sovereign Wealth Authority has established an Infrastructure Fund Anticipated Impact An additional 4,000 MW expected nation-wide in the next 2-3 years Overall power generation capacity is expected to grow to 20,000 MW by 2020 Road and Rail Since 2011, the Federal Government has invested $76M in road projects, 2,000 km of which are completed or nearing completion The Government of Nigeria secured a $1.1B infrastructure loan from the China Export Import Bank Road infrastructure is forecasted to grow by 8.8% in 2014, with average growth of 7.5% between 2014 and 2018 Rail infrastructure is projected to grow by 11.3% in 2014 Market Infrastructure The Federal Government signed a Memorandum of Cooperation for the concession of 33 silo complexes in 32 states and is piloting an electronic warehouse receipt platform with concession of four silos to Africa Exchange Holdings Blumberg Grain committed to investing $250 million in food security storage systems with 340,000 MT capacity FMARD is establishing Commodity Market and Trade Corporations across six value chains to coordinate the marketing system across producers, processors, and markets Total government-run storage capacity is projected to grow fourfold from 311,000 MT to 1.3 million MT Source: 2013 ATA Scorecard Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 30

Additional Government Interventions 2 Financing Interventions: FAFIN, NIRSAL, and Other Financial Incentives New financing mechanisms and financial incentives are available to investors to improve access to credit and reduce the cost of financing FAFIN NIRSAL Other Financial Incentives Fund for Agricultural Financing in Nigeria (FAFIN) provides farmers and agribusinesses with affordable debt and equity financing instruments Fund is currently conducting due diligence on potential investments Target fund size of $100-200 MN over the next 10 years Initial $33 MN seed capital from the FMARD, KfW, and the Nigerian Sovereign Investment Authority Focus on SMEs, but covering all value chains and all businesses from input suppliers to processors and distributors Will also provide $1-10 MN in grants for technical assistance to investees The Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) is unlocking $3.5 billion in loans through several interventions: Sharing lending risks with banks and covering proportion of default amount Linking insurance products to loan beneficiaries in order to ensure recovery of funds by banks Technical assistance facility to build capacity of banks Agricultural Bank Rating Scheme Developing incentives that encourage banks to have long-term agriculture lending commitments Pioneer status, including a five- to sevenyear tax holiday granted to companies in agricultural cultivation, processing, and preservation R&D and infrastructure investments and locally sourced raw materials eligible for tax deductions and credits Zero duty on agricultural machinery imports Discretionary tax breaks to businesses in labour intensive industries or economically disadvantaged areas Unrestricted capital allowances Subsidized initial cost for purchase of specific equipment (e.g. cold chain) Foreign investors can own 100% shares in any company and are free to repatriate their profits and dividends Source: 2013 ATA Scorecard Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 31

Additional Government Interventions 3 Supply Security Interventions: Growth Enhancement Support Scheme The Growth Enhancement Support (GES) scheme has successfully brought together the private and public sector to streamline input supply, improve production quality, and increase yields Private Sector Public Sector 25 fertilizer companies, 77 seed companies, and 1,800 agro-dealers participated Agro-dealers sell fertilizer and seed directly to farmers and are building supply chains and go-to-market platforms to more effectively reach customers Commercial banks lent over $20 million in 2012 to agro-dealers to secure input supply Established Electronic Wallet System through which farmers receive vouchers redeemable for improved, subsidized inputs Provides 50% subsidy to farmers for fertilizer Liberalized foundation seed production to grow the use of hybrid seeds from 8,000 MT to 1 million MT per year Registered over 10 million farmers in the National Farmer Database 6 million smallholder farmers received inputs through GES in the 2012-2013 planting season Source: G8 New Alliance Cooperative Framework Policy Matrix Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 32

Additional Government Interventions 4 Policy & Regulatory Interventions: Policy Reforms We have committed to additional policy reforms across domains to make Nigeria a competitive agricultural economy Each Policy Action Has a Performance Target Improve Business Environment Increase Private Participation in Input Production & Distribution Established the Nigerian Agribusiness Group (NABG) to strengthen the private sector s voice in improving the business environment Expediting land title registrations and improving transparency and timeliness in occupancy of land certificates Establishing robust information system with data on prices and input/output availability Passing seed law that tackles issues of international trade Building capacity of agro-dealers and complete biometric registration of farmers Increase Access to Credit Improve Food Security and Nutrition Restructuring and recapitalizing the Bank of Agriculture Liberalizing agricultural insurance market and linking it with the credit market Incentivizing banks to lend through interest drawback mechanism Restructuring Agricultural Research Council of Nigeria Providing legislation to extend the requirement of fortification and bio-fortification to important food staples Requiring businesses to improve nutrition content of processed food and labeling practices Source: G8 New Alliance Cooperative Framework Policy Matrix Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 33

Staple Crop Processing Zone Partners Remarkable Partner Support The Staple Crop Processing Zones have received remarkable support from international partners throughout the development process SCPZ Concept Design SCPZ Master Plan Development SCPZ Development Process Ongoing SCPZ Development Support Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria 34