Enterprise Expansion and Opportunities for Expansion in Agriculture

It has often been stated that the agricultural sector has the potential to provide the needed raw material for the manufacturing sector. It is pertinent to clearly identify this potential, interrogate why it still remains potential, and more importantly, suggest workable ways to sustainably and profitably exploit the potential as a going concern. This chapter is therefore designed to focus on enterprise expansion and opportunities for expansion in agriculture. The chapter is divided into the following sections: “Characteristics of Agriculture in Nigeria,” “Determinants of Youth Participation in Agriculture,” “Agricultural Enterprise Expansion and Agricultural Transformation,” “Enhancing Enterprise Expansion,” and “Opportunities in Agriculture.” The chapter concludes that for the potential of agriculture in an economy to be realized, the relevant stakeholders should know that business as usual is not an acceptable option; yield-increasing and enterprise-expansion-inducing strategies should be implemented in both the short and the long term. Recommendations are made to enable those engaged in agriculture to profit by it and increase in both output and in scale.

Economics of Farm Management

The concept of farm management can be defined as the organization of land, labour, capital, and management (decision-making and risk-taking) in operating a farm enterprise to meet the stated objectives including profit maximisation. Of the four fundamental factors of production, management stands out in its onerous role in organizing all the others in meeting the defined objectives of the enterprise. Onerous as the role of management as a factor of production is, it cannot work in isolation of the others. There is therefore a need to discuss farm management as a concept with due focus on the notion of entrepreneurial spirit and at the same time bring out the peculiar features of the factors of production in working together to maintain a going concern. It is against this background that this chapter discusses the concept of farm management. The specific objectives of the chapter include defining the meaning and scope of farm management, highlighting the resources available to the farm enterprise, highlighting the relevance of entrepreneurship behaviour and entrepreneurship spirit in growing an enterprise, and highlighting the importance of farm management. The methodology adopted is descriptive. It is argued in this chapter that present and prospective farm managers should essentially have entrepreneurial spirit with which to start, grow, and expand their enterprise in line with the objective of the enterprise in question. Searching out investment opportunities and effectively ploughing back profits on existing or new investments for expansion enterprise is one of the decisions of management.

The Role of Agriculture in the Development Process

Agriculture plays the role of providing employment, income, food, raw materials, and foreign exchange earnings for people. The ability and the inability of agriculture in playing the provisioning roles, in varying degrees, define the poverty status of those engaged in it. It is a paradox that a majority of those who are engaged in agriculture, especially in developing countries, tend to be associated with such poverty-linked characteristics as low income, hunger, deprivation, and vulnerabilities. There is therefore the need to refocus on defining the concept of agriculture with a view to bringing out its role in the development process and how the roles can be effectively achieved by the majority of those engaged in it. The objectives of the chapter include describing the expected roles of agriculture in the development process; highlighting the performance of the agriculture sector; describing the role of agricultural credit in agricultural development; defining the concept of extreme poverty; highlighting some of the strength and weaknesses of incometrics, highlighting vulnerability views of poverty; discussing measurement of extreme poverty; and highlighting feminization of formal agricultural finance. The chapter concludes with recommendations. The methodology is based on systematic reviews of relevant literature. The findings include how agriculture can play the roles expected of it and effectively empower those who are engaged in it. The chapter shares the view that majority of those engaged in agriculture in most developing countries are women, and that poverty has a feminine face and so advances the feminization of formal agricultural finance interventions. The chapter is concluded with relevant recommendations.

Valuation and Depreciation of Farm Assets

Assets, especially fixed assets, are obtained at a cost and are used in the course of more than one production period. In line with the method of acquisition of the relevant asset, the need arises that their accurate values are appropriately spread over the lifetime of the asset in question and over the relevant production period. It is against this background that this chapter is devoted to highlighting the concept of asset valuation. The discussions are based on a review of relevant literature. It is concluded that the realistic valuation of assets involved in a farm enterprise is essential in ensuring that enterprise is a going concern. It is recommended that relevant contributions of the farm assets including hoes, machetes, head pans, wheelbarrows, and all should be meticulously and rigorously factored into the costs and returns of the production cycles to give a complete idea of the enterprise as a going concern. Furthermore, farm asset such as land that appreciates in value should be realistically incorporated in the valuation of the production in the farm venture.

The Anchor Borrowers' Programme of Boosting Agricultural Production

On November 17, 2015, the government of Nigeria launched the Anchor Borrowers' Programme. The programme is aimed at boosting agricultural production and non-oil exports in the face of dwindling crude oil prices. Because the Anchor Borrowers' Programme is relatively recent and relevant to the main theme of the book—financing agricultural production expansion—its vision and mission are highlighted in this chapter with a view to informing and influencing the expected beneficiaries. The methodology employed is a systematic and analytic review of relevant literature. It is concluded that the Anchor Borrowers' Programme is a well-articulated initiative for economic linkage between smallholder farmers and reputable large-scale agro-processors with a view to increasing agricultural output and significantly improving capacity utilization of processors. It is recommended that the government resist the temptation of policies and programmes that are aimed at boosting agricultural financing and production rising and falling with the government that initiated them.

Financing and Training Imperatives for Resilient Agriculture in Nigeria

This chapter focuses on the financing and training imperatives for resilient agriculture in Nigeria. A proposed twin-track approach to addressing the challenge of agriculture as a development issue in Nigeria involves both encouraging agri-business and supporting the large population of smallholders. On the basis of supporting the large population of smallholder farmers, this chapter highlights the financial and training needs for the efficient practice of resilient agriculture. Discussions in this chapter are based on secondary data obtained from relevant sources. Supporting farmers for the purpose of resilient agriculture requires conscious investment in generation, development, and dissemination of relevant agricultural practices for agricultural intensification and sustainable use of natural resources. In effect, finance and training in support of the farmers are called for. Against the background that there is low government investment in agriculture, and because agriculture is a private sector activity, special funding mechanisms that incorporate public-private partnerships that deliver financial solutions are recommended. With respect to training, resilient agricultural practices should form part of the curriculum in the primary, secondary, and tertiary schools in Nigeria.

Measures of Project Worth

Investments usually involve the procurement of assets for which using marginal analysis may not be adequate in evaluating their worth to an economic activity in an enterprise. Furthermore, all the costs involved in the purchase of fixed assets are not ordinarily charged to the account of a production period. It is against his background that this chapter focuses on the concept of measures of project worth with a view to enabling farmers to obviate related problems in capital budgeting, non-discounted measures of project worth (pay-back period, average rate of return), discounted measures of project worth, benefit-cost analysis, net present value, decision criteria in using the net present value, internal rate of return, calculating the IRR, and interpreting the IRR. Discussions were based on a review of related and relevant literature. Conclusions and recommendations are made based on the discussions.

Agricultural Risk Management and Insurance

Risk management in agriculture can be described as the art and science of choosing among alternatives aimed at reducing the adverse effects of foreseen and unforeseen variability in the production process. Because agriculture is a biological activity, the practice is prone to risks and uncertainty. The need is urgent and cogent to continue to draw attention to the risky nature of the practice of agriculture and thereby proffer effective risk management strategies. This chapter therefore focuses on the basic concepts of agricultural risk management and insurance as they relate to agricultural finance and enterprise expansion. The discussions are based on a review of relevant literature. The chapter concludes that granted that the practice of agriculture is a private sector activity, the need for institutional support, especially in the area formal agricultural insurance schemes, cannot be overemphasized. It is recommended that relevant institutions involved in agricultural insurance as a formal risk-management strategy should ensure that famers obtain due compensation for their insured enterprises in the event of the relevant catastrophe in the farm enterprise.

Cost of Capital and Methods of Charging Interest

In the course of running a business, debt and equity are employed in the financing decision. The employment of debt and equity in the financing mix of an enterprise involves costs. The investing farmer should keep track of the cost of capital invested in an enterprise if only to ensure that they do not exceed the returns. It is against this background that this chapter is devoted to the cost of capital ad methods of charging interest. It is concluded that it makes business sense to equip farmers with the knowledge that interest rate on loans is subject to negotiation and that the amount paid as interest on a loan depends on the method adopted in calculating the interest rate. It is recommended that in employing funds for running an enterprise, the farmer should be committed to the obligations of due repayment and also make profits from the borrowed funds.

Farm Planning and Analysis

Nigeria's renewed interest at transforming agriculture essentially entails that the process of farm planning should be in constant focus at all levels of agricultural enterprise production. As agricultural enterprise becomes more business oriented and environmental regulations become more site-specific, farm planning becomes more useful. It is against this backdrop that this chapter focuses on the concept of farm planning and analysis with a view to equipping the investing farmer with the rudiments of farm planning and analysis. The methodology is based on a systematic review of related and relevant literature. It is recommended that farmers should be able to constantly evaluate the profitability of their proposed investments; where the relevant skills are sufficiently deficient, it is advisable that professionals be invited to undertake the analysis.