How To Invest In Farmland In Nigeria

  • 1 year ago
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Investing in land in Nigeria can be profitable. But land comes in different shapes, sizes and forms. Farmland or agricultural land is one type that is regularly overlooked.

Investors can see significant benefits from investing in farm land, as against commercial or residential, depending on where and what type of farmland you purchase. Farmland is often seen as one of the best long term real estate investments out there (due to the rising global demand for food). As such, farmland can be used as part of a land banking strategy in Nigeria.

A simple method of making money from farmland is buying up prime agricultural land and leasing it back to local farmers. However, there are other methods of potentially generating an income.

This articles aims to shed light on why investing in farmland and by extension agriculture in Nigeria, is a great thing to do. Ways you can actually go about profiting from it will also be discussed.

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Why invest in farm land

Farmland investments can be lucrative for many reasons, primarily due to the fact that agriculture is an integral part of our lives: the food that we eat daily comes by the way of farming.

Agriculture is all the processes involved in the production of food, fiber, feed and other needed products by the growing of different crops and the raising of livestock (domesticated animals).

In order to practice agriculture suitable land is needed. Without this, animals cannot be raised and plants/crops cannot be grown in enough quantities.

Since life is so dependent on agriculture, as the global population increases so too will the demand for good agricultural land.

Where to buy farmland

Land across Nigeria has been appreciating in recent years. This is especially true for farm land. Having said this, not all farmland is created equal.

There are various factors that go into making land valuable for agriculture (or not). These factors include:

  • Quality of soil
  • Climate of the region
  • Location

Generally land that is more fertile and that which sits closer to cities or ports, commands more value.

The more fertile the land, the greater the crop yield per acre. The closer farmland is to larger populations, the greater the likelihood of being developed in the near future: giving it a greater potential value through price appreciation.

On the whole, Nigeria as a country has an excellent climate and soil structure for growing and rearing almost any kind of crop or animal. However, what does vary across the country is the quality of location.

The best place to buy farmland in Nigeria is near urban areas, this is down to the fact that it makes more economic sense. Being close to urban areas means easy access to the goods and services required to cultivate a farm, as well as the market that you will eventually sell produce to.

Two of the country’s biggest urban centers are Abuja and Lagos. These two cities have a large market for both export and local consumption, as to do they have good infrastructure. Hence, it makes sense to buy farmland in and around Abuja or Lagos. This is even truer for those more concerned with the real estate investment aspect of farmland: land in Abuja and Lagos is always in demand and so will be easier to sell in the future.

When you compare Abuja to Lagos, when it comes to where to buy agricultural land, Abuja is the clear winner. This is because of a number of reasons including:

  • Abuja, being a developing city, is surrounded by virgin undeveloped land whereas land in Lagos is more limited.
  • As a result of the increased availability of agricultural land in Abuja, investors can buy it for far cheaper than they can in Lagos.
  • Abuja’s location, in the north central part of Nigeria, means it has the perfect climate for growing a variety of crops.

Places good for buying farmland in Abuja include Gwagwalada, Kuje and Kwali among others. You can use the services of a real estate agent to find you the best deals in these areas.

Ways of making money from farm land

The most common (and arguably the best) way to invest in farmland is directly purchasing it. Alternatively you could invest in a farming-centered real estate investment trust (REIT).

If you do physically acquire farmland, there are a variety of ways from which you can profit:

Buy and sell: land flip

As a limited resource, the supply of quality farmland is fixed. The only thing that does fluctuate is economic demand for the products that can be obtained through farming: mainly food.

As the worlds population continues to rise, so too does the demand for basic food related commodities. As demand increases, so does the value of agricultural land appreciate. Thus investors can buy farmland, wait and sell as prices rise in the future i.e. flipping it.

Buy and lease

As well as providing monetary value to an investor, buying and then leasing land out to a farmer (or professional farming company) can help the local economy by increasing access to locally grown agricultural produce.

With this option, one can collect yearly rental income or structure a profit sharing agreement.

Yield (directly selling harvested produce)

Related to buying and leasing, you can make money from the income that arises from harvested crops. With the use of the latest technology and good farm management: fertile agricultural land soon pays for itself with positive returns on investment.

This option involves you employing and paying a farmer to manage your farmland, while you make money from selling the produce. One can enter into long term contracts with buyers, who agree to buy final produce at fixed prices.

Adding value to farmland

Like with other forms of real estate, investors can always add value to their property by making improvements. For example one can switch from planting generally lower value subsistence crops (maize, cassava etc.) to planting more higher-end cash crops (coffee, tea, cotton, cocoa etc.) for export. Or one can shift to organic farming.

Further, one can add value by improving any buildings/infrastructure on the said land. Any of these changes will lead to increased value and greater profits anytime an investor decides to sell.

Other income

There are other ways to generate income that do not actually relate to the crops being grown or animals being reared. For example, for farmland that contains a significantly large body of water, water rights can be sold.

Farmland located near strategic places such as major roads, may make money from advertising billboards placed on the property or even from mobile network communication towers.

Final thoughts

Investing in agriculture by the way of acquiring farmland can be very profitable.

However, you must:

  • Know what you are investing in
  • Be able to get the right farmland
  • Be able to acquire land relatively cheaply

Ticking all three of these boxes will see investors making good profits.

Looking for farmland for sale in Abuja? Contact Villa Afrika for a list of lands suited to your requirements: +234 708 500 8039.

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How To Invest In Farmland In Nigeria

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