In the early 1960s, Nigeria was the world’s largest palm oil producer with a global market share of 43 per cent. Today, it is the 5th largest producer with less than two per cent of the total global market production of 74.08 million. From being one of the leading exporters of palm oil in the 1960s, Nigeria is now a net importer. Nigeria’s current local demand for palm oil is approximately three million metric tonnes, but the country produces only approximately 1.02 metric tonnes of oil palm. To complement the existing gaps in the sector, Nigeria spends about $500 million annually on oil palm importation.
The decline can be chalked up to the country’s over-reliance on crude oil as a source of revenue. On the other hand, traditional oil palm processing is a significant reason for the country’s low palm oil production. This slow and wasteful method of harvesting and processing palm oil is largely used by smallholder farmers, who account for 80 per cent of palm oil production in the country.
If these farmers had the right resources, Nigeria could earn above $20 billion annually from the cultivation and processing of palm oil, the Central Bank of Nigeria (CBN) posits. Releaf, a company focused on leveraging technology to accelerate agricultural-based industrialisation in Nigeria and Africa, is well on its way to make this achievable.
Founded in 2017 by Ikenna Nzewi and Uzoma Ayogu, Releaf focuses on value chains with small factories near smallholder farmers. This reduces logistics costs and post-harvest losses while increasing processing yields and farmers finances.
In this interview with Ventures Africa, Nzewi discusses his background, challenges, recent funding, and plans.
Kindly introduce yourself and tell us about your background.
My name is Ikenna Nzewi. I grew up in the United States. I attended YALE University and majored in Computer Science. I visited Nigeria for the first time when I was 20 and got to visit the International Institute of Tropical Agriculture (IITA), where I fell in love with agriculture technology. I decided to return to Nigeria after university. Y Combinator invested in our company. We were one of their first ten African investments, and as a result, we were able to relocate to Nigeria and begin operations. We are focused on the oil palm industry.
What inspired you to start the company?
Releaf was established in 2017 to drive development in Nigeria and Africa’s food system, and we were excited to use technology to do so. We wanted to demonstrate what technology could do, so we piloted various technologies. For example, there was a time when we did a lot of commodity linkage between buyers and sellers. We then moved on to trade finance, business finance, commodities flowing from farms to factories, and finally to our business model centred on the oil palm sector.
How did you get the money to start Releaf?
Our Y Combinator investment was the first money into the business, and it was able to catalyze our start, allowing us to relocate to Nigeria. My co-founder and I started the company in the United States, so we needed to raise some funds before we could relocate. YC helped us do that, and as we gained traction, we attracted more investors. This year, we have also received a million and a half dollars in grants.
Releaf is catalyzing an agricultural revolution in Africa by leveraging digital technology and cutting-edge hardware. What is the company’s business model?
Our business model consists of three steps: we buy nuts from farmers, crack the nuts using our proprietary technology, sell to large food processors, and then provide consumers with vegetable oil and soap products.
You recently raised $2.7 million in seed funding and received $1.5 million in grants from The Challenge Fund for Youth Employment (CFYE) and USAID. What should we expect from this?
The focus of this seed round is to create technology that can process farmers’ crops, reduce post-harvest loss, and then commercialize that technology. So the goal is not just to build that technology but to use it in real-world markets with farmers to make them more prosperous. The emphasis is on technological advancement and commercial production. So, as I previously stated, our business model is to first develop the technology, then purchasing nuts from farmers, cracking those nuts with Kraken technology, and selling vegetable oils to these big food processors.
Why does Releaf prioritize palm production?
Nigeria’s history with oil palm and the potential of oil palm in the future are both of interest to us. Previously, Nigeria was the largest exporter of palm oil, but we now do less than two per cent of global export. There is an opportunity to reclaim the industry. As for potential, Nigeria is the world’s largest market of oil palm produced by smallholders farmers. We have millions of actors of oil palm under production, but Nigeria also has one of the worst yields per hectare in the world. So there is an immense opportunity to make smallholders more efficient so that we can transform the industry.
Oil palm is a crop with a biological advantage, so if I plant a plot of land with oil palm and you plant a plot of land with other crops that produce vegetable oil, my plot of land will produce seven to ten times more oil. With four million people employed in this sector, there is an opportunity to develop and deploy technology that makes the value chain more efficient and captures the potential of biological advantage.
Tell us about the Kraken machine. In how many states of the federation it is available?
Kraken is a development that we raised our seed round of funding for, and it is in Uyo, Akwa-Ibom. Akwa-Ibom is West Africa’s leading oil palm hub. The quality of the output the Kraken produces is superior to the industry standard. We also aim to achieve higher processing rates in other machines. A farmer can process about 500kg of palm nuts per day by cracking the nuts with their hands and rock. We are designing this technology to operate at 100 tonnes per day which is 200 times faster than a smallholder farmer with a rock.
Our goal is to develop technology that will bring this sector into the twenty-first century and deploy it as close to the farmers as possible. It will not be a large factory in Lagos or Ibadan, but a factory in local and rural areas with high agricultural productivity. That is where the factories should be so that farmers can concentrate on production and factories can concentrate on processing.
Kindly shed light on the equipment financing process?
Another goal of this round is to fund improved machinery for smallholder farmers and their steps of processing. Smallholder farmers have a method for extracting red palm oil from palm fruit, but the machines they use are rather rudimentary and do not extract all of the vegetable oil. So there is an opportunity to extract more vegetable oil by financing that equipment, so that is another activity we will pursue with this seed round.
What challenges do you face in the course of your business?
Doing something different from the general market is a challenge. We are an agritech company, not a fintech. We also manufacture hardware, and we operate in rural Nigeria. Educating the investor market on opportunity is something that we have had to do because not every international investor who invests in Africa has checked the oil palm sector and knows it intimately. So investor education has been hard to do.
Another challenge has been logistics. Especially during the COVID-19 lockdown, when there was a restriction on movement, we found it difficult to get raw materials to process to test our technology. COVID-19 also made equipment importation difficult. Approximately 20 per cent of the machines we import are difficult to import.
Nigeria used to be the vanguard of palm production globally, what would you attribute its decline to?
I think there are several reasons for the decline. In general, as a nation, the oil and gas industry took off, and there was a concentration of human capital resources concentrated on this industry. A lot of that human capital left agriculture. We are now seeing a resurgence of world-class technology in the agricultural space, bringing the necessary capital to catalyze the industry. I am very optimistic about what the next 30 to 50 years in Africa will look like. We will look back on what we have done, be surprised at how much progress we have made, and be excited to be a part of the journey.
Kindly educate us on the mega plantation approach of planting palm trees.
Although we don’t do that, 80 per cent of oil palm production in Nigeria comes from smallholder farmers, and the other 20 per cent are from mega plantations. These are public real estate companies that buy a large piece of land, remove the natural vegetation and set up an oil palm monoculture. This approach has a lot of environmental and biological challenges such as the erasure of natural biomes. We don’t think it is the way out for oil production. We believe the way out for oil production is smallholder-based. Another problem with running mega plantations is that there is often the case of people not been paid their wages. Releaf’s view of oil palm production is that it should be in the hands of smallholder farmers and that factories like ourselves should help them become more productive. So we are reimagining the way that oil palm is grown sustainably.
How many people constitute your labour force? And kindly describe your impact so far.
We have a team of 85 citizens. We call our employees citizens.
In terms of impact, we have bought close to 10 million kg of palm nuts, and we have been an off-taker and the customer of these smallholders, turning their hard work into revenue and compensation. We have led over a thousand smallholder farmers to provide food factories with 7.5 million kilograms of quality crops in less than 18 months.
Are there plans to move to other African countries?
We fully expect to expand geographically; this is a West African market opportunity. Oil palm grows similarly in Nigeria as it does in Ghana, Cameroon, or the Ivory Coast. Of course, there are local nuances in every market, and you can’t approach the Nigerian market the exact way you will approach Ghana. In general, what you see is that smallholder farmers drive oil palm production, and they are fragmented. They have variable-size farms, and they have problems processing oil palms.
Oil palm processing requires a lot of energy, but there is a lot of potential. Although we see oil palms as a west Africa opportunity, we are looking at the entire continent for business models similar to what we have in oil palm. Our mandate is to decentralize food processing by placing factories near farmers. Famers can then be supported with production, while factories can concentrate on supplying the market with cheaper commodities.
What do you think is the potential of agriculture in Africa if the sector was to be heavily mechanized?
I have a strong belief in Africa to feed the world. By the end of this century, 40 per cent of the world’s population will be in Africa, and we will be feeding the world. 40 per cent of something is typically considered a monopoly share, so we have an incredible opportunity to be the suppliers and producers of food that feeds the world.
I think that we have found ourselves at a beautiful inflexion point in the agricultural journey as the population in Africa increases faster every day. There is an opportunity for new business models to capture this increase in demand and proffer a long-term solution to the problems in the market.
Can you tell us your prospect for the future and where you see the company in a few years?
I see Releaf as a company operating in multiple countries in Africa within the oil palm sector. I see us expanding from oil palm production into other crops, especially crops that can be planted alongside oil palm. Cassava is a great example of that, and I see us transforming the lives of communities and setting up economic pillars in these communities that enable more economic activities to occur in rural parts of Africa.
We cannot continue to rely on Lagos to be the centre of opportunity for every Nigerian. The city cannot contain everyone, so we need to create opportunities outside our megacities and set up a set of tier two cities throughout the continent. Our work is critical to getting it done.
What can you say about young people’s attitudes toward farming?
I think many youths are interested in agriculture, as evidenced by the number of emails we receive from people seeking internships and jobs. I would say our youths are excited about agriculture and what makes them more interested is when there are opportunities to develop technology within the value chain. Instead of carrying a bag of beans on your head or shoulder, find an automated way to do it. I believe that by incorporating more technology into the value chain, we will see an increase in the number of technology-savvy Africans who are enthusiastic about agriculture.
Written by Adekunle Agbetiloye