How To Spot An Agricultural Investment Scam

Nigeria has a teeming population estimated to be over 200 million people, and this figure is expected to rise to over 400 million by 2050. What this translates to is that food production and sufficiency will always be on the front burner, as such, agriculture will always be a critical sector of national development. Recently, there has been an influx of investors, entrepreneurs, and innovators applying technology to solve the myriad of challenges bedeviling the agricultural sector. Unfortunately, the sector has also seen an influx of individuals with malevolent motives. Such individuals prey on the unsuspecting through various scams, a notable example being Ponzi Agriculture Investment Schemes (PAIS).

Below, we elucidate the key factors you should be on the lookout for when you’re about to invest in an agricultural scheme, following this advice judiciously will save you from falling prey to scammers and their ilk.

Verify physical presence

Before investing in any agricultural platform it is necessary to visit the physical location of the farm as stated on their website. If you can’t visit, get someone else who can confirm the farm is at that location. Some fraudulent agricultural platforms state farm addresses that are non-existent or belong to other people. Visiting their stated locations will enable you to fish out such scams.

Conflicting or hidden details of the team/individual behind the scheme

Every business is managed and run by a team or an individual. It would be proper to run a background check of the individual or directors of the company to determine their credibility. If the team lacks credible or traceable digital details or doesn’t explicitly tag themselves to the investment platform. That is a warning sign.

Unrealistic Return On Investment (ROI)

The first question to ask about returns is how it is calculated. Is it paid per product cycle or per annum? Keep in mind that most agricultural investment scams give outrageous rates in a bid to lure their clients into investing in their platforms. Hence, review the prevalent market rates and compare it with what you’re being offered. The best bet here is to seek the services of an investment professional and ask that a cost–volume–profit analysis (CVP) be done to evaluate the reality of the advertised return on investment.

Verify that it is insured

As most agricultural products are perishable and farming cycles could become untenable due to weather or other conditions, it is important to make sure the scheme is insured. Also, make sure to contact the insurance provider to understand the type and extent to which the farm is insured. Is the insurance for the produce, equipment, livestock, or all of the above? Usually, most premiums don’t cover the ROI, so in a case where something bad happens, you will not get your expected returns till the farm can begin operating again.

Verify Accreditations and Partnerships

The business should be duly registered with the Corporate Affairs Commission and its fillings up to date. Also, accreditations from the Security & Exchange Commission and NAFDAC are a plus. Verify partnerships such as extension service providers (agencies that provide advice and information to improve production), suppliers for raw materials, and off-takers (people who buy off harvests or farm produce), if any or all of these missing then you should not proceed.

Finally, it is less risky to invest in an already existing agricultural business looking to scale up or one looking for a second round of funding after start-up. As always, don’t be in a hurry, take your time and investigate all that has been recommended and you can be sure you’ll keep scammers at bay.

Contributors:

Temitayo Oloruntoba

Agbaze Jeremiah

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