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Proposal for Value Chain Study on

Agricultural Commodities

2

CMK Consulting

Contents

1 Background/ Understanding of Your Needs

2 Engagement Approach

3 Deliverables & Timelines

4 Our Fee Estimate

Copyright © 2014 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture

1 Background/ Understanding of Your Needs

2 Engagement Approach

3 Deliverables & Timelines

4 Our Fee Estimate

4

CMK Consulting

Background & Understanding of Your Needs.The client approached Watermark consulting with a view to understanding the value

chain, cost drivers, risks and a recommendations on an implementation strategy to

guide investment in agricultural commodities. Sample commodities are:

RiceAn extremely important commodity, both from a policy and food security point of view

• Nigeria is one of Africa’s largest markets for rice, with an estimated population of 167 million people, growing at 3.2%

annually and predicted to reach 221 million by 2020

• Rice consumption in Nigeria is forecasted to reach 36 million metric tons by 2050

Oil Palm

Nigeria has an illustrious history as one of the focal points of the Oil Palm trade. Strategic importance of Oil Palm as a cash

crop was recognized as far back as the 19th Century.

Nigeria was the World’s largest Oil Palm exporter and impressive infrastructure / institutions were put in place to facilitate

production and trading. Unfortunately, in the wake of the “Oil Boom”, these gains were reversed

• Three dominant products are Special Oil Palm (SPO), Technical Oil Palm (TPO) and Palm Kernel Oil (PKO)

• The Nigerian Vegetable Oil Industry can process 900,000 metric tons of palm oil annually, but due to inadequate supply,

several oil palm refineries are operating at 25% of installed capacity

Poultry

Poultry is the most common source of animal protein in Nigeria.

• Commercial poultry population as at 2008 was put at 64 million birds (24 million layers and 40 million broilers)

• Commercial poultry is a fast growing sector driven largely by urban consumption patterns, population growth & growth of

the fast food sector/catering services.

Copyright © 2014 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture

1 Background/ Understanding of Your Needs

2 Engagement Approach

3 Deliverables & Timelines

4 Our Fee Estimate

6

CMK Consulting

Engagement Approach

4.0 Feedback &

Recommendations

3.0 Value Chain

Mapping &

Analysis

2.0 Data &

Information

Gathering

1.0 Project Team

Mobilization

5.0 Project Management

• Develop common

understanding of

mandate and

outputs

• Agree Work

Program and

Approach

• Data gathering planning

& readiness

• Conduct research and

interviews across

segments of each

commodities value chain

• Map & analyze value

chains (conduct value

chain analysis).

• Analyze market

opportunities and risks.

• Determine financing

needs and risks.

• Develop implementation

road map

• Finalize feedback and

recommendations.

• Plan and manage program delivery / Scope / timelines / resource

• Manage program status reporting; issues & risks; program and content quality

• Communicate project status/results to all stakeholders periodically

Our proposed work approach is as illustrated below. It is based on a careful analysis

of your needs. More detail is provided in subsequent slides.

7

CMK ConsultingWe will analyse interactions among key players

in the commodity value chains…………

Input

Supplier

Producer/

Supplier

Aggregator /

Primary or

Wholesale

Trader

Processor

Marketer /

Distributor

Fertilizer &

Veterinary Input

Supplier

Seed Dealer Government

Research

Institutes

Farm Equipment

Dealers / Fabricator

The relationships between key players in each of the value chains will be included as

part of the analysis.

Wild Trees/ Back Yard

Poultry/ Smallholder

Farmer Contract Out Grower

Small Scale

Commercial

Farmer

Integrated Producers/

Processers

• Most large scale

farmers fall under

this category

• Common to Poultry,

Oil Palm , Rice &

Horticulture

• May have “Out

Grower Scheme”

Medium Scale Farmer

Small Scale

Commodity

Trader/Wholesaler

Medium Scale

Commodity

Trader/Wholesaler

Intermediate Product

Importer (e.g. Oil Palm

& Brown Rice, Fruit

Juice Concentrate)

Artisanal

Processor

Small Scale

Processor

Medium Scale

ProcessorLarge Scale

Processor

Traditional Rural/Urban Market

Retailer

Medium Scale Finished Products

Trader/WholesalerSupermarketLarge Scale Finished

Products Trader/Wholesaler

Importer of Processed Products Smuggler

Benin Border

8

CMK ConsultingThe analysis will also include typical cash flows

of commodity farmers/ expected cash flows

(87.67)

(0.67) (0.67) (0.67) (5.67)(14.29)

(1.79) (1.79) (1.79) (7.73) (7.73) (7.73)

212.59

-150.00

-100.00

-50.00

0.00

50.00

100.00

150.00

200.00

250.00

300.00

1 2 3 4 5 6 7 8 9 10 11 12 13

Th

ou

san

ds

Cash Outflows (B) Cash Inflows (B) Net Cashflows (A - B)

Harvesting

costs

Weeks

Naira

Seed purchase.

Soil preparation.

Nursery

preparation

Land preparation &

nursery operations

Field operations (Fertilizer

application, herbicide

application

Sales

revenue

Cash Flows For a Farmer

9

Cost Element Unit

Cost

(NGN)

Year 0

(NGN)

Year 1

(NGN)

Year 2

(NGN)

Year3

(NGN)

Year 4

(NGN)

Year 5

(NGN)

Year 6

(NGN)

Year 7

(NGN)

Year 8

(NGN)

Sales Revenue

Special Palm Oil XXX,000 139,050 232,200 349,650 403,650 531,900

Palm Kernels XX,000 4,944 8,256 12,432 14,352 18,912

Total Revenue (A) XX,000 XX,000 XX,000 XX,000 XX,000

Direct Material Costs

Seedlingsa XX,000 45,000

Fertilizerb XX,000 5,500 137,500 137,500 137,500

Diesel (For Mill)c XX,000 2,496 2,496 2,496 2,496 2,496

Labour Costs XX,000

Nurseryd XX,000 15,000

Land Preparatione XX,000 150,000

Transplantingf XX,000 37,500

Weeding + Fertilizer

Applicationg XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000

Pruning/

Harvestingh XX,000 3,600 3,600 3,600 3,600 3,600

Mill Operatorsj XX,000 6,000 6,000 6,000 6,000 6,000

Total Cost of

Production (B)XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000

Contribution

(C = A – B)XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000 XX,000

We will also analyze production costs &

processing costs…………

10

Our recommendations will be based on an

analysis of risks and rewards …………

High

Low

Low High

0%

100%

100%

Rewards

Risks

“Golden

Quadrant”

Copyright © 2014 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture

1 Background/ Understanding of Your Needs

2 Engagement Approach

3 Deliverables & Timelines

4 Our Fee Estimate

12

Deliverable & Timelines

Copyright © 2014 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture

1 Background/ Understanding of Your Needs

2 Engagement Approach

3 Deliverables & Timelines

4 Our Fee Estimate

14

Business Arrangements

Our professional fees for the arrangement described in this proposal are based on the level of

staff and time required to complete the assignment.

We estimate this assignment will take 4 months.

Based on our understanding of the required scope of the project, We estimate that our services

will cost a discounted fee of N 15.252 million, representing 50% discount on our fees in line

with our commitment to partner with you on this strategic initiative.

Our fees exclude VAT and out-of-pocket expenses which are incidental to the assignment. Out-

of-pocket expenses will be billed separately at actual costs incurred, if not provided directly by

you. Furthermore, Watermark will bill 60% of the contract sum as mobilisation billing prior to

commencement of the engagement.