Currently, about half of the local tomato crop rots because of a lack of storage facilities, poor pricing and access to markets, which has prompted many farmers to stop cultivation, said the CBN.
The improved seed varieties to increase yields, access to chemicals, more up-to-date farming techniques and a ready market for the produce is designed to entice farmers back.
"Once we start production the factory will be providing employment to farmers and (the) tomato paste packaging industry, traders, haulage operators and many others to support the tomato value chain," said production manager Ashwin Patil.
Plans to increase production -- and acquire an idle tomato paste factory in neighbouring Kaduna state -- are in the pipeline, he added.
For farmers such as Yusuf Ado Kadawa, it's a lifeline.
"We really incur heavy losses from our yield, which rots away due to lack of (a) ready market for our tomatoes, which is a perishable produce. But now we have a market close to us," he said.
President Muhammadu Buhari is keen to diversify Nigeria's economy away from an over-reliance on oil as revenues have been severely depleted by the global slump in crude prices.
Former agriculture minister Akinwumi Adesina, now head of the African Development Bank, in 2013 described the sector as "the new oil".
Some 30 percent of Nigeria's estimated 170 million people are employed in agriculture, mostly at a subsistence level, although moves have been made to commercialise production.
Erratic power supply, which Nigeria has been grappling with for more than two decades, and lack of import controls remain the factory's main challenges.
The factory will have to rely on diesel-hungry generators for electricity, adding to production costs and reducing competitiveness with cheaper imports.
Both issues contributed to the collapse of hundreds of factories in Dangote's home state of Kano in the past two decades, including his textile and wheat flour factories.
But the vice-president of Nigeria's manufacturers union, Ali Madugu, said the future still looked bright.
"Once the government can place restrictions on the import of Chinese tomato pastes... the sky's the limit for the Dangote tomato paste because the market is there for them to exploit," he added.