Raises $50 Million to Finance Agri-SMEs in Nigeria

Nigeria’s leading private commodities exchange company, has announced the first Warehouse Receipt Backed  Commercial Paper in Africa, with tech-enabled operations and a 24-hour fast cash turnaround for borrowers. With over $50 million raised for Agri-SMEs, this bridges the funding gap between lenders and borrowers in the Nigerian agricultural sector with a commodity-backed instrument – for the first time. 

The AFEX financing deal will help eradicate the high cost of procurement incurred by processors by  deploying a discounted value of a warehouse receipt distributed among five leading players in the  Food and Beverage, Trading Poultry and Animal Feed segments in Nigeria. The receiving companies  are top 10 players in their respective segments. They have now been enabled access to a tool for  managing price volatility, enabling up to 30% direct savings on prices. 

“With our vision to reach a cumulative total of over $5 Billion in investment to the agriculture sector over the next five years, this financing deal is right on track to achieve this goal’’ – said Ayodeji  Balogun, CEO, AFEX Commodities Exchange. “As we move towards building a derivatives market  in Africa, we want to be able to reduce exposure to price risk for stakeholders, by enabling them to hedge their positions and trade in commodity derivatives.” 

The warehouse receipts, which can then be transferred from commodities to a financial asset and  listed under the borrower’s portfolio on the AFEX trading platform, will create a sustainable funding  structure and address underfunding in the Nigerian agricultural sector. With the warehouse receipt  system linked to financiers, the system allows financiers value and marks the commodities’ price to  market on a real-time basis.  

“Our mission is to provide low-risk working capital facility for stakeholders in the Agro sector, in a way that is transparent and has a very high viable investment return’’ – said Akinyinka Akintunde, VP  Financial Markets at AFEX. “As a licensed commodities exchange and warehouse receipt system  operator, we deploy a warehouse receipt system and collateral management infrastructure to increase  market confidence for both lenders and borrowers.” With AFEX’s goal to support Africa’s food security while promoting a fair exchange of value among players in commodity value chains, this deal’s social impact is delivered through market access for farmers and reduced post-harvest losses. AFEX  continues to contribute to the United Nations Sustainable Development Goals 1, 2, 5 and 8; no poverty, zero hunger, gender equality, decent work, and economic growth.

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