AFEX announces first warehouse receipt backed commercial paper in Africa

Raises $50 Million to Finance Agri-SMEs in Nigeria

AFEX Commodities Exchange Limited (AFEX), 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 per cent direct savings on prices.

“With our vision to reach a cumulative total of over $5 Billion in investment in the agriculture sector over the next five years, this financing deal is right on track to achieve this goal.

“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 CEO of AFEX Commodities Exchange, Ayodeji Balogun said.

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.

“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 borrower,” the VP Financial Markets at AFEX, Akinyinka Akintunde disclosed.

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.

AFEX harness Africa’s commodities and talent to build shared wealth and prosperity. AFEX’s infrastructure and platform investments work to unlock capital to power a trust economy in Africa’s commodities markets.

Since inception in 2014, AFEX has developed and deployed a viable commodities exchange model for the West African market, and are on track to impact one million producers; providing services in productivity and value capture and access to finance and markets. By deploying an efficient market system, we will facilitate trade with Africa worth over USD500 million in the next five years.

AFEX’s vision is to be the reference point for commodities in Africa. To achieve this goal, AFEX looks to introduce products that de-risk the sector, drive financial inclusion for rural communities, develop technology for data collection and market access, and enable capital deployment.