When farmers produce on their farms, they often face one major challenge; what next? What are they going to do with baskets or sacks of harvested commodities as the case may be, particularly when they are highly perishable or require special storage.
Access to market has been a major challenge in the agriculture sector for as long as the profession has existed in Nigeria, with producers often on the losing end. Even when access to finance is given as a challenge of farmers, the fact has remained; no matter how much credit is extended to any farmer, if they are unable to access markets (and profitably too), then they will default.
“Money does not matter if you can’t sell,” remarked Ayodeji Balogun, country manager for AFEX Commodities Exchange Limited and the regional director of Africa Exchange Holdings during a panel discussion at the 2019 BusinessDay Agribusiness and Food Security Summit.
Balogun is today, leading what is unarguably Nigeria’s most successful commodity exchange platform, through which he is enabling producers of different commodities get a guaranteed access to market.
In his roles at AFEX Commodities Exchange Limited and Africa Exchange Holdings, Balogun is pioneering the development of a private sector led commodities exchange and an electronic warehouse receipt system. He previously worked on developing the company’s new market entry strategy in East and West Africa, and before joining AFEX, supported several private sector enabling policy initiatives at the Tony Elumelu Foundation.
Background and early professional years
In his profile on the website of THNK School of Creative Leadership, Balogun stated that at AFEX, his team is building systems that leverage technology, innovative finance, and inclusive agriculture to connect smallholder farmers to commodity and financial markets.
Balogun holds an MBA from Lagos Business School, a first degree in Mechanical Engineering and a diploma in Heavy Equipment Engineering from Penn Foster University, Scranton, US. He also recently graduated from the Global CEO Program at the Lagos Business School, Pan-Atlantic University.
He has worked as an analyst with Unilever Nigeria Plc and an associate at Doreo Partners where he contributed to the development of Nigeria’s Agriculture Transformation Plan in 2011. He was a visiting consultant to DFID (GEMS3) and the Ministry of Agriculture on value chain development and coordinator of the West African chapter of Aspen Network of Developing Entrepreneurs (ANDE).
As a fresh graduate after an undergraduate degree in Engineering, Ayodeji decided to follow his passion for business, going on to study for an MBA, with the ultimate objective to understand how institutions, and not just businesses were built.
He would later apply to the Elumelu Professionals Program – (formely known as African Markets Internship Programme (AMIP)), which as he was quoted on the foundation’s website was to give “some validation of the experience gained from my years of venturing as a young entrepreneur in an emerging market and the structured thinking capacity from the MBA. AMIP placed me among 30 other fresh MBAs from the best schools in Europe, North America, and Africa, and we had 100 days of cross-pollinating ideas and cultures and had an immersion into the African Business Landscape.”
Through the EPP, Ayodeji as noted by the Elumelu foundation supported several private sector enabling policy initiatives including designing the Nigerian National Competitiveness Council and drafting a bill to regulate the non-profit sector in Nigeria. According to him, his work at the Tony Elumelu Foundation gave the confidence and courage to compete. Within five years after the program and fuelled with his drive for business and building a career around Impact Investing/Finance, he has grown from an analyst to running the West Africa operations of a Commodities Exchange – African Exchange (AFEX). He has also served on the board of some Nigerian Capital Market institutions and serving in advisory roles on food security and poverty alleviation across East and West Africa.
The leap into commodity exchange
AFEX Commodities Exchange Limited (AFEX), a sister company of East Africa Exchange (EAX), was established in Nigeria in 2014 through a Public Private Partnership with the Federal Ministry of Agriculture and Rural Development (FMARD) to establish a Warehouse Receipt System (WRS) and Commodities Exchange in Nigeria. AFEX Nigeria secured its license as a Commodities Exchange in compliance with the Investments & Securities Act (ISA), 2007 and the Securities & Exchange Commission (SEC) Rules & Regulations in March 2015.
AFEX is also the first private sector led and funded Commodities Exchange in Nigeria and across West and Central Africa. Adopting lessons learned and challenges met during the establishment of EAX, AFEX Nigeria has built on existing logistics systems by providing warehouses across major grain-producing states in North-West, North-Central & North-East Nigeria. This has led to the creation of trading terminals where processors, traders and farmers exchange value.
A timeline of AFEX’s existence shows that while it following its establishment in 2014, and subsequent licensing in 2015, in 2016 it launched the Grain Bank and Commodity Exchange Project with the West Africa Food Market (WAFM), targeting 100,000 farmers. It also launched the first structured Grain for Fertiliser Programme in Nigeria, and issued a £350,000 repo bond fully subscribed to by DFID.
In 2017, the trading platform powered by Nasdaq was launched, and matched with a commencement in the distribution of weekly commodities price data. The same year, its agribootser product was launched in partnership with OCP Africa, targeting 5,000 farmers and also taking part in the Central Bank of Nigeria’s (CBN) Anchor Borrowers’ Programme as an aggregator. In 2018, AFEX launched the pilot of its flagship #CodeCashCrop event, which it says drives necessary conversation about the intersection of technology, finance and agriculture. The company also began on-boarding non-bank financial institutions on the Exchange for farmer financing
In 2019, AFEX introduced Nigeria’s first ever commodities index – the AFEX Commodities Index (ACI), which tracks the changes in price for some major agricultural commodities. It has also continued its capital market integration, introducing the first ever market education platform for commodities named ‘EdEX’.
A 2018 report on ‘Commodities Trading Ecosystem in Nigeria’ by the Securities and Exchange Commission noted that the Nigeria Commodity Exchange (NCX) was the only commodity exchange in the country for more than a decade when in 2014, the SEC registered AFEX commodities exchange, the first private sector commodities exchange
Of the two exchanges in Nigeria, AFEX commodity exchange as noted by SEC is fully operational while NCX is not fully operational due to funding challenges occasioned by government’s inaction, amidst several other challenges.
The SEC report highlights AFEX’s performance over a period, noting for instance that volume traded on the platform ranged from 2,500MT in Q2 2016 to 1,943MT in Q4 2017 with a value of N213m and N235m respectively.
Volume and value traded peaked between Q4 2016 and Q1 2017, leading to the expectation of a much higher value by Q1 2018. The report showed maize (especially white) as the most traded commodity, followed by soya beans, paddy rice, ginger and others (i.e. cowpea, wheat, yellow sorghum).
It further noted that the record of some activities already occurring on the AFEX platform is an indication of the potential available in Nigeria’s commodity trading. Also, given that the level of transaction is still far less than the total production in the economy there is ample room for growth in commodity trading in Nigeria.
AFEX’s approach is to leverage technology to build efficient supply chain networks within Africa’s rural agrarian communities, linking the farmers to both financial and commodity markets. At AFEX, Ayodeji and his team are taking bold steps to transform agriculture into a dynamic market-oriented one by working to provide finance to promote increased access to trade finance for micro, small and medium enterprises entrepreneurs in import/export sectors to enable them explore market opportunities.
