AYODEJI BALOGUN, Chief Executive Officer (CEO), AFEX Commodities Exchange Limited, in this interview with ADEMOLA ASUNLOYE, speaks to how AFEX is building a trust economy in Africa’s commodity markets. Excerpts:
Kindly tell us about AFEX: the transitioning?
AFEX is Nigeria’s leading commodities market player, established as the first private sector commodities exchange in the country after getting licensed by the Securities and Exchange Commission in 2015. At the time, the outlook was to create a national trading platform and supply chain network in carefully identified commodity value chains. Over time, we have grown to unlock the potential of Africa’s commodity value chains through the development of innovative products and services around storage, logistics, trade, access to finance and a ready market, with our physical and technology infrastructure serving as supporting pillars to the vision.
Currently, we operate over 100 warehouses in Nigeria’s key grain-producing areas and have reached over 200,000 farmers and traded over 200,000MT of commodities since inception in 2014. Our vision is to be the reference point for commodities in Africa and the plans for expansion that we are rolling out over the next five years will solidify that position.
As Nigeria’s leading commodities exchange, could you share with us some of your landmark achievements since the past 6 years of operation?
Product and market innovation is a key aspect of our business, which has led to us creating and listing the first-ever commodities index in Nigeria and working with capital market players to structure debt securities to finance over 200,000 smallholder farmers. We deploy the largest supply chain network with over 120 warehouses across 23 states in Nigeria, and with our value chain management software Workbench, have registered over 200,000 farmers to date with complete records, over time ensuring that they are financially included.
In 2020, we introduced our commodities trading platform ComX to the market as the first digital trading platform for commodities in Nigeria.Earlier in this year, we were also proud to announce the first warehouse receipt backed Commercial Paper in Africa, which raised $50 million for Agri-SMEs to bridge the funding gap between lenders and borrowers in Nigeria’s agriculture sector.Most recently in December 2021, we have announced a new $100m 10-year bond called The Food Security Fund (FSF).
You spoke earlier about your commodities trading platform, ComX. Can you tell us what it is all about? How can the new and existing investors trade on this platform?
ComX is a trading platform for retail and institutional investors seeking exposure to alternative assets. And because commodity-backed investments often have inverse correlations to standard investing classes, the products on our platform are a great way to diversify a portfolio.
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Both new and existing investors need to sign-up either on the web or download the app, and the signup is quite seamless. Investors can invest in ComX products such as the spot contract, Exchange Traded Commodities (ETC), Input Note, Trade Finance and Asset-commercial paper.
Existing and future opportunities on ComX can be easily accessed through the ComX platform at comx.afexnigeria.com and by engaging with the wider AFEX network across all our channels.
What are your future expansion plans that both old and new investors can plug in?
Most immediately, investors can look forward to new listings of some of our standard products on ComX as the harvest season for each of the commodities comes around the corner. We are also planning on introducing commodity derivatives as a product class in the coming year, and this will give both existing and new investors exciting opportunities in diversifying their investment portfolios.
You recently announced that AFEX is issuing a $100 million 10-year bond to enhance Nigerian food production. Could you please tell us more about this?
AFEX launched a 100m 10-year bond called The Food Security Fund (FSF), which aims to produce an additional three million metric tonnes of food on the continent. The FSF will support the financing of 250,000 hectares of land for commercial and smallholder farming, initially consisting of 30,000 hectares in the Nigerian states of Kano, Kaduna, Oyo, Ogun, Cross River & the FCT, before covering markets across East and West Africa. Ghana, Côte d’Ivoire, Kenya, Rwanda, Uganda, and Tanzania are all in view as the other markets that the fund will reach with its impact potential. Essentially, the focus of the FSF will be to explore and optimize climate-smart innovations and high yield agronomy protocols to ensure more food is produced and that land is used efficiently.
A major challenge in the Agric Sector is data-led statistics. As a major player in that sector, how have you been able to overcome the constraints of data for better productivity and mitigation of risks?
Indeed, agricultural data at granular levels that can help assess and manage production and price risk for the sector is generally unavailable in Nigeria. This early on dictated our focus on developing a structure and network that supports data gathering and analysis through our warehouses and the deployment of our outreach structure in key grain production areas. This enables us to be part of the data solution as we utilize our tech-enabled processes to gather data on industry and business-related activities. We released the second edition of our Annual Crop Production report in 2021.
What type of data do you capture, how are you able to do this (what technology) and what are your projections for the coming months and years?
We collect and analyze agricultural data, focusing on prices for commodities traded on the Exchange, such as maize, wheat, soybeans, sorghum, paddy rice, cocoa, and ginger. The AFEX WorkBench (WB) provides smallholder farmers with a digital identity and access to quality inputs, organized marketplaces, and agri-advisory services. The platform provides farmers with digital solutions while collecting data on their operations and trade, which may be combined with our market research on commodity prices in major grain marketplaces in production centres. We intend to establish a robust food system database for Nigeria in the coming year, incorporating demand, supply, and storage data.
Tell us about AFEX’s 5-years Impact Report and the next milestones that AFEX is targeting.
Our 5-year impact report highlights the full impact of AFEX’s activities over the years in enabling productivity, trade, and access to finance to rural households through the use of innovative technology and processes. Measuring impact is now more important than ever. Having grown significantly over the last five years, we decided to gauge the impact of our activities, which align with 5 Sustainable Development Goals – SDGs 1, 2, 5, 8, and 12 advocating for no poverty, zero hunger, gender equality, decent work, and economic growth, and sustainable production and consumption.
Over the next 5 years, we aim to scale 10 times in capacity and capability. We will build inclusive markets; establish an efficient trade infrastructure with 1 million MT storage capacity that supports a robust supply chain network while also enhancing the livelihoods of 1 million smallholder farmers, aggregating 1 million MT trade volumes, and facilitating the funding of up to 500 million dollars.
AFEX recently received two different awards at the just concluded Nigerian Business Leadership Awards (NBA). Tell us about it and how it affects your business?
At the 2021 edition of the Nigerian Business Leadership Awards (NBLA), AFEX won the awards for “Agribusiness Company of the Year’ and ‘Trading Platform of the Year”. For us, the awards show some recognition of the work that we have started, and that we are scaling in earnest. Our outlook is to take this as a pat on the back that encourages us to work even more efficiently towards our goal of helping Africa feed itself.
