AFEX, a Nigerian leading commodities market player seeks to raise $175m in ABCP to boost Nigeria’s agro sector

AFEX, a Nigerian leading commodities market player seeks to raise $175m in ABCP to boost Nigeria’s agro sector

AFEX, a Nigerian leading commodities market player and the first private sector commodities exchange, announced on Monday the reopening of its $240m Asset-Backed Commercial Paper (ABCP) which will help in stabilizing the country’s agriculture sector by offering low-cost financing to Agro-processors to bridge the funding gap between lenders and borrowers.

The funding will be AFEX’s second in a three-year Commercial Paper program that started in the Q4 of 2021, where $65m was raised. The startup seeks to raise an additional $175m for processors who ordinarily would not have been able to borrow in the commercial paper markets. 

The Asset-Backed Commercial Paper (ABCP) is a short-term debt instrument that typically provides investors with a competitive 15% return on investment. The maturity is up to 270 days. Although the banks and other financial institutions typically issue the security themselves, the ABCP Notes are sponsored by AFEX Commodities Exchange and the proceeds of the issuance will be used by AFEX Investment Limited to provide pre-qualified Agro-processors with working capital support to enable them to purchase commodities required for their production processes at an agreed price.

AFEX’s security is backed by the commodities serving as the credit enhancement in the transaction. AFEX lists the ABCP on ComX, its commodities trading platform and engages capital market operators for subscriptions for a set time. Funds raised are used to provide pre-qualified Agro-processors with working capital to buy needed commodities for their production processes at an agreed price.

Agriculture is one of the most important economic sectors in Nigeria. The sector contributes a significant part of the country’s GDP. In the Q3 of 2021 it contributed almost 30 percent of the total GDP, yet the nation is struggling with food security due to the gap between supply and demand in the sector.

Ayodeji Balogun, CEO at AFEX in a statement said, “AFEX has a strong track record in offering distinctively differentiated and innovative financial instruments to the marketplace, and this new Asset-Backed Commercial Paper will help bridge the gap between Agro-processors and investors. Access to low-risk funding and capital is critical to empowering Africa to feed herself. We believe in making capital that is a right fit, in terms of timeliness and structure, available for all players in the value chain. Based on our past performance, we are confident that we will attract even more financing from private investors and, subject to value for money, they will help us secure this $175m (₦73bn) investment in Africa’s food security.”

AFEX in its 7 years of existence has been very committed to leveling-up Africa’s agro-tech sector, by boosting food security and making food production more efficient by harnessing its commodities and talents to build shared wealth and prosperity.

Blessed Frank

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The Ouut 2022
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