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AFEX raises N73bn to finance agro-processors in Nigeria

. Agric sector facing N2trn funding gap

By Victor Uzoho

Nigeria’s first private commodities exchange, AFEX, has announced the reopening of its N100 billion ($240 million) Asset-Backed Commercial Paper (ABCP), and seeks to raise about N73 billion ($175 million) to provide pre-qualified agro-processors with low-cost working capital.

The organisation said it would use the issuance deposit to provide agro-processors with low-cost funding to help them purchase commodities required for their production processes at an agreed price.

According to the firm, this would help bridge the funding gap between lenders and borrowers in Nigeria’s agriculture sector.

The new funding is AFEX’s second in a three-year CP programme that started in the fourth quarter of 2021, with investors investing about N27 billion ($65 million).

Speaking in an interview with China Global Television Network (CGTN), monitored by Sustainable Economy, the Chief Executive Officer, AFEX, Ayodeji Balogun, said the funding would be used to stabilise Nigeria’s agriculture sector, mainly by offering agro-processors low-cost financing.

Balogun said: “Agriculture is a large part of the continent. In Nigeria, it contributes 25% of the country’s Gross Domestic Product (GDP) but only gets about 5% of credit to the private sector. This disproportionate share of capital to a sector that’s growing and has been the most resilient in the country is something that we feel needs to be addressed.

“There is a funding gap of about N2 trillion to the agricultural sector, and we constantly worry about how to bridge this gap and particularly ease the transactions from commodities to capital.

“One of the innovations we launched last year was the AFEX bank commercial paper, and this allows our tier two corporate players to be able to tap and access capital from the capital market. Now we are raising about $175 million after a series that was successful due for the first issue that happened in 2021.”

Considering ESG (environment, social and governance) requirements, we did get a lot of buy-in across several tiers of investors, and we also expect that we have a robust pipeline.

Investors’ response

On how investors responded to the first round and the company’s expectations from the second round, Balogun said the first round was oversubscribed by 20%.

“The investors particularly liked that it gave them the above-inflation yield, which was good for balancing the portfolio. Secondly, it also gave them an impact-related asset class, which solved the critical problem in the sector.

“Considering ESG (environment, social and governance) requirements, we did get a lot of buy-in across several tiers of investors, and we also expect that we have a robust pipeline. We are hoping that it would be received warmly and that this asset class will in this round lift its true potentials to solve and bridge the critical gap in the financing fabric of the country,” he added.

He disclosed that in 2021, AFEX did a turnover of about $200 million, and expects this to hit about $600 million in 2022.

“We are growing about three times year-on-year, and we expect to sustain that in another three to four years,” Balogun added.

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