AFEX seeks to raise $175m to finance agro-processors in Africa

AFEX, one of Nigeria’s commodity players, says it is seeking to raise $175 million in its bid to provide low-cost financing to agro-processors in Africa.

In a statement on Monday, the commodity exchange firm said the new funding will be raised via an asset-backed commercial paper (ABCP).

The ABCP is a short-term debt instrument, typically providing investors with a competitive 15 percent return on their investment, and maturity is up to 270 days.

“AFEX, Nigeria’s leading commodities market player and the country’s first private sector commodities exchange, has today announced the reopening of its $240 million (N100 billion) asset-backed commercial paper (ABCP) to help stabilize Nigeria’s agriculture sector by offering agro-processors low-cost financing to bridge the funding gap between lenders and borrowers,” the statement reads.

“Today’s new funding, AFEX’s second in a three-year commercial paper programme that started in Q4 2021, where $65 million (N27 billion) was raised, seeks to raise an additional $175 million (N73 billion) for processors unable to borrow in the commercial paper markets.”

AFEX said it had listed the ABCP on ComX, its commodities trading platform, and it will engage capital market operators for subscriptions at a set time.

The company stated that funds would provide pre-qualified agro-processors with working capital to purchase commodities required for their production processes at an agreed price.

Commenting on the development, Ayodeji Balogun, AFEX’s chief executive officer, 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 $175 million (N73 billion) investment in Africa’s food security.”

Recently, the company projected that food items would become more expensive in 2022.