NIGERIA – In a bid to offer agro-processors low-cost financing, AFEX, Nigeria’s leading commodities market player, has reopened its US$240m (₦100bn) Asset-Backed Commercial Paper (ABCP).
The ABCP is a short-term debt instrument typically providing investors with a competitive 15% return on their investment, and maturity is up to 270 days.
The new funding is aimed to help stabilize Nigeria’s agriculture sector by bridging the funding gap between lenders and borrowers.
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.
The company’s security is backed by the commodities serving as the credit enhancement in the transaction.
While banks and other financial institutions typically issue the security itself, the ABCP Notes are sponsored by AFEX Commodities Exchange.
To facilitate this, AFEX lists the ABCP on ComX, its commodities trading platform, then engages capital market operators for subscriptions for a set time.
AFEX is confident it will attain its target
The recently launched fund is part of the company’s three-year Commercial Paper program that started in Q4 2021, where US$65m (₦27bn) was raised, with the aim of raising an additional US$175m (₦73bn) for processors unable to borrow in the commercial paper markets.
Ayodeji Balogun, CEO at AFEX 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 launches US$100m Food Security Fund
Since its launch in 2014, AFEX has committed to levelling-up Africa’s agro-tech sector; by helping the continent feed itself by boosting food security and making food production more efficient.
Prior to 2021, in a first-of-its-kind for Africa, AFEX raised US$48m (₦19bn) from their 20% oversubscribed Warehouse Receipt Backed Commercial Paper.
Meanwhile, the commodities market player, is seeking to spread his impact across the region with the launch of new US$100m 10-year bond dubbed The Food Security Fund (FSF).
The financing is aimed to strengthen Africa’s food security and produce three million MT of food annually on the continent.
According to AFEX, the fund 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.
The other markets on the blended financing radar include Ghana, Côte d’Ivoire, Kenya, Rwanda, Uganda and Tanzania.