Redefining Africa’s commodity trading market- Ayodeji Balogun


    Ayodeji Balogun, CEO AFEX Commodities Exchange Limited speaks on redefining Africa’s commodity trading market and creating the first digital trading platform for commodities in Nigeria.

    Here is the interview

    Question 1: Can you introduce yourself and what your AFEX Commodities Exchange does?

    Ayodeji Balogun, CEO AFEX Commodities Exchange Limited. AFEX Commodities Exchange Limited (AFEX) enables the transition from production to transaction for agricultural commodities. Since its founding in 2014, AFEX has developed and deployed a viable commodities exchange model for the West African market; building a strong supply chain infrastructure to support the securitization of agricultural products. AFEX operates 45 warehouses in Nigeria’s key grain-producing areas and accounts for over 100,000 MT of total national storage capacity. Since 2014, the Exchange has reached over 106,000 farmers and traded over 156,000 MT of commodities with a total turnover of USD47.6milliion (NGN17.1billion). The Exchange’s mission is to support Nigeria’s food security while promoting a fair exchange of value among players in agricultural value chains. To achieve this goal, AFEX looks to introduce products that de-risk the sector, drive financial inclusion for rural communities, develop technology for data collection and market access and enable the deployment of capital.

    Five years into doing business, and building the ancillary infrastructure necessary to support trade and manage risk in the sector, we are now focused on offering up our infrastructure as a service to various players and enabling the larger capital market to tap into the activities in the commodities market with ease. Essentially, we are building a technology-driven capital market infrastructure, which will unlock alternative investment capital to finance tradable low-risk agriculture and other commodity types.

    Question 2: Commodity Trading in Africa is done by a significant few, what are the measures put in place by AFEX to curb the issue.

    A key thing that we have set out to do is to fill in a need for information about the commodities market and commodities trading landscape in Africa. This has led to the deployment of a number of education initiatives, but is also the thinking behind the publication of our price data and quarterly reports on key commodities and the landscape for commodities trading as a whole. 

    We are also actively innovating to ensure a vibrant commodities ecosystem first in Nigeria and then across Africa. To date, AFEX has created and listed the first-ever commodities index in Nigeria and has worked with capital market players to structure debt securities to finance over 113,000 smallholder farmers. We have created the largest network with 45 warehouses across 15 states which also serve as hubs for smallholder farmers and traders to transact and make payments with each other. We also have the largest database of credible farmer data complete with bank verification number and land coordinates. Still on a platform level, we introduced the first digital trading platform for commodities in Nigeria with an increasing array of innovative commodity-backed securities, and a learn module that further facilitates the education and information needs I spoke about earlier.

    Question 3:  What are the commitments of AFEX towards the development and transformation of Nigeria’s sustainable Agriculture?

    One of the core mandates that AFEX was set up for was to provide scalable solutions that can unlock capital at the right cost and structure for African smallholder farmers, and support their livelihoods and income-generating capacity. We believe in having a firsthand contact with farmers we work with while bringing technology right to their doorstep by providing services such as access to warehouse receipt system, financial inclusion and access to credit and micro-insurance. On top of this, AFEX has built a platform that facilitates effective trading and settlement of commodity transactions, helping to structure and formalize the commodities markets. The Exchange facilitates aggregation and trading of grains through its expansive network of warehouses across the country, allowing farmers to access markets.

    Question 4: Kindly enlighten Agric stakeholders on how investment in your ComX App influences crowd funding investment in commodities? 

    ComX is a trading platform that is primarily focused on retail and institutional investors that want exposure to alternative assets and investments. So, it gives both a geographical diversification but also it gives a product basket mix. And knowing that a lot of times commodity-backed assets always have an opposite correlation with traditional investment classes it’s a perfect alternative investment tool to balance a portfolio with. All of the products traded on ComX are traceable back to the farmer. We have a complete story on the farming community, what the impact of the program is, who is the original farmer selling or receiving the loan and how does this transaction affect their livelihood but also the larger community. So, it is definitely an impact investment platform that allows you to make a decent at per or above market return but also at the same time give back to a needy community. From a technology standpoint, we have dared to question how traditional capital markers work in a very hierarchical market structure which capital market platforms are based. We have brought in the platform model of eCommerce and the two-sided marketing structure common with them and the interaction that comes with social platforms together to make this experiential. So, we have a community where brokers can interact with their investors, give advice, investors can sign up and pick their brokerage networks based on ratings. Also, people can share their experience and their knowledge and can chat within a for a and share trends and advise on what to invest in and that gives a different dynamic and experience on investing and trading with the platform.

    Question 5: What main commodities are available on the app?

    Six key commodities are traded on ComX structured under a variety of product classes. The six commodities are Maize, Sorghum, Soybean, Paddy Rice, Ginger and Cocoa. On product classes we have spot contracts, Exchange Traded commodities and Fixed Income Products.

    Question 6: What data protection measures are put in place for investors on the app?

    All our data is encrypted through top of the line systems.

    Question 7: Does international market/foreign exchange affect the commodities on the ComX app?

    All our investments on ComX are naira based, and are therefore not affected by the international market/ foreign exchange. 

    Question 8: What is your view about youth inclusion in Agribusiness? What measure can be taken to have African Youths engaged in Agribusiness?

    It is of course imperative that youths are able to bring their energy into agriculture and agribusiness. Our definition of agriculture jobs however has to change and be expanded. There needs to be a switch from considering agriculture simply as a subsistence level production activity to one that can accommodate our swelling youth population in a number of ways both on and off the farm. Companies like ours which are heavily tech enabled are making it possible for youths to find jobs in a variety of areas across the value chain from Knowledge, Research and Services to Credit and Finance.