Nigeria’s leading commodities market player, AFEX, announced a new $100m 10-year bond called The Food Security Fund (FSF). The financing will strengthen Africa’s food security and produce three million MT of food annually on the continent.
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 focus of The Food Security Fund will be to explore and optimise climate-smart innovations and high yield agronomy protocols to ensure the increased production of food and the efficient use of land. As a blended finance structure, with an external fund manager, AFEX’s $100m bond will boost food security in Nigeria, with additional impact across Ghana, Côte d’Ivoire, Kenya, Rwanda, Uganda and Tanzania.
A significant portion of the funding will be allocated to constructing warehouses. There is only capacity to store 4% of annual grain production in Nigeria alone. Limited production has led to a 300,000 MT gap between demand and supply of seeds, a 10 million MT gap in demand and supply of grains, increasing food import costs, and declining capacity utilisation of processing plants.
“The launch of The Food Security Fund is another significant milestone as we chart our journey building the physical and technology-enabled infrastructure for the continent’s commodity sector,” said Ayodeji Balogun, AFEX’s CEO. “Finance will always be a key component of that infrastructure, and so we’re very excited to roll out this bond to deliver what will eventually be a decade’s worth of impact. One of our core missions is to help the continent feed itself, and we deliberately aligned our company goals with the UN SDGs from the outset, in particular, the first and second goals to end hunger and eliminate poverty.”
Having worked with capital markets players to structure debt securities for over 200,000 smallholder farmers to date, AFEX is well-positioned to roll out the Food Security Fund. Bolstered by an existing network of over 100 warehouses and digital trading platforms that link investors with producers and processors, the company’s commitment to the agricultural sector and deep industry knowledge will add crucial expertise to this much-needed funding.
AFEX harnesses Africa’s commodities and talent to build shared wealth and prosperity. Its infrastructure and platform investments work to unlock capital to power a trust economy in Africa’s commodities markets. Since its inception in 2014, AFEX has developed and deployed a viable commodities exchange model for the West African market and is on track to impact one million producers, providing productivity, value capture, and access to finance and markets. By deploying an efficient market system, the company will facilitate trade with Africa worth over USD500 million in five years.
AFEX’s vision is to be the reference point for commodities in Africa. 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 capital deployment.