Ahead of the 2024 local harvest season, Africa’s leading commodity player, AFEX, reiterated the importance of promoting investment in agriculture through innovative commodity-based instruments.
This was the focus of discussion at the just-concluded CEO Breakfast attended by heads of capital markets operations and financial market executives. This conversation broadly considered the range of subscription financial products, with a focus on exchange-traded products as an alternative investment class.
Exchange-traded products (ETCs) are a product variation of the financial markets’ exchange-traded funds (ETFs), which are designed as a basket of diverse products in one product. This allows investors to access the returns of all components in the basket, rather than just one product, increasing scope and profits.
For the agricultural sector, ETC plays an important role in promoting investment and supporting sustainable growth. ETC attracts a wide range of investors, including institutional investors, hedge funds, and individual investors, by providing a transparent and efficient way to invest in agricultural products. This increased investment will help increase market liquidity, reduce price volatility, support research and development, and promote sustainable agriculture.
In his presentation, Mr. Oluwafunto Olasemo, Chief Operating Officer (COO) of AFEX Commodity Exchange, emphasized the importance of this type of investment, saying: Only about 1%. The exchange’s goal has always been to create risk-adjusted products that enable participants to contribute to the growth of the agricultural sector, which is so necessary for economic growth, while facilitating wealth creation for investors, to the commodity ecosystem. The aim was to promote investment in ”
He also said, “Current government relief policies for the food security crisis are temporary and revolve around imports to fill the gap, but we cannot import due to food insecurity because the gap is large.” ” he repeated.
The immediate challenge is to improve productivity and meet growing demand. One of the viable solutions discussed at the meeting was the need to free up capital and encourage private investment in the agricultural sector through customized products such as ETC.
Mr. Ayodeji Balogun, Group CEO, also commented on AFEX’s progress in the product ecosystem: By leveraging our expertise and cutting-edge technology, we have been able to develop products that meet the specific needs of investors, while also contributing to the development of the Nigerian economy as a whole. This is likely the first step, as it will require continued partnership with key stakeholders such as financial institutions, regulators and agricultural cooperatives. ”
With over 10 years of experience in the commodity market, AFEX highlighted its commitment to Africa feeding itself at the event. Going forward, the team plans to introduce non-agricultural assets such as metals and enable ETCs to be a blend of both agricultural and non-agricultural assets, offering a year-round primary investment as opposed to the current holding period nature of ETCs. He mentioned plans to further promote investment in industrial products. .
