Uche Usim, Abuja
A concerted effort to financially buoy over one million smallholder farmers was finalised on Wednesday with the Financial Market Dealers Quotation (FMDQ) and the AFEX Commodities Exchange Limited signing a Memorandum of Understanding to pool N2.5 trillion funding for them in the next five years.
AFEX Chief Executive Officer Mr Ayodeji Balogun signed the agreement on behalf of his company, while FMDQ Chief Executive Officer Mr Bola Onadele signed on behalf of his firm.
In his remarks, Ayodeji said that the carrying value of credit from banks to the agricultural sector was about N500 billion, describing as grossly insufficient to stimulate the type of growth envisaged by the Federal Government for the agricultural sector.
The AFEX boss said if the economy must grow at a sustainable rate of about 4.5 per cent, then there was the need to unlock additional sources of finance for Nigeria’s agricultural sector.
He said the agreement recognises the importance of product innovation to market development and would encourage participation of a wider number of investors in the capital market.
Balogun added that products developed under the new partnership would support innovative financing structures for the sector that will leverage AFEX’s established infrastructure and supply chain network.
He said that at a time when AFEX is on the path to building Africa’s second commodities derivative market, the agreement would set the tone for that journey to commence.
He added that AFEX is currently working with 106,000 farmers in Nigeria, noting that about 45,000 of them have sold their products through its trading platforms in the last five months
The farmers, according to Balogun, are scattered across 15 states and deal in five commodities.
“We are extremely proud to be collaborating with FMDQ as this helps our goal of increasing our products offerings to investors.
“We see a clear path to product innovation that will unlock a wider range of products that are able to be traded within Nigeria’s capital markets, promoting broad-based wealth creation that is accessible to every Nigerian.
“Our vision is to reach a million smallholder farmers in the next five years and we anticipate that we would boost Agric sector funding by five folds
“Currently agricultural lending from commercial banks is N500bn. If we want to achieve growth in the sector, we need financing of N2.5tn.
“Our desire is to create new asset classes so that the liquidity increases and risk will be better managed,” he said.
In his comments shortly after signing the agreement, the FMDQ boss said his company would support the growth of the agricultural sector through commercial and market-driven initiatives.
Through this partnership, he said FMDQ would be introducing new products aimed at de-risking the value chain as well as attracting capital market funding to the sector.
He also said the move would help to diversify the existing products available to investors in the agricultural sector.