Nigeria’s first private sector commodity exchange firm, AFEX Commodities Exchange Ltd has said that it will in partnership with Trade Finance Market deploy Warehouse Receipt Check to reduce fraud and drive access to funding for the agricultural sector in Nigeria.
The chief executive of AFEX, Mr. Ayodeji Balogun explained that as each warehouse receipt is encrypted and stored on the blockchain, funders are able to check if a receipt has previously been financed— avoiding a problem that has globally cost the industry over $1 trillion.
He said AFEX “is constantly exploring innovative risk management structures for the agriculture sector, in line with our focus on unlocking finance for the sector.
He stated that the partnership with TFM “will enable us layer on its Warehouse Receipt Check on our existing technology stack to streamline the process of financing agriculture to smallholder farmers and other players in the commodities markets through blockchain.”
He said the inability of smallholder farmers to access finance has had a devastating impact on the growth of Africa’s agriculture sector – worsened by the global pandemic. As Nigeria’s first private sector commodities exchange, 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’s Warehouse Receipts System (e-WRS) also allows farmers access credit facilities on the back of the value of their produce, giving them a path to reduce poverty.
By utilising TFM’s blockchain application to reduce risk, funders are given added assurance that the transaction has been de-risked and the risk of fraud reduced.
As each warehouse receipt is encrypted and stored on the blockchain, funders are able to check if a receipt has previously been financed – avoiding a problem which has globally cost the industry over $1 trillion.
Also speaking, the executive director of TFM, Raj Uttamchandani described the blockchain collaboration with AFEX as “a game changer for the African continent – akin to the way mobile phone technology leapfrogged landlines.”
“We are very proud to work with AFEX to introduce cutting edge technology which removes obstacles for smallholder farmers in obtaining finance quickly. Warehouse Receipt Check provides a solution which utilizes blockchain in a way that has never been done before – providing funders with security and ensuring liquidity flows to the agricultural sector – the backbone of the economy – thereby protecting countless jobs and livelihoods,” he added.
TFM’s CTO, Brad Lucas, also added that: “Using the blockchain as the central component of the system provided the mechanism to enable uniqueness and single source of truth about the state of a warehouse receipt”,
The gains in liberating farmers from inefficiencies in existing financing systems is the biggest case for this partnership, which will empower smallholder farmers and lead to marked changes in trading and financing commodities.
AFEX enables the transition from production to transaction for agricultural commodities and 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.