September 5, 2013

Efforts to transform Nigeria’s agribusiness sector are underway and being led by African Exchange Holdings, a pan-African company established to strengthen commodity exchanges across Africa to transform trade dynamics and ensure higher incomes for farmers.

The company announced on Wednesday it had signed a Memorandum of Understanding (MOU) with Nigeria’s Federal Ministry of Agriculture to create a pioneering warehouse receipt system that will allow Nigerian farmers and cooperatives to safely store their produce at accredited warehouses.

“Agriculture in Africa is key to the prosperity of the continent. Specifically for Nigeria, we are investing in the infrastructure needed to ensure the flow of commodities from farms to the local, regional and global marketplace,” said Nicolas Berggruen, the founder and president of Berggruen Holdings.

In line with its strategy to build commodity exchanges across Africa, this latest initiative in Nigeria is part of AFEX’s efforts to increase efficiency and transparency in Africa’s commodity markets as well as to increase income for farmers on the continent. It will build upon the experience and success of East Africa Exchange, a subsidiary based in Rwanda that was established earlier this year and has since become a critical player in agribusiness development across the continent.

AFEX will complement the Nigerian government’s goal for the agriculture sector as directed by Minister of Agriculture Akinwumi Adesina, supporting the country’s agribusiness competitiveness globally, reducing markets barriers to trading and increase liquidity and sustainability of commodity markets to facilitate financing and improve farmers’ incomes.

“Strengthening agricultural markets is critical to diversifying Nigeria’s economy,” said Adesina. “Our partnership with AFEX will help to improve the access of farmers to markets, reduce post-harvest losses, stabilize prices and raise their incomes. We are rapidly modernizing agriculture in Nigeria and the development of warehouse receipt systems will underpin the successful establishment of thriving agricultural commodities exchanges in Nigeria.”

Nigerian farmers can now use receipts for their produce as collateral for loans. This will help control price volatility due to the availability of buffer stock, allowing farmers to sell produce at better price points.

The two-year pilot phase of the warehouse receipt system will start in October and will be available in seven states, mostly in northern Nigeria, where agriculture is by far the largest economic sector: Kano, Kaduna, Katsina, Zamfara, Kwara, Gombe and Oyo.

Jendayi Frazer, the former U.S. Assistant Secretary of State for Africa who is now the managing partner at AFEX, said in a statement, “The warehouse receipt system will help improve food security across Nigeria. It will not only give farmers and cooperatives better access to markets by linking their market produce to high-value buyers, but will also deliver higher profits for stakeholders. AFEX believes our electronic warehouse receipt system and improved warehousing operations will be the stepping stone to establishing a vibrant commodities exchange in Nigeria.”

The Federal Ministry of Agriculture will support the warehouse receipt system by creating the enabling environment that is essential for its successful delivery and will also provide warehouse infrastructure.

The private-sector led AFEX was founded by Tony O. Elumelu, chairman of Heirs Holdings, and two other partners—Berggruen and Jendayi Frazer, President of 50 Ventures—to establish a network of commodity exchanges across Africa.

“We are pleased to be working with the Nigerian government on this project to deliver transformative, sustainable investment to the country’s agribusiness sector,” said Elumelu. “This initiative is a step towards financially empowering more farmers and ensuring that agriculture is not only commercially viable, but a strong positive contributor to the Nigerian economy.”

The East Africa Exchange has helped increase regional market efficiency and liquidity as well as giving the region’s smallholder farmers, better access to markets.


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