AFEX To Unlock Finance For $1trn Commodity Market

Africa’s commodities player, AFEX has unveiled its updated pricing methodology for its business unit to unlock finance for the $1 trillion Commodity Market.

The implementation of the price methodology fills a gap in formalising participation in the Nigerian commodities ecosystem, as the firm doubles down on investor education and protection, while enhancing price discovery and eliminating price gaps across the different boards on the Exchange.

The AFEX Commodities Exchange pricing methodology is a framework used by the Exchange to transparently communicate the prices of the commodities that are available for trade. Previously, the pricing methodology aggregated prices across all markets and represented them differently across each of the Exchange’s boards. However, the new methodology will unify these prices from different markets and boards to generate a homogenised price per commodity.

During his presentation at the CEO breakfast held in Lagos, president/CEO of AFEX Nigeria, Akinyinka Akintunde relayed relevant updates on the Exchange said: “we have launched initiatives to strengthen data availability and accessibility for the commodities market in the country over our years of operation.

“This to be a core fundamental for a robust and vibrant market. Improving our thinking around pricing is a commitment to transparency, and to ensuring that stakeholders understand the pricing and valuation of these commodities while being able to access the data for decision-making.”

He added that clients on AFEX’s trading platform are currently exposed to three boards inclusive of a cash settled market board, OTC board and Dawa board, saying that these boards enable investors and value chain players to hedge risks, diversify their portfolios and get orders fulfilled by participating on the Exchange.

“In the coming months, investors can also expect the introduction of a fixed income board and derivatives trading board on the upgraded trading platform,” he stated.

During his keynote address, MD, Sahel Capital, Mezuo Nwuneli stressed the importance of unlocking finance for the $1 trillion commodity market.

According to him, “food inflation and global trends point to the need to build resilient food supply chain systems, and commodity investment serve as the vehicle to bolster Africa’s regional supply chains.

By leveraging private sector and foreign investments, we can unlock value for the agriculture value chain and hedge against creeping inflationary pressures.”

Giving a market overview, the MD, Analysts’ Data Services and Resources, Dr Afolabi Olowookere, highlighted the consequences of the removal of the ban on sourcing forex from the official window for 43 items including rice, maize and cement.

He said: “in trade policy, the argument is that once we are able to produce, then we can lift the ban. If we are able to compete, then nothing should be banned. This particular decision may have a lot of impact on domestic companies and challenge them in terms of how competitive they are.”

The AFEX market turnover currently stands at $300 million, with more education drives planned to serve as a catalyst for the continued development of the commodities market ecosystem in Nigeria.