AFEX Commodities Exchange Limited (AFEX), a private commodities exchange company, has announced the first Warehouse Receipt Backed Commercial Paper in Africa. The paper has tech-enabled operations and a 24-hour fast cash turnaround for borrowers.
This was disclosed by AFEX in a statement issued and seen by Nairametrics on Thursday.
The $50 million Agri-SMEs fund is expected to bridge the funding gap between lenders and borrowers in the Nigerian agricultural sector with a commodity-backed instrument – for the first time.
Ayodeji Balogun, CEO, AFEX, stated, “The AFEX financing deal will help eradicate the high cost of procurement incurred by processors by deploying a discounted value of a warehouse receipt distributed among five leading players in the Food and Beverage, Trading Poultry and Animal Feed segments in Nigeria.
“The receiving companies are top 10 players in their respective segments. They have now been enabled access to a tool for managing price volatility, enabling up to 30% direct savings on prices.
“With our vision to reach a cumulative total of over $5 Billion in investment to the agriculture sector over the next five years, this financing deal is right on track to achieve this goal.’’
He added that as AFEX move towards building a derivatives market in Africa, “we want to be able to reduce exposure to price risk for stakeholders, by enabling them to hedge their positions and trade in commodity derivatives.”
Why it matters
- The warehouse receipts, which can then be transferred from commodities to a financial asset and listed under the borrower’s portfolio on the AFEX trading platform, will create a sustainable funding structure and address underfunding in the Nigerian agricultural sector.
- With the warehouse receipt system linked to financiers, the system allows financiers value and marks the commodities’ price to market on a real-time basis.
What you should know
- AFEX’s mission is to provide low-risk working capital facility for stakeholders in the Agro sector, in a way that is transparent and has a very high viable investment return.
- As a licensed commodities exchange and warehouse receipt system operator, it deploys a warehouse receipt system and collateral management infrastructure to increase market confidence for both lenders and borrower.
Oil prices near $70 a barrel, rising for a 7th week in a row
For the week, Brent crude gained 5.2%, rising for the 7th week in a row for the first time since December,
Crude oil prices were all fired up at the last trading session of the week, hitting their highest levels in more than a year.
Oil prices are on yearly highs as recent data in the world’s largest economy revealed a stronger-than-expected U.S. jobs report, coupled with a decision by OPEC+ to keep the status quo.
For the week, Brent crude prices gained 5.2%, rising for the 7th week in a row for the first time since December, while WTI surged by 7.4% after gaining almost 4% last week.
At the end of the Friday trading session, Brent Crude futures gained 3.9%, to settle at $69.36 a barrel. The session high for Brent crude was its highest since January 2020.
Also, the U.S based oil contract, U.S. West Texas Intermediate futures, rallied by 3.5% to settle at $66.09 a barrel.
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave key insights on OPEC+ supply dynamics at the world’s biggest commodity market.
“Saudi Arabia seems to have used its 1mb/d voluntary cut as a bargaining chip to persuade most OPEC+ members not to raise production and also appears to have reiterated the desire to see compensation cuts from OPEC+ participants who have produced above quota so far.
“Oil soared as the rest of OPEC+ holds steady at current production levels. Saudi Arabia’s output will start to phase back in from May and it seems likely increases will be permitted across the whole of OPEC+.
“Driven by a need to benefit from higher oil prices, Russia desires to raise production amid concerns about sending the wrong signal to US shale producers. At the same time, Saudi Arabia says shale is “not on the radar” as a risk.”
What to expect: Oil traders in the mid-term would place their gaze on the next meeting scheduled to hold in April, where energy prices will pose a volatility tango all over again.
Gold drops to a nine-month low, U.S Fed Chief disappoints metal buyers
Gold futures were down 0.63% to trade around $1,690 an ounce. Gold prices dropped to their lowest since Jun. 8, 2020.
The yellow metal drifted lower at the last trading session of the week staying near a nine-month low and headed for a third consecutive weekly drop. U.S. Federal Reserve Chairman, Powell disappointed metal traders on his perception of Treasury yields pushing both the greenback and bond yields up.
At the time of writing this report, Gold futures were down 0.63% to trade around $1,690 an ounce, dropping below the $1,700 price levels. Gold prices dropped to their lowest since Jun. 8, 2020, and have lost about 2.3% for the week so far.
The U.S. 10-year Treasury yield peaked at about 1.5%, while the dollar, which usually moves inversely to gold, bounced up at morning trading session in London.
The most powerful monetary policymaker affirmed his stance to keep credit loose in a speech to the Wall Street Journal jobs summit held yesterday and added that the rise in treasury yields was “notable”, he did not consider it a “disorderly” move.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics, spoke on prevailing market conditions weighing hard on the precious metal;
“Gold continues to struggle in a trend that started right out of the gates in 2021. And by failing to $1,700 this week, the sell-off may continue.
Rising bond yields and a stronger US have been the most significant obstacle while overall economic conditions improve as the trifecta Covid-19 vaccines roll out in the US.”
Bottom line: Metal investors have increased their sell-off in metals momentarily, with nickel the worst hit of all with $1,500 drops two days in a row.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Seplat falls into a loss in FY 2020
- 2020 FY Results: Cornerstone Insurance Plc reports a 61.1% decline in profit
- Ellah Lakes increases operating expenses by 33.36% in HY 2020
- 2020 FY Results: Nigerian Breweries reports a 54.3% decline in profits in 2020
- Abbey Mortgage Bank projects N51.08 million profit in Q2 2020.