When Ige Akinwale Benson, a Nigerian cocoa farmer, first heard about AFEX Commodities Exchange, he was skeptical. He thought they were just another band of scammers. But AFEX was offering something that seemed too good to be true. As the FT’s fastest-growing African company, AFEX provides loans to smallholder farmers for purchasing agricultural inputs, buys their produce at market prices, stores it in warehouses, and transports it to market.
In developed economies, these services are standard. However, in Nigeria, a country with around 34.5 million smallholder farmers, AFEX’s offerings are revolutionary. Agriculture plays a vital role in Nigeria, with approximately 70% of the population engaged in the sector. However, limited financing, poor access to inputs and markets, and a lack of warehouses have historically plagued Nigerian farmers.
For Ige Akinwale Benson, joining AFEX’s system in 2019 changed everything for his family. Previously, their annual income was around 1.2 million naira ($1,463), but now they are earning between 4.5 million ($5,488) and 5 million ($6,098) naira. Benson’s newfound financial stability enabled him to provide a better education for his four children and invest in a house and a car. AFEX’s model has helped Nigerian farmers overcome generational poverty.
Founded in 2014, AFEX has achieved a compound annual growth rate of 502% between 2018 and 2021. The company aims to raise $75 million in equity and debt by the end of the year, potentially from international investors. AFEX’s business model focuses on integrating Nigerian farmers into an agricultural system, providing training on crop selection, input usage, and pest management. Instead of providing cash loans, AFEX offers loans in the form of farm inputs, charging 15% annual interest. When farmers sell their produce, the loan and interest are deducted from the payment.
This approach has resulted in significant crop yield increases. Last year, around 500,000 farmers registered on AFEX’s database produced approximately 500,000 tonnes of crops, up from 307,000 tonnes in 2021. AFEX’s network of warehouses has also addressed the issue of post-harvest waste, reducing losses significantly. Prior to the warehouses, inadequate storage caused up to 40% waste. After implementing AFEX’s methods, waste has decreased dramatically.
AFEX is not the only company operating in this space. ThriveAgric, backed by California start-up accelerator Y Combinator, serves 514,000 farmers across 26 Nigerian states. ThriveAgric’s CEO, Uka Eje, highlights the vast untapped potential of agriculture in Nigeria, with millions of hectares of uncultivated land. ThriveAgric follows a similar model to AFEX but incorporates group guarantees within farmer clusters, boosting performance through social pressure.
Digitalization plays a crucial role in both AFEX and ThriveAgric’s operations. Mobile phones are used for land mapping and verification, and digital processes enable loans using farmers’ bank verification numbers, identity cards, and online accounts. The widespread availability of affordable mobile phones in Nigeria has facilitated agricultural aggregation.
Uka Eje emphasizes the role of digital technology in creating structure in an otherwise chaotic environment. Despite limited infrastructure, technology systems can serve Nigeria’s unstructured agricultural market.
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