ComX, a Nigerian commodities exchange app has launched to change the nature of commodities investing in Nigeria and democratize this asset class by simplifying access to markets that were previously accessed by a relatively small club of sophisticated institutional investors.
ComX enables trading in assets backed by commodities and allows investors to gain exposure to commodities as an alternative investment class by providing features that help in buying and selling commodity-backed instruments while analyzing and managing their portfolios.
According to Ayodeji Balogun, CEO AFEX Commodities Exchange, ” Commodity trading goes back to even before stocks and bonds and other popular investment options. It was a significant business, linking different cultures and people together. From oil palms, cocoa, groundnuts, cotton etc. in the early days to the exchanges where these assets are now traded, commodities are still a popular investment vehicle.
Aside from being a viable portfolio diversifier, commodity trading offers investors a better risk-adjusted return on investment than traditional asset classes. Investors hoping to get into the commodity trading can consider investing directly in the physical commodity or any commodity-backed financial instrument available on ComX.”
Balogun adds that there has been a surge of interest in commodities and commodity trading. AFEX has therefore introduced an array of securitized financial instruments backed by commodities that can serve as alternative investment products for investors. In addition to developing commodity-backed instruments, AFEX is also strongly engaged with Capital Market Operators and other Financial Institutions to offer commodity trading as an alternative asset class to investors.
ComX aims to help lower some of the barriers of entry into investing in commodities, including market education, transaction costs, operational risks, and product availability.
AFEX Commodities Exchange Limited which was founded in 2014 as a viable commodities exchange model for the West African market. AFEX operates 45 warehouses in Nigeria’s key grain-producing areas and accounts for 100,000 MT of total national storage capacity. Since 2014, the exchange has reached 106,000 farmers and traded 126,400 MT of commodities with a total turnover of NGN14.1 billion.
AFEX’s mission is to support Africa’s food security while promoting fair exchange of value among players in agricultural value chains.
Smallholder farmers often have limited access to markets and fair prices for their produce. A commodity market provides smallholder farmers with much-needed access to useful, timely, and transparent market and price information; this allows the smallholder farmer efficiently sell more products and be adequately remunerated for his work and investments.
Without a commodity market, the ability of the smallholder farmers to earn decent incomes from their produce is limited, and this will impact their level of productivity in subsequent seasons.
A vital aspect of the work of commodities exchanges and our work at AFEX is to unlock financing for agriculture. The pervasive view of agriculture as a high-risk endeavour dissuades the flow of capital into the sector, and to unlock finance, the first fundamental is to ensure that the risk profile is low and manageable. With systems for price discover and transparency that is provided by a commodities exchange, it becomes easier to monitor the flow of money in and out of the sector, and by extension measure and manage risk, increasing the amount of finance that is made available to value chain efforts over time.
