Enhanced business methods are expanding opportunities beyond subsistence levels. When Ige Akinwale Benson, a cocoa farmer in Nigeria, first heard about AFEX Commodities Exchange, he was skeptical. He initially believed that the company, which tops the list of Africa's fastest-growing companies, was involved in fraudulent activities. AFEX offers loans to smallholder farmers for purchasing agricultural inputs, buys their produce at market prices, stores it in warehouses, and transports it to the market. While such services are common in developed economies, they are revolutionary in Nigeria, where an estimated 34.5 million smallholder farmers face challenges such as limited financing, poor access to inputs and markets, and a lack of storage facilities.
Since joining AFEX in 2019, Benson has overcome the longstanding issues that have kept his family in poverty. Prior to 2019, their annual income was around 1.2 million naira ($1,463), but now they earn between 4.5 million ($5,488) and 5 million ($6,098) naira. Benson has wisely managed the money, saving it in a bank account and using it to improve his family's living conditions and provide a better education for his children.
AFEX, founded in 2014, has experienced remarkable growth, with a compound annual growth rate of 502 percent between 2018 and 2021. The company aims to raise $75 million in equity and debt by the end of the year, potentially attracting international investors. AFEX's business model revolves around lifting Nigerian farmers out of isolation and subsistence by integrating them into an agricultural system. Farmers receive extensive training on crop selection, suitable seeds, fertilizers, pesticides, flood prevention, pest control, and post-harvest loss reduction after joining the platform. Instead of providing cash, AFEX offers loans in the form of farm inputs, charging an annual interest rate of 15 percent. When farmers sell their produce to AFEX after harvest, the cost of the inputs plus interest is deducted from their earnings.
By applying improved farming techniques and utilizing AFEX's network of warehouses with a capacity of 600,000 tonnes, crop yields have significantly increased, reducing post-harvest losses. AFEX's methods have attracted around 500,000 farmers who produced approximately 500,000 tonnes of crops last year, up from 307,000 tonnes in 2021. The company primarily deals with crops such as cocoa, sesame, cashew, ginger, rice, sorghum, coffee, and barley.
ThriveAgric, another company operating in this field, has over 514,000 farmers on its platform and operates in 26 Nigerian states. Similar to AFEX, ThriveAgric groups farmers into clusters, where they collectively guarantee each other's output. This social pressure helps drive performance. Digitalization plays a crucial role in both AFEX and ThriveAgric's operations. Mobile phones are used to map and verify farmers' land, and digital processes enable loan disbursement using farmers' bank verification numbers, identity cards, and online accounts. The prevalence of affordable mobile phones in Nigeria has become a vital enabler for agricultural aggregation.
These innovative approaches harness digital technology to bring structure to the agricultural sector in Nigeria, transforming an unstructured market into a thriving ecosystem. Despite the existing challenges and infrastructure gaps, these companies are leveraging technology to uplift farmers and create a more productive agricultural landscape in Africa.
