Q and A On Making Gains With Commodity Trade Using Cashew And Input Note By ComXbyAFEX

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Friday, March 19, 2021 / 06.30 PM / Ayomide Oguntoye for WebTV / Header Image Credit: EcoGraphics


 Proshare Nigeria Pvt. Ltd.


Nigeria's leading private commodities exchange AFEX through its COMX platform hosted a tweet chat in partnership with Proshare Nigeria on the topic "Making Gains With Commodity Trade: Cashew And Input Note Focus".

 

Find below excerpts from the Q&A session of the conversation.

 

What is the significance of the COM X Platform by AFEX and how is it improving commodities market trading?

  • The platform is the first digital commodities trading platform in the country and it essentially allows people to gain access to commodities as an asset class for their investment portfolio, effectively promoting alternative investments that deliver both significant returns and impact.
  • The commodities market used to be a market with a variety of considerations for players from storage and logistics infrastructure and the fragmented nature of most value chains in the country
  • With COM X, investors who want to earn the type of returns that this asset class has to provide, do not have to worry about that.

 

You are introducing the cashew and input notes to the COM X Platform. What are The Notes and How will this deepen the commodities market in Nigeria?

  • AFEX introduced the Cashew Spot Contract and the Input Notes on the COM X platform last week. The Cashew Spot Contract (CSCN) is a tradeable instrument, where investors can buy and lock in a price today, watch for movement in market prices, and sell when they have a higher price, which gives them a profit on their trade
  • The Input Note, however, is a fixed income product that offers returns of 6% in 180 days (from the 22nd of March), and the funds raised from the instrument go to finance a farmer to produce

 

What value is the COM X platform inclusion bringing to the Agric commodities ecosystem

  • There is amazing potential in including both products. Cashew for one is one of the agriculture commodities with the greatest market potential in the world.
  • The export value of the commodity has increased over time, and unlocking finance for the value chain will ensure continuous expansion of the potential of the Nigerian commodities ecosystem with regard to the commodity
  • The value of the Input Note is directly to producers as it really allows them to get access to quality inputs (fertilizers, seeds etc.) in time for the season.

 Proshare Nigeria Pvt. Ltd.


How will this serve the interest of the smallholder Farmers?

Smallholder farmers gain access to credit and are financially included, enabling them to produce and get higher yields than they ordinarily would, So the farmer benefits from an increase in productivity, livelihoods and is also able to draw other farmers into our programs, which over time helps to lift rural families out of poverty

 

What opportunities do investors have by taking advantage of the cashew and Input Notes on the COM X Platform?

  • The first opportunity is simply an opportunity to make returns, very close to that is the necessary action of helping to diversify your investment portfolio
  • Secondly, there is an opportunity to join an impact investor network that is delivering visible and sustainable change to rural communities, but also transforming our food systems in Africa in a way that makes value creation and distribution a norm for all players.

 

What are Spot Contracts and Inputs Notes?

  • Spot Contracts are a type of contract where an investor buys a product in order to benefit from a price appreciation over a period of time. Capital appreciation occurs when investors buy low and sell high, for instance, you buy cashew at the beginning of harvest season, after some time, it appreciates by certain percentages - that increase is where the profit lies for the investors.
  • The Input Note is a fixed income product that allows investors to finance a farmer to produce more commodities with the end goal of making a pre-agreed profit on the investment after the farmer harvests.

 

In the era of increasing cyber-risks, how secure is the COM X Platform for trading commodities in the Nigerian Capital Market?

  • The COM X system is very safe and secure. We have the system designed in such a way that coming onboard is as seamless as possible, but we designed it with simplicity in mind, meaning we have two factor authentications for you to log in.
  • When you bring your funds in, it is seamless, but when you take your funds out, we have a robust process that ensures that checks and balances are carried out on the system. We have the wallet system designed on the app that ensures your values are always visible and available to you at all times.

 

What strategies are in place to increase awareness of the opportunities in the commodities market?

  • We are relying on a lot of partnerships and building a reliable education bank, where investors can access quick, easy content on the market and share it with other curious investors
  • We are also increasing the number of ways that our price data can be accessed, utilizing our website, social channels and even distribution with media channels to ensure that investors never have to look too far to find information on the market

 

What are the optics for cashew nut as a strategic commodity in Nigeria?

  • The demand for African raw cashew nuts has been on the increase. India and Vietnam account for over 80% of imports from Africa with Ivory Coast, Tanzania, Guinea Bissau and Nigeria as the major exporting countries
  • The high demand for roasted cashew by Indian consumers and the failing output experienced by farmers in Vietnam means processors have to depend on imports from Africa to keep their factories running.
  • Nigeria is the 8th largest producer of cashew in Africa and has a global market share of about 2%. Cashew also accounted for about 16% of Nigeria's total exports in the last three years
  • Cashew nuts are therefore a strategic Agric commodity with a lot of local and export potential for the country.

 

With the cashew spot contract and AFEX Input Notes on the COM X Platform. What are the associated risks for traders and farmers?

 In order to limit the risks inherent in the product class, a combination of crop insurance policies and equity contribution by farmers help limit the risk factors and improve the smooth execution of contractual agreements.


 Proshare Nigeria Pvt. Ltd.


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 Proshare Nigeria Pvt. Ltd.

 



 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

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