Nigeria’s leading Agritech firm AFEX says it has deployed an input-financing program based on blockchain technology to help unlock financing for Nigeria’s smallholder farmers from retail and institutional sources.

AFEX said this amid news last week that the federal government of Nigeria has published an early draft strategy document charting Nigeria’s ambitious vision to use blockchain technology as a platform for the transition into a digital economy.

In an interview with Biztech Africa, AFEX CEO Ayodeji Balogun noted that through AFEX's program farmers are not only able to gain access to other extension and advisory support, but also to the necessary finance and market.

He said that while most farmers are unable to access these inputs and consequently improve their livelihoods because they are stuck in a cycle of poverty - where they farm using substandard inputs and methods, sell to earliest bidder at harvest and use proceeds to immediately stave off daily personal or household needs – the key issue is the perception of the agricultural sector as high-risk, limiting financing sources for production and other value-chain activities.

According to him, although there have been some interventions from the government in the sector  to tackling the problem through subsidy-based programs, these programs have considerable challenges, with repayment rates being low.

“The Input Financing Program therefore fulfils a vital mission for us to allow smallholder farmers access to necessary finance and market, and we are then able, as an Exchange, to fulfill orders from processors and big buyers from the volumes we aggregate from the activity,” he stated.

How it works and benefits

Balogun said AFEX went into partnership with Sterling Bank and Binkabi on a blockchain-based marketplace in 2018 which enabled AFEX to start using blockchain technology built on a shared ledger or DLT (Distributed Ledger Technology).

The features of the DLT makes it possible for networks such as farmers, consumers, retailers, producers, investors to not only transact but also source and supply financing to drive funding for smallholder farmers in Nigeria. He added that all the information about the entire cycle of agricultural events can be put onto blockchain to enable a transparent and trusted source of information for the stakeholders.

“Most farmers subscribe to our basic bundle, which is a package for just fertilizer (that translates to an application of 4 bags of NPK and 2 Urea bags to 1 hectare of a maize farm). We also have Plus and a Premium bundles, with the Plus giving Crop Protection Products (CPPs) along with fertilizers and the Premium package including mechanization, hybrid seeds, CPPs and fertilizers,” he explained.

Balogun further explained that the initial partnership helped in establishing a direct link between farmers and consumers/retailers. It also helps to capture the necessary events in the agricultural value chain and introduces a level of transparency that Nigeria’s fragmented agricultural sector has historically been unable to enjoy.

“Its aim was to empower smallholder farmers to better organize themselves and get together to access the market without interference from middlemen thereby reducing the problems of low income, as blockchain gives transparency in the supply chain. This enabled farmers get a fair price for their produce,’’ he stressed.

Blockchain partnership to reduce fraud

Balogun also shared some insight into AFEX's recent collaboration with Trade Finance Market which also witnessed the introduction of the Warehouse Receipt Check, another blockchain technology that aims to reduce fraud and drive access to funding for the agricultural sector in Nigeria.

He said by utilizing TFM’s blockchain application to reduce risk, funders are given added assurance that the transaction has been de-risked and the overall risk of fraud reduced.

“As each warehouse receipt is encrypted and stored on the blockchain, funders are able to check if a receipt has previously been financed – avoiding a problem which has globally cost the industry over $1trillion,” he intimated.

Having seen the result of improved the livelihoods of over 106,000 farmers and aggregated over 135,000 metric tons of commodities, Balogun strongly believes that as farmers engage in the program and are enabled to improve their yields, productivity and livelihoods, they can also get higher bundles for better results.

Nigeria's blockchain draft strategy

Meanwhile, the Nigerian government's draft blockchain document says its blockchain start-up operational landscape 2019 Survey suggests that a good number of blockchain start-up projects have either gone live or have an MVP.  “The survey generally shows the promising nature of blockchain technology adoption by businesses in Nigeria,” the document says.

It outlines some examples of potential use cases include the following such as tracking and tracing of drugs in the pharmaceutical supply chain, claim verification and approval in the disbursement of fertilizer subsidy, the verification of university certificates and the transfer of land records. 

Share this News
Share |
Subscribe to our Daily Newsletter here