Timing differentiates profit and loss in the business of agriculture. One business owner may be scrambling for funds to buy ten thousand tonnes of maize before it is out of season, while another is raising money to pay farmers in advance before payment from international clients is received. Accessing finances in time to seize opportunities is a challenge that has plagued agro-industrial businesses in Nigeria. Bank loans remain an important source of funding, but that is changing due to the ongoing transformation of Nigeria’s agro-industrial sector.
The agro-industrial sector’s transformation is powered by an innovation in financing, in addition to technology, policy reforms, and an improved value chain. It was necessitated by the high interest rates and hurdles of traditional loans. Commercial papers are emerging as an alternative for eligible businesses. Previously considered a financial instrument for only large corporations and high-net-worth individuals, commercial papers have become an increasingly relevant financing option for creditworthy agro-industrial businesses looking to thrive in Nigeria.
The perfect tool for agro business cycles
Commercial papers are short-term, unsecured debt instruments issued by companies to raise funds directly from investors. They are issued at a discount and redeemed at face value, with maturity ranging from a few weeks to 270 days. Unlike traditional bank loans with long approval processes and rigid repayment structures, commercial papers can give eligible issuers access to capital and the…
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Read Full Article by Uche Bosah at businessday.ng
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