The need for Nigeria to develop a vibrant commodities exchange capable of attracting investors into the agriculture value chain, and enhancing job creation has been stressed. Capital market experts who spoke in an interview with The Guardian linked Nigeria’s inability to diversify its export base away from oil over the years to the absence of an efficient commodities market.
They noted that vibrant commodities exchange would help increase incomes for farmers and agro-businessmen since as it ensures appropriate pricing of produce.The Nigeria Commodity Exchange (NCX), formerly known as the Abuja Commodities and Securities Exchange, was originally incorporated as a Stock Exchange on June 17, 1998. It commenced electronic trading in securities in May 2001, and was converted to a commodities exchange on August 8, 2001.
The conversion was premised on the need for an alternative institutional arrangement that would manage the effects of price fluctuations in the marketing of agricultural produce, which adversely affected farmers’ earnings since the abolishment of Commodity Boards in 1986. But the exchange had challenges living up to expectations till date.
Therefore, experts suggested that government must as a matter of urgency, reposition the exchange to enable it carry out its business effectively in facilitating trade, and developing settlement instruments and platforms in agricultural produce and basic minerals.
Specifically, the Chief Executive Officer, Stanbic IBTC Nominees, Akeem Oyewale, said Nigeria must toe the path of countries like Malaysia, and Ethiopia that developed their economies through a vibrant commodities market, by allowing proper dealings and pricing of commodities, without the middlemen dictating the price of major agricultural produce.
“Nigeria is a country that is blessed with so many commodities. Before we discovered oil, we had agriculture powering our economy extensively. But we do not have proper pricing of agriculture, even developed economies like the United States have the Chicago Mercantile Commodities Exchange that allows proper dealings and pricing of commodities.
“When you have a functioning commodities exchange that is vibrant, properly regulated with adequate broadcast, you will find a very efficient way of meeting the suppliers of these commodities with people that are demanding the commodities.”The Head, Banking and Finance Department, Nasarawa State University, Keffi, Prof. Uche Uwaleke, said a well-functioning commodities exchange will help integrate Nigeria with global commodities exchanges.
“Commodities-based derivative instruments represent a key feature of a modern financial architecture. It would help diversify the country’s export base away from oil, and make the economy less vulnerable to external shocks.“It will enhance forex market stability through accretion in external reserves. Again, adequate warehousing facilities will minimise wastes and support stable prices throughout the year.”
The Acting Head of Department, Recognised Exchanges, Emomotimi Agama, said it is very important that Nigeria looked at the prospects and opportunities in development of commodities market.According to him, Nigeria is so blessed that in any state of the country, there is either an agricultural produce or minerals in commercial quantity.
“The function of a commodities exchange is price discovery, accountability and transparency; and that is the ingredient with which any country can develop its resources and wealth of the farmers.
Farmers are the majority population in Nigeria, and are over 70 per cent agric inclined. So in every part of this country, it means you have 70 per cent of the population involved in agriculture, and if there is a way to empower this number of people to create wealth, and bring them out of poverty, there cannot be any better way to do it other than through a commodities exchange system.”