Stakeholders Want Commodities Exchanges to Commence Operations

Goddy Egene
Stakeholders have urged the federal government to fast-track the take-off of commodities exchanges in the country, saying, they have the potential to boost the nation’s Gross Domestic Product (GDP) by revamping the ailing economy through employment generation, digital transaction of agricultural and mineral products and foreign exchange earnings among others.

Specifically, they urged the federal government should remove any bureaucratic bottlenecks that may affect smooth functioning of commodities exchanges to enable them enhance economic growth and development.

A commodity trader and Chief Executive Officer, Wyoming Capital and Partners, Mr. Tajudeen Olayinka, said: “Commodities exchanges provide numerous benefits to an economy, especially, a developing economy like Nigeria if the relevant authorities provide appropriate support for their orderly functioning.

“Price discovery is a major driving force in this organised market. It refers to the mechanism through which prices come to reflect known information about the market.

“The fact that farmers, merchants, commodity brokers, government and other stakeholders can reasonably gauge the mood of the market from publicly available information around demand and supply, makes planning, organising, and forecasting, integral part of the market easy.”

Another commodity trader and Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, explained that the Nigerian commodities exchange’s ecosystem is a $1 trillion economy that is untapped and still largely misunderstood.

“The recent announcement of N50 billion lifeline for Nigeria Commodity Exchange (NCX) by the Central Bank of Nigeria (CBN) may have sent a wrong signal to the global community as creating a conflicting the role between the Securities and Exchange Commission (SEC) and the apex bank on the institution that regulates commodities exchanges in Nigeria.

“The investment and Securities Act of 2007, among others empowers SEC to not only regulate commodities exchanges but ensure that all commodity exchanges compete effectively on an even playing field.

“There should be clarification of roles on the regulator of commodities exchanges to enable the investing public determine where to haul blame on the delay in effective takeoff the exchanges in Nigeria.”

Also commenting, David Adonri of Highcap Securities Limited, noted that commodities exchanges could promote financial inclusion.
He said: “A commodities exchange’s value chain is a mechanism for formalisation of trading in commodities. It brings informal participants to a structured system, for financial inclusion and de-risking.

“The exchange provides transparent pricing mechanism that enhances volume of transactions. This attracts more investment into commodities, leading to multiplier effect on the economy. The standardised contract terms, guarantee performance by all parties thus serve as a safe and profitable investment outlet in the economy.

“This can engender increased inflow of export proceeds. As a formal and regulated market, commodity exchange offers great opportunity to unlocking the potentials in mining and agribusiness from production, to storage, logistics and trading. This enhances the diversification capacity of the economy.”