COMFORT EKELEME, Business Editor
Commodity Exchange is acknowledged as one of the most vital catalysts for economic development all over the world to the extent that it plays significant roles in establishing global standards in the pricing of important commodities such as crude oil, gold, copper, orange juice, coffee, maize, rice.
Commodity Exchanges are essential for both producers and consumers hence the overwhelming support for the planned revamping of the Nigerian Commodity Exchange.
It is against this backdrop that the Central Bank of Nigeria (CBN), a majority shareholder of the Nigerian Commodity Exchange (NCX) said recently that it is gearing up for the rejuvenation of the exchange through the injection of N50 billion to boost production of farm produce.
A commodity exchange is a market in which multiple buyers and sellers trade commodity-linked contracts on the basis of rules and procedures laid down by the exchange. In developed countries, such exchanges typically act as a platform for trade in futures contracts, or standardized contracts for future delivery.
The Nigeria Commodity 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 commodity exchange on August 8, 2001 and brought under the supervision of the Federal Ministry of Commerce.
The conversion which was premised on the need for an alternative institutional arrangement that would manage the effect of price fluctuations in the marketing of agricultural produce has adversely affected the earnings of farmers since the abolishment of Commodity Boards in 1986.
Across the globe, Commodity Exchanges serve as a platform for a different type of investors for buying and selling the commodities through fair price discovery, acquire and disseminate the commodity news, in order, to help traders in making decisions. It also helps in settling the disputes between the traders.
Industry watchers are of the view that this present move by the CBN will positively impact on the Nigerian economy, which is in dare need of financial support from the agricultural sector, especially now that the COVID-19 pandemic has negatively affected the economy.
In a telephone interview with Daily Champion, Former President, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe said the injection of funds into the NCX by the CBN will go a long way in resurrecting the exchange.
He said, “Before now, we have not been able to operate Commodity Exchange the way it is supposed to be operated, the only thing people know too well is the stock market. I think people are beginning to go in that direction and CBN putting some money there is a step in the right direction.
“It is a good initiative because we need to develop that area so that and I praise CBN for doing that.
In most cases, most of the farm produce, because of some factors, go bad before getting to the consumers, but with effective Commodity Exchange, that will be reduced. It will make people to farm more, it will make farmers not to lose so much of their produce in the cause of looking for buyers.
“I think it is a good one and it means well for the economy. There are going to be some off-takers that buy everything and take to the exchange, there is a whole value chain. It is a good development for the economy,” he said.
Also speaking, Managing Director, Maxifund Investment and Securities, Mazi Okechukwu Unegbu was of the view that the Commodity Exchange is a very important aspect of the economy.
Unegbu who is a security expert is also a member of the NCX said the Nigerian government presently does not have the facility to monitor that commodity exchange, adding that there is need to ensure that there is technical capability in place to gauge commodities.
He said that there are many commodities in Nigeria, stressing the need to identify the ones to work on.
To him, money is a facilitator and does not solve all problems, adding that what solve problems are the skills of the people that use the money.
“If you bring all the money and there are no skills, then the money will be lost. First and foremost is to develop the skills, and the people that will run the commodity exchange, make sure that the skills are there.
“This development will have positive impact on the economy if the necessary skills are available, but I am arguing that the skills are not available. We need to make sure that the skills are available, that the training facilities are available. Once these are available, the impact will be very positive because a lot of people are looking for these commodities. The grading is very important, and once it is properly done, the impact on the community and the Nigerian economy at large will be very high,” he said.
CBN Governor, Mr. Godwin Emefiele had at the inaugural meeting of the steering committee for the repositioning of the NCX said the apex bank also plans to revalidate its 59.7 per cent majority shareholding in the exchange, to enable it to implement far-reaching measures, including the reconstitution of its board and committees.
He said, “In the next 90 days, we should be able to really begin the first launch and this will involve approvals on repositioning, restructuring, setting up bureaus, board structures, board committees, governance committees.
“This meeting is aimed at putting in place the enabling structure and framework that would lead to the repositioning of the NCX into a commercially viable platform in Nigeria, for delivering efficient pricing of Nigeria’s agricultural produce,” he stated.
Emefiele reiterated that the federal government, through the CBN, had implemented several intervention schemes in the agricultural and manufacturing sectors.
He said, “The schemes are aimed at boosting employment generation and wealth creation, reducing our dependence on imported food items, conserving our foreign exchange earnings and spurring economic growth.
“These interventions in the agricultural sector, particularly the Anchor Borrowers’ Programme and Commodity Development Initiative, sought to strengthen key agricultural commodities’ value chains. They will also enable improved productivity in the agricultural sector and increase sourcing of inputs locally by stakeholders, in the manufacturing sector.”
He said the CBN will engage the Nigerian Postal Service to convert some of its assets to warehouses.
The Exchange will be of immense benefits to farmers, agro-commodity processors and merchants, as it will serve as a veritable platform for them to mitigate the inherent risks in agricultural production and marketing.
The enlarged market for agricultural produce, which the NCX will engender, shall promote commercial farming and the growth of the agricultural sector. The Exchange will start operations in spot and forward markets and gradually introduce trading in warehouse receipts and eventually evolve into a futures market trading commodity futures and options.
It will trade contracts in agricultural produce, solid mineral products, energy, financial indices and currencies. The Exchange will commence spot trading on agricultural commodity contracts in July 2026 and later in the year launch spot trading on solid mineral contracts.
Corporate Governance
The ownership and management of the Exchange are completely separated from the right of a trading member to trade on the Exchange. The Exchange has a Board of Directors, which determines its policy matters as a company.
Market decisions relating to operations are delegated by the Board to the Council, which includes representatives of the promoting institutions, members of the Exchange, commodity associations, warehouse operators/collateral managers, clearing banks and other financial institutions.
The Council of the Exchange shall operate through four standing Committees; Membership and Finance Committee, Trading Committee, Clearing House Committee and Arbitration and Vigilance Committee. All the committees shall have established rules and regulations governing their operations and shall meet from time to time on cases relating to each of them and make recommendations to Council for consideration and approval.
The membership of the Exchange is comprised of ordinary trading members, intuitional trading members, and ordinary members. The day-to-day management of the Exchange is delegated to the Managing Director/CEO.
For a better society
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