The Nation Newspaper

Tag: Commodities

  • Nigeria loses over N3.6 trillion to agro export commodities

    Nigeria is losing about N3.6 trillion to export opportunities from agricultural commodities due to lack of operational and investment drives in the agro perishable and aviation sectors.

    This submission was part of the reports obtained from a recent workshop on Agro Air Logistics with Sub theme, ‘Enhancing Air Transport Support for Perishable Goods’ at the Airport Business Summit and Expo 2018 conducted by FCI International Limited in Abuja.

    According to the report, the annual Airport Business Summit conveyed the special workshop session tagged “Agro Air Logistics” so as to close the development, operational and investment gap between the agro perishable industry and the aviation sector.

    The official document signed by the Managing Director of  FCI International limited , Fortune Idu, listed the challenges to include: distance of production site to the market, high prices of perishable goods coming from loss along the supply chain, insecurity hindering sustained production and evacuation, multiple levies, poor transportation, poor logistics infrastructure, power, relatively crude local market, poor access to international the market, lack of comprehensive agro air logistics policy, clustering and touting at the freight corridor, de-marketing of Nigeria and lack of professional manpower placements.

    Others as revealed by the report are: Low government support to private investors, discontinued previous air cargo projects by Federal Airports Authority of Nigeria (FAAN) and non-expansion of the air cargo apron of the Murtala Muhammed International Airport (MMIA) project currently abandoned.

    Recommending some ways to close the gap, the report stated that there is need for stronger government policy on agro perishable air logistics and that there should be an  establishment of a perishable goods unit in all airports to enable all airports capacity provide support for warehousing, handling and transportation of the perishable cargo through the country and beyond.

    “There is also need for the establishment of one stop quality Inspection machines along the air logistics chain  that allows shippers to access customs, quarantine, Standard Organization of Nigeria (SON) and National Agency for Food and Drug Administration and Control (NAFDAC) services  for both local and international freighting. We need to promote further development of the Airport Free Trade Zone to strategically drive the perishable air cargo potentials under private public sector agreement.

    “That Federal Ministry of Transportation, Aviation to advocate for the revisiting and review of the past air cargo programme of FAAN in order to implement the project under a PPP arrangement as government has already invested capital.”

    The report pointed out that encouragement of private sector investment is key for addressing these challenges and sustaining the process of making Nigeria an international player in the agro and perishable export sector; therefore government should create the right environment and leadership that will allow the private sector to have confidence in long term investment.

    It equally noted that introduction of export cargo growing promotion tax incentives may be required to be extended to private investors who want to develop perishable cargo handling centres along the transport corridor.

    “The exploitation of unmanned aerial vehicles in agro business and the encouragement of research and youth engagement in this new technological area for possible perishable cargo delivery and to provide connectivity to remote farm areas,” the report recommended.

  • Commodities Exchange seeks N500m initial capital

    Promoters of the proposed Lagos Commodities and Futures Exchange (LCFE) have launched a private placement to raise N500 million initial capital for the takeoff of the new Exchange.

    At a meeting in Lagos yesterday, promoters of the new Exchange under the aegis of the Association of Stockbroking Houses of Nigeria (ASHON) endorsed the N500 million private placement to flag off the Exchange.

    The proposed Lagos Commodities & Futures Exchange is expected to trade in currency, commodities, oil and gas and solid minerals.

    The Memorandum of the Private Placement indicates that 500 million ordinary shares of N1 each would be offered to investors at N1 per share. The net proceeds of the private placement will be used to fund the start-up and operational take-off costs, administrative and personnel costs of the LCFE as well as leasing of a trading platform for the trading of qualifying derivatives including options, futures and spots among others.

    Several potential investors have already indicated interest in the LCFE, which they described as a laudable project that fits into the Federal Government’s diversification programme with special emphasis on agriculture.

    Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Mr Patrick Ezeagu said ASHON had worked tirelessly with its financial advisers, consultants, auditors and accountants to put together the Strategic Business Plan and Information Memorandum for the LCFE in order to provide investors with the basis for informed investment decision.

    Vice Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Mr Akin Akeredolu-Ale added that in order to ensure a seamless take-off of the Exchange, the Association had hired different consultants to confirm the depth of the market in terms of absorptive capacity for commodity and futures trading and models to run the Exchange in terms of strategy and the structure of the board to ensure compliance with corporate governance requirements.

    According to him, all reports indicated that the proposed Exchange would be run professionally and profitably.

    He noted that the private placement makes provision for strategic investors because the new Exchange requires huge capital outlay and know-how.

    “The Exchange is a capital intensive project. It also requires investment in high technology. We need one or two institutional investors that have huge capital and also technology. Some institutional investors that meet these criteria are already showing interest.  But by the structure that we shall adopt, there is no fear of marginalization of minority shareholders,” Akeredolu-Ale said.

    A senior stockbroker and former President, Chartered Institute of Bankers of Nigeria (CIBN), Mr Okechukwu Unegbu commended ASHON for the initiative.

    According to him, stockbroking firms should take advantage of the right of first refusal to invest in the project because it has potential for good returns.

    He said that the fund raising’s Memorandum contained vital information that can help any investor that intends to participate in the project, noting that government had begun to build many silos to boost trading in commodity products as part of the diversification programme.

    Representative of Meristem Securities Limited, Mrs Adejumoke Awolumate, who spoke extensively on the processes, benefits, critical success factors and other variables that would position the Exchange as a viable investment platform, assured investors that the Placement Memorandum contained all critical areas of investment decision on the project.

  • World Bank: industrial commodities prices to rise

    World Bank: industrial commodities prices to rise

    The World Bank is forecasting strong gains for industrial commodities such as energy and metals this year due to tightening supply and strengthening demand.

    In its January 2017 Commodity Markets Outlook, the World Bank is holding steady its crude oil price forecast for the year at $55 per barrel, a 29 per cent jump from last year’s. The energy price forecast assumes that members of the Organisation of the Petroleum Exporting Countries (OPEC) and other oil producers will partially comply with an agreement to limit production after a long period of unrestrained output.

    The global lender is raising its metals price forecast to an increase of 11 per cent from the four per cent rise anticipated in its October outlook on further tightening of supply and strong demand from China and advanced economies.

    “Prices for most commodities appear to have bottomed out last year and are on track to climb in 2017; however, changes in policies could alter this path,” said John Baffes, Senior Economist and lead author of the Commodity Markets Outlook.

    Agriculture prices as a whole are expected to rise by less than one per cent this year. Small increases are anticipated for oils and oilseeds and raw materials, but grains prices are forecast to drop almost three per cent on an improved supply outlook.

    Precious metals prices are seen declining seven  per cent as benchmark interest rates rise and safe-haven buying slows.

    A special focus shows how commodity-exporting emerging and developing economies have been hit hard by slowing investment growth, which has declined from 7.1 per cent in 2010 to 1.6 per cent in 2015.

    “Investment weakness – both public and private – hinders a range of activity in commodity-exporting emerging market and developing economies. Most of these economies have limited policy space to counteract the slowdown in investment growth, so they need to employ measures to enhance the business environment, promote economic diversification, and improve governance to better growth prospects over the longer term,” said AyhanKose, Director of the World Bank’s Development Prospects Group.

    The World Bank’s Commodity Markets Outlook is published quarterly, in January, April, July and October. The report provides detailed market analysis for major commodity groups, including energy, metals, agriculture, precious metals and fertilizers.

  • SEC throws weight behind Lagos Commodities & Futures Exchange

    SEC throws weight behind Lagos Commodities & Futures Exchange

    Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), has expressed its readiness to give all necessary supports for the realisation of the proposed Lagos Commodities & Futures Exchange as part of efforts to mainstream the capital market into national development.

    The proposed Lagos Commodities & Futures Exchange is expected to trade in currency, commodities, oil and gas and solid minerals.

    Director General, Securities and Exchange Commission (SEC), Mounir Gwarzo said the Commission would support the Lagos Commodities & Futures Exchange and other similar initiatives as part of its overall responsibility of development of the Nigerian capital market.

    Gwarzo spoke during a courtesy visit by the new executives of the Association of Stockbroking Houses of Nigeria (ASHON). ASHON is the main promoter of the Lagos Commodities & Futures Exchange.

    Gwarzo however insisted on the December 31, 2016 deadline for stockbroking firms and other capital market operators to comply with new minimum capital requirements for their functions.

    ASHON had requested for additional grace period of three months noting that stockbrokers carry equities in their balance sheet and prices of equities have gone down thus affecting their capital.

    Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Patrick Ezeagu had solicited for the possibility of increasing the grace period to six months to recapitalize or reclassify.

    ASHON also noted with concern the proposed amendment of Rule 56(1), which will preclude brokers from providing investment advice to their clients and the investing public.

    ASHON, while acknowledging not knowing the thinking behind the proposed amendment, solicited for the reconsideration of the proposal. The call is based on the backdrop of the value addition provided by brokers and dealers in providing investment advice to their clients.

    ASHON argued that several stockbroking houses had well-established research desks that not only help to broadcast market information on a continuous basis but also carry out indepth analysis and provide opinions on complex financial issues to their clients.

    The association also expressed its dismay on the Federal Government’s sole reliance and emphasis on monetary policy for macroeconomic management to the detriment of the capital market.

    The association accepted to look at the Investment and Securities Tribunal funding proposal being championed by SEC and NSE.

  • Agric commodities group targets $50b exports

    • Seeks Fed Govt support

    Federation of Agricultural Commodities Association of Nigeria (FACAN) President, Victor Iyama has said the group is ready to partner the Federal Government to increase export of commodities, including wheat, rice and vegetables, to enable the country hits $50 billion exports target.

    In an interview, he said the country has good stocks and the export of agricultural products should earn it valuable foreign exchange (forex).

    Iyama lamented that there were many agric commodities that Nigeria could export but that the country was only exporting a few.

    He called on the government and other stakeholders to step up action in the development of the agricultural commodities to meet international standards to be accepted by buyers across the world.

    To achieve this, he urged the government to implement its various export promotion schemes to promote exports.

    According to him, robust foreign trade, particularly exports, should be a key feature of the government’s economic growth strategy as it looks to the sector to provide jobs and revenue.

    Among the targeted new measures, he noted, should be helping exporters of higher-value products.

    According to him, FACAN was determined to transform farming, using the latest technologies to ensure the process is as productive.

    He said the association wants to empower more Nigerians to go into rice farming to boost domestic rice production to ensure self-sufficiency.

    Iyama said the move was also targeted at halting rice import, adding that it is frittering the country’s foreign exchange.

    He said it was wrong for the Central Bank of Nigeria (CBN) to determine how export proceeds were used, because the government does not finance private business.

  • Commodities exchange: Failed project?

    Commodities exchange: Failed project?

    Food prices volatility and high transactions costs have remained major problems to farmers. They have given a strong justification for a virile commodity exchange.Farmers and stakeholders believe the commodity exchange has failed to develop into a sustainable trading platform to boost agriculture. DANIEL ESSIET reports.

    Many farmers in Nigeria and Africa face a myriad of challenges in marketing their produce. They lack proper storage facilities, which makes them incur heavy post-harvest losses. Most farming areas are inaccessible due to poor road infrastructure, which translates to high transaction costs as they pay heavily to transport their goods. Besides, they are victims of fragmented and disorganised markets where they sell their products lower than the market price.

    To this end, farmers need every support that will provide a centralised market place where they can sell their commodities to manufacturers and consumers to make profit.

    Experts believe the commodity exchange can help farmers link up to markets.

    Commodities exchange, according to the Director-General of African Centre for Supply Chain (ACSC), Obiora Madu, is part of efforts to get small-scale farmers sell their crops at a profit.

    Such exchanges come with a warehouse receipts programme by which farmers can store their harvest at a certified warehouse and sell when prices rise. The warehousing system can also turn their commodities into collaterals if they choose to apply for loans.

    According to him, if the farmers are able to increase their income, they would be able to afford input such as high-yield seeds and increase production.

    Normally, farmers, who have produce sell them through the exchange, just like people would sell shares.  Before them, the produce is inspected and certified as tradable. Sellers and buyers place their products and orders, which they execute in a transparent manner. The future aspect of the exchange takes a price risk management function as it helps farmers to avoid serious losses when prices fall. It also enables farmers to receive a guaranteed price from a purchaser or intermediary and facilitates more effective planning and investment because of greater income predictability.

    One of the most prominent examples is The Ethiopian Commodities exchange (ECX) set up in 2008.

    The commodities exchange trades coffee, beans, maize and a few other crops.

    Analysts say Ethiopia Commodities exchange experiment has helped farmers to sell their commodities at a profit with agricultural mechanisms such as crop insurance and warehousing.

    This will help them gain collateral, and then loans to expand their businesses.

    The ECX has been a big motivator for African nations to form their own exchanges. Only two countries have produced lucrative models: South Africa and Ethiopia. But there have been a large number of commodity exchanges tried over the past decades, many resulting in failure or little growth and activity. One of the examples cited is Nigeria. The exchange has not convinced stakeholders that it can improve food security. One of them is Madu.

    Speaking with The Nation, Madu, who is also the Chief Executive Officer and Programme Director of Multimix Academy, expressed concern that the nation’s commodities exchange has had difficulties getting off the ground.

    He expected the commodity exchange to do well with an economy made up of large commodity producers and many of them are top suppliers worldwide.

    Nigeria one of the largest producers of agro commodities in West Africa, he said, is lagging behind in such market infrastructure.  Watchers see Nigeria as a home of a non functioning exchange.

    Since 2006 when an intensive effort to get commodity trading off the ground through the Abuja Securities & Commodity Exchange (ASCE), stakeholders said the exchange was operating below potential. Relabeling ASCE to “Nigeria Commodity Exchange”, a roadmap was adopted to put in place a fully functional electronic warehouse receipt system, with some 16 commodities selected for trading.

    Notwithstanding, this has not changed the fortunes of the market.

    According to the Programme Corodinator, Farmers Development Union (FADU), Mr Victor Olowe, said a functional exchange rests on clear rules for trade and delivery, as well as consistent monitoring to ensure integrity.

    Apart from that,  the contracts, he said, must define the amount, quality, and location of the commodity traded, as well as an execution date. Other necessary features include the minimum increment for price fluctuations, duties required of buyers and sellers during the delivery process, and deadlines for those duties to be completed.

    Olowe said one of the biggest problems that farmers and producers have is poor knowledge of the market.

    A lot of farmers, who belongs to his group do not know that the market exist not to talk of using the platform to sell.

    His other concern is that the system is not supported nationwide by a warehouse receipts programme, where farmers can store their harvest at a certified warehouse and sell when prices rise. The warehousing systems helps them to turn their commodities into collateral if they choose to apply for a loan.

    This gives the farmers breathing room and the option not to sell their maize at harvest time, when everyone else is selling and prices are low. For him, storing commodities in certified warehouses eliminates a range of risks, guaranteeing quality, and ensuring that the crop is secure. Those two factors open the door to financing from banks. On the whole, he observed that the problem is that conditions for success, such as large trading volumes, a strong financial sector, and a commitment to transparency, do not exist yet. In most of the towns, transactions involving agricultural commodities are not based on formal standardised measures. These conditions make it impossible to operate commodity exchanges, which compel actors to certify quality and quantity by physical sampling. The other issue is lack of reliable market information, not only on commodity prices, but also on available volumes and estimates of demand.

    Further, the system has not been able to curtail cheating on weights and measures from which disadvantaged smallholders farmers suffer, and reduce storage losses. As a result of these constraints,  commodity exchange, he argued, has not lived up to expectations.

    Watchers believe that the system is weakened by an inefficient legal system, small spot markets, limited numbers of potential participants, passive financial institutions, and high levels of policy unpredictability.  More broadly, concerns are mounting that the Abuja commodity exchange was being churned out without due consideration for enabling conditions.

    The failure of such platforms elsewhere shows how important it is to have the right infrastructure in place from the start. Some are of the opinion that the exchange was created as a political rather than commercial endeavour, with poor infrastructure and political bickering that hampered imminent efforts.

    For watchers, trading suffered from the same flaw: a top-down approach that is better at attracting foreign aid than at improving farming practices and developing transportation and communications networks. But AFEX Commodities Exchange Limited (AFEX), a subsidiary of Africa Exchange Holdings Limited, established last year through a partnership with the Federal Ministry of Agriculture and Rural Development, said it is facilitating access to commodity and financial markets for Nigeria’s 35 million smallholder farmers.

    The organisation said it operates across 11 states, but are mainly in the north, offering solutions to agricultural problems faced by farmers in the region.

    The organisation said farmers face a myriad of challenges ranging from poor distribution structures to limited storage, warehousing and quality control. All these, according to it, combine to drastically reduce the price at which their products can be sold, hence their income.

    It said AFEX’s investors, are deploying capital and entrepreneurial skills to create a competitive agricultural sector and a commodity market with price discovery and risk management mechanisms.

    Licensed by the Securities and Exchange Commission in March this year, as an operator of a commodities exchange in Nigeria; it said Afex is the first private sector-led commodities exchange in Nigeria.

    With its facilities, it said farmers will have direct access to high value markets, store long enough to earn over 30 per cent increased profit from sales. While its Electronic Warehouse Receipt System (EWRS) secures the underlying commodities, instills integrity of trade and facilitates access to finance, the organisation said e-WRS is a real-time online inventory management system with the ability to transfer stock between buyers, sellers and banks.

    The organisation said it plans to scale up to 100,000 farmers in the 2015/16 season, creating up to 25 million in increased income to the rural communities across Nigeria.

    Meanwhile, the Federal Ministry of Agriculture and Rural Development has resolved to partner with the Nigerian Commodities Exchange Commission to develop the commodity market.

    The Permanent Secretary, Federal Ministry of Agriculture and Rural Development, Sonny Echono, who disclosed this in Abuja, when he received the Managing Director and Chief Executive Officer and management of Commodity Exchange Commission, expressed the readiness of his ministry to collaborate with the board in developing the commodity market and its storage programme, but informed the commission of the presidential directive on the ministry to do an index study before engaging in any concessionary plan.

    He said the ministry is promoting ware housing and working very hard to open the market to competitors, saying some may be kept for storage reserve. He advised the commission to consider warehousing, saying 33 of such warehouses are available for off-taking.

    Earlier in her remarks, the Managing Director and Chief Executive Officer of the Exchange Commission, Mrs. Zaheera Baba-Ari said the Commission was in the ministry to seek areas of support and value addition.

    She said the Commission would want to have a Memorandum of Understanding (MoU) on storage and co-operatives with the Ministry and equally needs warehouses in some locations in the country.

    She said the Commission started working with the Ministry of Agriculture since 2010, with a request for the leasing of some warehouses and had worked with some seed associations in the past.

  • Commodities’ trading, e-exchange kick off

    Arrangements have been concluded for the commencement of real and active trading on Nigerian commodities as from tomorrow as the Nigeria Commodity Exchange (NCX), Stanbic IBTC Holdings Plc, Bank of Agriculture (BoA), Central Securities Clearing System (CSCS) and other stakeholders formally launch the, electronic commodity exchange, otherwise known as electronic warehouse receipt system (e-WRS) in Abuja tomorrow.

    Managing Director, Nigeria Commodity Exchange (NCX), Mr. Yusuf Abdurrahim, told The Nation that the launching tomorrow of the e-WRS by Minister of Investment, Trade and Industry, Mr. Olusegun Aganga, would kick-start real active trading.

    According to him, all arrangements have been concluded for immediate take-off of trading in the commodities.

    “We are hoping there would be real trades on that day. The warehouses that we are going to use are ready and we will build up capacity as we progress,” Abdurrahim said.

    Under the e-WRS, farmers will be able to place their commodities at an NCX-accredited warehouse in different parts of the country and will be issued an electronic receipt stating details such as commodity type, quality and quantity, owner and other relevant information. The depositor will have the choice of using the receipt as collateral to obtain bank loans or for trading on the Exchange. Another option is to keep such commodities in the warehouse until their prices stabilize or appreciate.

    On the prospects of the e-WRS, Abdurrahim had explained that the new initiative would encourage the provision of standard storage facilities for operators in the agricultural value chain and make the warehouse receipts a prime tool of trade while facilitating access to finance.

    According to him, the E-WRS would also strengthen small scale farmers and agro-allied businesses while creating jobs and sustainable economic growth.

    He outlined that an active commodity exchange would significantly help in unlocking Nigeria’s agriculture potential pointing out that agriculture is a game changer for the country if the sector receives the desired level of commitment by both the private and public sectors.

    Stanbic IBTC Bank will act as the settlement bank for the electronic commodity exchange while CSCS will serve as clearing and depository agent. The e-WRS is also being undertaken in collaboration with other banks and relevant stakeholders including the Federation of Agricultural Commodity Association of Nigeria (FACAN).

    Earlier at a media session on the e-WRS, Chief Executive Officer, Stanbic IBTC Holdings Plc, Mrs. Sola David-Borha, had pointed out that the commodity exchange and the warehouse receipt system would be instrumental in opening up Nigeria’s farm produce to the global commodity market.

    “The transparency it will engender is crucial in ensuring participation from across the world. And with transparency comes improvements in efficiency and pricing. It also makes it easier for banks to provide financing for operators in the agricultural value chain,” David Borha said.

    She said Stanbic IBTC considers agriculture to be a very strategic sector for Nigeria and it would continue to deploy its expertise and products towards the development of agriculture business in the country.

    According to her, agriculture, which was hitherto seen as a subsistence activity, is increasingly becoming middle-level businesses and people are getting involved in it.

    She said Stanbic IBTC aims to become one of the top agriculture financing banks in Nigeria by making available bespoke schemes and initiatives that would help in the realisation of agricultural transformation agenda of the Federal Government, which among others seeks to create improved market integration and significant reduction in post-harvest losses.

    “Stanbic IBTC has a well-structured business unit that focuses on agriculture. We have developed a number of schemes and products that will have significant impact on the entire agricultural value chain. Stanbic IBTC Bank is one of the leading financial institutions contributing to the growth of agriculture in Nigeria, with products and services customized for the sector.  The bank is accessible to all operators in this sector. We are also working with a number of government agencies and multilateral organisations to spearhead a true agricultural revolution in Nigeria leveraging on the Standard Bank Group’s experience and expertise in agricultural financing,” David-Borha said.

    According to her, the Standard Bank Group, the parent company of Stanbic IBTC Holdings, would bring it global expertise and resources to continue to support opportunities in strategic sectors of the Nigerian economy to grow its business while helping to create sustainable prosperity for the people.

    “As an institution that is in Nigeria for the long run, we are committed to helping the country achieve her developmental aspirations. We will continue to identify partnership opportunities towards the sustained development of pivotal sectors of the economy,” David-Borha said.