The Nation Newspaper

Tag: exchange

  • Why I support Buhari’s exchange policy

    SIR: After watching Nigeria for over 25 years and seeing the “boom bust” cycle happen twice, I am now very weary of international agencies like IMF, World Bank and all these high sounding economists on CNN who prescribe policies like road side medicine peddlers who sell “cure all” medicines for all diseases.

    I definitely agree with President Muhammadu Buhari that devaluation of the Naira will only bring hardship upon all Nigerians and it will not solve the problem at hand.

    Engineers and scientists follow exact science. When they advise you on certain steps in a sequence, it is possible to predict the outcome in a deliberate way. An aeroplane will always take off and land with such certainty that we are willing to take the risk of flying even for holidays. Engineers and scientists are all able to prove what will NOT happen with some accuracy and they will back up their position with data and research.

    Unfortunately social scientists and economists are not in the same business. They are busy peddling their trade of faulty medication all over the market place without fear of reproach. They occupy all the news media like CNN, BBC , CNBC etc and spend hours analyzing and advising people, companies and countries on economic policy and even political policy. They are quick to advice on Syria and Iran but when it fails they simply move on.

    They are quick to advise Egypt and Nigeria on currency management but nobody notices how they have failed.

    Egypt is now suffering from this misdirected policy while Nigeria was saved this embarrassment by the steadfastness of our own PMB. People will recall that Egypt was one of the countries to accept the international agencies’ advice to devalue her currency. A recent report by Reuters quotes an Egyptian banker on the devaluation of the Egyptian Pound: “Traders say the crackdown has only exacerbated the crisis. People with dollars are shunning the official financial system, starving it of foreign currency. This is putting yet more pressure on the pound, with potentially dire consequences for inflation, investors’ confidence and economic growth….No one sells dollars to the banks any more. They all prefer to go to the black market which will pay them more”.

    Our president posed the following questions in the event of devaluation and I wager answers:

    Will organised labour ask for an increase commensurate to the inflation figures? Yes

    Will pump price of petrol go up? … Yes

    Will it increase production and export?  Definitely but not in the near term.

    What is the predicted gap between the parallel rate and the official rate after devaluation?  No one knows.

    Have the prices of goods and services doubled since the parallel rate has practically doubled?  No.

    Will the prices of goods and services double once we devalue to N280 officially? Definitely)

    Will it cause widespread inflation? No Brainer.

    Where devaluation is not matched with increased supply of dollar on a “willing seller willing buyer” basis,  in my opinion will not solve the problem. Therefore we should avoid it unless we are sure devaluation will increase dollar supply. It will only increase poverty for already

    Yes it a well known economic principle that devaluation encourages export. But in the short term, there is nothing to export. The few exporters we have already bring their export proceeds through the back door and sell at black market anyway.

    I support PMB on devaluation. Perhaps we should take our time to observe the patient before taking the surgeon’s knife to start an operation where we are unsure of the final outcome.

    Perhaps creating a third-tier interbank rate that allows people to inflow funds to settle expenses, credit cards bills, school fees etc will reduce the pressure on the roadside market. But the transactions should be subject to international rules and anti-money laundering rules. Spending money on Amazon, Konga and other online purchases up to a limit depending on the category of customer. A limit of $500 per week up to a maximum of $4,000 per annum will definitely be enough for many young people and it will prevent people from buying cash on the road side to pay international fees ACCA annual dues etc. This will greatly reduce the pressure on the currency for now and it will satisfy the majority of people who do millions of simple transactions daily. It will also allow many people to remit funds to Nigeria for their family and friends.

     

    • Yemi Idowu,

    Lagos.

  • Fed Govt to revitalise commodity exchange

    The Federal Government plans to revitalise commodity exchange in Nigeria as part of a comprehensive development programme for the nation’s agricultural sector.

    Vice President Yemi Osinbajo made this known last weekend at the First National Economic Forum organised by Vintage Press Limited, the publishers of The Nation Newspapers, in collaboration with CEEDEE Resources at Lagos Airport Hotel, Ikeja, Lagos.

    Osinbajo said the government would develop the commodity exchange system to support the development of the agricultural sector.

    He said government would revitalise the Abuja-based Nigeria Commodity Exchange (NCX) and other infrastructure and operators in the whole commodity exchange value chain.

    According to him, a functional commodity exchange would ensure that Nigerian farmers receive good prices for their products.

    Osinbajo said the government also plans to introduce a Minimum Price Guarantee scheme under which the government will set floor prices at which it would buy agricultural produce from farmers.

    He noted that a Minimum Price Guarantee scheme would encourage the farmers to scale up their production to their highest capacity with the assurance that government will be ever ready to buy the farm produce at guaranteed prices.

    It should be recalled that the NCX had introduced a pilot electronic warehouse receipt system (e-WRS) in 2014. 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 stabilise or appreciate.

    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. The e-WRS is also expected to strengthen small scale farmers and agro-allied businesses while creating jobs and sustainable economic growth.

  • ‘Foreign exchange imbalance affecting power firms’

    The imbalance in the foreign exchange regime, occasioned by the falling rate of naira, is taking its toll on the operations of new power investors, the Chairman, Egbin Power Plc, Mr. Kola Adesina, has said.

    He said the power distribution companies (DisCos) are spending more money than before to buy equipment abroad, because  the naira is falling at abysmal rate.

    While speaking at a stakeholders’ meeting in Lagos, Adesina said the problem facing the naira has made it difficult for power firms  to survive, since they depend on Original Equipment Manufacturers(OEMs) in their   production.

    He said: “When we bought Egbin Power Company when the sector was privatised in 2013, naira was sold for N159 per dollar. At a point, the value of naira reduced further as it was sold for N179 to a dollar, and later N196 to a dollar at the official window. The situation was worse at the black market where dollar is sold for N220 and above. This is not without its attendant consequence on operators in the sector.’’

    According to him, spare parts used in the industry can only be procured in dollars, stressing that the development is having far-reaching effects on the performance of the operators.

    Adesina said despite the fiscal problem, among others, facing the sector, and the economy, Egbin Power has weathered the storm to record some successes.

    He said the achievements included increased megawatts (Mw) of electricity, thereby making the turbines functional, among others.

    Adesina said the recent one was the dedication of 220 megawatts of electricity to Lagos, by Egbin. He said this would not have been possible without the support of the Vice President Yemi Osinbajo.

    “When we choose to dedicate the 220 megawatts to Lagos, the Vice President, Osinbajo stood by us,” he added.

  • Exchange inducts 31 stockbrokers

    Exchange inducts 31 stockbrokers

    The Nigerian Stock Exchange (NSE) has inducted 31 dealing clerks, who recently qualified to trade on the Exchange..

    The induction is the end of a long-drawn process of internship and paves the way for the stockbrokers to trade on any floor of the Exchange or through personal remote access.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, charged the new dealing members to uphold the virtues of integrity, good character and high ethical and professional standards.

    He noted that the Exchange has clear and enforceable rules with a zero tolerance policy on all infractions.

    “Today’s ceremony  is not just a celebration. It marks a call to stand tall on integrity, to be spotless in character, to be professional in service and to be deep in ethics and values,” Onyema said.

    He said with the rigorous process that led the qualification of the new dealing members, the Exchange has found them worthy to be a practising stockbroker and able to trade on any floor of its floor.

     

     

     

  • More French companies may list on Stock Exchange

    More French companies may list on Stock Exchange

    Nigeria will soon have more leading French companies investing in its economy and actively involved in the stock market as French business group Mouvement des entreprises de France International (MEDEF) prospects for new investments in Nigeria.

    Chairman, MEDEF, Mr. Pierre Gattaz, who made his first visit to Africa to Nigeria last week, led a group of some 50 French businessmen for familiarisation with the economy and preliminary discussions on prospective business areas and partners.

    Gattaz, during a visit to the Nigerian Stock Exchange (NSE), said many French companies would soon toe the line of Total Nigeria and Lafarge Africa Plc, two French companies that are quoted on the NSE.

    “This is our first visit and we know all these 50 business personalities who are with me are very motivated. They are very happy with what they have seen in this country. So, I think there will be more Totals and Lafarges coming in,” Gattaz said.

    He noted that French companies would be interested in bringing their capital and expertise in helping Nigeria to solve its infrastructure and basic amenities challenges. The areas of investments would include infrastructure, water, agriculture, energy, jobs, knowledge and training.

    “All those things can be brought by most of the French companies. So, this visit is the first of a long-lasting partnership with your country. There are a lot of things to be done between the two countries. That is why we are and we are very much ready to see the development of Nigeria; to see the growth of the population, and the growth of Gross Domestic Products (GDP),” Gattaz said.

    While acknowledging that the completion of the investment process may take some time, he assured that French businessmen have positive impressions about the Nigerian people and the economy.

    Both Total Nigeria and Lafarge Africa Plc have been making additional investments to strengthen their Nigerian operations in recent years. Total Nigeria plans to step up its business diversification programme by investing further in solar power business while consolidating the safety and efficiency of the current business.

    Chairman, Total Nigeria Plc, Momar Nguer, said the company is  seeking new ways to expand its offerings and the company is implementing strategies to ensure that the company remains brand of reference and leading energy solutions provider.

    “We plan to increase the number of our solar powered stations this year by eight additional stations and will be introducing our offer of solar home system. The solar home system is a solar power driven energy solution for homes,” Nguer had told shareholders in June, this year.

    He said the company would be seeking to align its business and structures with the dictates of the environment in which it operates and through all these, create sustainable value for all the shareholders.

    Lafarge Africa this month completed the acquisition of 30 per cent equity stake in United Cement Company of Nigeria (Unicem) Limited from Flour Mills of Nigeria Plc. Nigerian Cement Holdings BV (NCH), a 50 per cent affiliate of Large Africa, completed the acquisition of the second tranche of 15 per cent in Unicem, making the company a wholly-owned subsidiary of NCH. NCH had in March, this year acquired the first tranche of 15 per cent stake in Unicem from Flour Mills of Nigeria.

    With this final acquisition, NCH now owns 100 per cent of Unicem and consequently Lafarge Africa now owns 50 per cent of the equity of Unicem.

    Lafarge Africa plans to use Unicem to further deepen its geographical strength in the Southsouth axis. Unicem’s operational office is located in Calabar and its manufacturing plant is in Mfamosing, Cross Rivers State. It has a cement production capacity of 2.5 million metric tonnes per annum (Mtpa) and it is developing a second production line of 2.5Mtpa. The second production line is targeted to be commissioned in 2016 to bring Unicem’s total production capacity to 5.0Mtpa.

     

    The board of Lafarge Africa had rationalized the acquisition as part of the cement group’s continued investment in Nigeria to accelerate the growth and development of its business, with a focus on serving its customers and delivering value through provision of innovative products and services with a strong geographical spread.

    Lafarge had in July 2014 consolidated its cement businesses in Nigeria and South African to create a leading sub-Saharan building materials giant to be known as Lafarge Africa Plc. The consolidation was done by transferring Lafarge’s assets in South Africa and Nigeria to Lafarge Cement Wapco Nigeria Plc, which was subsequently rebranded as Lafarge Africa.

    Under the transaction, Lafarge Group transferred its direct and indirect shareholdings in Lafarge South Africa Holding Limited of 72.4 per cent and its equity stakes in three other cement companies in Nigeria-United Cement Company of Nigeria Limited, 35 per cent; Ashaka Cement Plc, 58.61 per cent and Atlas Cement Company Limited, 100 per cent to Lafarge Wapco for a cash consideration of $200 million and the issuance of some 1.4 billion Lafarge Africa shares to the Lafarge Group.

    The new group managing director, Lafarge Africa, Mr. Peter Hoddinott, who resumed in July 2015, wears two caps as group managing director of Lafarge Africa and area manager for the LafargeHolcim business in the West African region. His main mandate included acceleration of the global cement group’s expansion plan in Nigeria and the West African region.

    Hoddinott’s appointment was said to be in furtherance of Lafarge’s long-term agenda for Nigeria as the focal point of its business within the region and the continent. The new group managing director is expected to deepen the existing businesses of the Lafarge Africa, introduce new businesses and drive the group’s capital investments.

    After it successfully combined its operations in South Africa and Nigeria to create Lafarge Africa, Lafarge had revealed plan to double its production capacity in Nigeria as part of a new expansion programme that would see additional investments by the foreign majority shareholders in its Nigerian subsidiaries.

    Lafarge, which had increased its capacity from 3.0 million metric tonnes to 8.0 million metric tonnes, said it would be making new investments in the next few years to double its capacity and strengthen its position as a leader in the Nigerian cement industry.

  • Price war to undercut Africa’s biggest exchange coming

    kevin Brady, once head of equity trading for South African-born bank Investec Ltd., wants to compete with Africa’s biggest and oldest financial market, JSE Ltd. To do that he plans to undercut the monopoly’s fees.

    “Our target is to make the end-to-end cost of an equity trade between 30 to 50 per cent cheaper,” Brady, 48, said by phone from Johannesburg on September 3. “Our value proposition is about giving people a choice and a high-performance platform with top-end technology and a material reduction in price.”

    The new exchange, named A2X, may open for trade in the second half of next year if the regulator, the Pretoria-based Financial Services Board, approves its license application, which was first lodged in May. Brady is starting it with partners Ashley Mendelowitz, formerly of technology company Peresys Ltd., and Sean Melnick, who co-founded investment firm Peregrine Holdings Ltd.

    “If people are able to get a license on the same basis that we operate, then I am up for the competition,” Nicky Newton-King, chief executive officer of the JSE, said by phone on September 3. “Our pricing isn’t out of the ballpark in global terms. Our general policy is to reduce our pricing every year. When they come out with pricing, we’ll see how we need to react.”

    Johannesburg’s stock exchange started in 1887, spurred on by the gold rush in South Africa. The companies it lists have a market value of about 9.92 trillion rand ($713 billion), making it the largest exchange in Africa, according to data compiled by Bloomberg. In the six months to June, the JSE recorded revenue of 1.01 billion rand and increased pretax profit 28 percent to 585.4 million rand from a year earlier.

    “With a 50 percent pretax margin, there is absolutely space for competition,” Brady said.

    The JSE is one of the 20 largest exchanges in the world

    Of course, it’s not just about the price. Investors trust exchanges that can offer liquidity, price discovery and transparency with dependable regulatory oversight. While A2X will offer the full gamut of trading, clearing and settlement services along with surveillance and regulation, Newton-King believes introducing competition in a relatively small market may in turn hurt investors.

    “I think competition in this market is a very bad idea,” she said. “Fragmenting price discovery will increase the spread on shares. Settlement risk increases. For the market as a whole there are some serious negative potentials.”

    Brady’s example to counteract Newton-King’s argument is Australia’s Chi-X. Started in November 2011, Chi-X had an average daily trading of A$296 million ($207 million) in 2014, compared with A$1.6 billion on the JSE’s more direct counterpart, the Australian Securities Exchange, according to data compiled by Bloomberg. Since Chi-X began, prices and costs have declined, investors have used technology to ensure price discovery, and liquidity and spreads have improved, Brady says.

    Risks aside, if A2X is successful and able to settle trades while providing appropriate levels of regulation, it may help boost South Africa’s economy and increase the total trade in equities. The country, Africa’s most developed nation, needs to attract more investors as growth slows amid power outages and rising inflation.

    “If A2X obtains a license, it will immediately be negative for the JSE, even if A2X do not gain much market share or are not profitable for a number of years, as it will force the JSE to reduce pricing in cash equity products,” Harry Botha, an analyst at Avior Capital Markets who rates the JSE underperform, said in a note to clients on Aug. 26. “We expect this initial fee reduction to be about 10 percent for trading, and clearing services and this will reduce our earnings forecasts by about 8 percent.”

    The JSE’s share price dropped as much as 3.1 percent to 132 rand in Johannesburg, the lowest intraday level for two months, and was 2.6 percent lower as of 1:48 p.m.. The FTSE/JSE Africa All Share Index declined 0.6 percent.

    A2X isn’t the only wanna-be exchange applying for a license. Another two, called 4AX and ZAR X, want to focus on shares that have been trading over the counter in mostly unregulated environments. That said, only A2X poses any immediate threat to the JSE’s business, according to Botha.

    “There are a lot of opportunities that come from people trading, but we’re not going to make it easy for them to gain traction in any part of our business,” Newton-King said. “We have to take the view that we earn trade, so we do what we do better every day.”

    The new exchange has already noted a pent-up demand among brokers who want to become authorized members and might break even within three years, Brady said, adding that the company will need about 30 staff members when it’s operating at full capacity. At first, 50 to 65 stocks with primary listings on the JSE will be able to be traded on A2X.

    “We will grow our business according to what our clients want and need and we’re starting with a blank slate rather than a lot of legacy systems,” Brady said. “The JSE is very protective of its space. It says it welcomes competition, but the proof will be in the pudding. I hope it does.

     

  • 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.

  • Govt urged to reposition commodity exchange

    The Federal Government has been urged to strengthen the commodities market to boost trade in the sector.

    The Managing Director, Multimix Academy, Mr Obiora Madu, said failure to do this would put off investors and stifle the development of commodities business.

    According to him, the main factor limiting economic potential of the sector is lack of a common market that boosts the confidence of farmers, as well as financial institutions, to invest in the sector.

    The move, he said, would encourage market access and fair returns for smallholder farmers and facilitate the formalisation of informal agricultural trading.

    Madu  said commodities trading platform has certain innovative features which have been designed to limit risks in the sector to attract agricultural investments, aside from the provision of a ready market and formalisation of commercial activities.

    To create a transparent and efficient marketing system for key agricultural commodities to promote agricultural investment and enhance productivity, he said the government must commit itself to the establishment of a functional commodity exchange and associated Warehouse Receipt System (WRS). One structure of a commodity is the Warehouse Receipt System, where farmers will be provided with receipts based on the food crops that they deposit.

    This system means dealers or farmers certified by the exchange to receive receipts from warehouses showing the quality and quantity of the commodity that they have delivered. The warehouses serve as the point at which the commodities are stored with the owner of the goods issued with the receipt to confirm their existence. In the event of a pressing need, the receipts can be presented to the bank as security for loans, in a manner similar to the way title deeds and logbooks are used in lending.

    At the commodities exchange, the warehouse receipts can be traded like shares, thereby becoming derivative instruments because they are derived from underlying real assets in the form of commodities.

    He said it is good for the banks to understand the system, so that they could see these receipts as collateral to provide funds to various actors along the agric value chain to push sector productivity and growth.

    Madu said banks would introduce financing for commodity traders and farmers secured through warehouse receipts. He said the commodity receipts will be used as collateral by exporters and commodity dealers to get loans from banks. He said dealers could then pay for their business activities even when the goods have not been sold or exported.

    He said the exchange would  tackle the challenges which make the sector a risky investment as farmers and sector actors would produce and deposit their crops to the designated warehouses and get the receipts to source funds from banks.

    This, he said, would help smallholder farmers to move from subsistence to commercial farming, as they would grow more crops which the country has comparative advantage in to promote the national quest for an export-based economy.

  • Naira to back foreign exchange demand, says CBN

    Naira to back foreign exchange demand, says CBN

    •Demands 48hrs advance payment 

    The Central Bank of Nigeria (CBN), in its sustained drive to defend the local currency, has directed that all foreign exchange demand must now be backed by naira cover 48 hours before the request is sent to the apex bank’s intervention window.

    The order which was communicated to the Deposit Money Banks yesterday, The Nation investigation revealed, is to take effect from today.

    Consequently, some of the banks, in implementing the directive, have notified their  customers who intend to purchase foreign exchange through the CBN intervention window, “to make funds available in their accounts two working days before each intervention day.”

    In a document obtained by The Nation, one of the banks said: “Given the effective date of 6th August for this new arrangement, collation for intervention window of  10th August 2015 will be done on 6th August, 2015 when the bank will be expected to move funds to the CBN position.

    “Kindly ensure that all customers’ requests are received in Trade Services  on or before 12noon two days preceding their intended CBN intervention window,” the financial house stated, adding that ”in case of matured obligations that will require the booking of naira IFF (Import Finance Facility) to fund account, booking may be deferred until successful FX (foreign exchange) allocation in which case, Trade will debit customer’s account naira equivalent of FX sold, whether or not the account is adequately funded, while the Branch/Relationship Managers will be required to follow up with the relevant department, or unit for regularisation with same value date as original debit.”

    The document clearly stated that bids supported with incomplete documentation will not be processed.

    It said apart from the exception earlier highlighted for matured obligations,  bids presented on unfunded account will not be attended, it stressed.

  • Commodity exchange’ll limit risks, says expert

    Strengthening the nation’s commodity exchange will provide the much-needed financial assistance to small-holder farmers and limit risks in the agric sector, Programme Coordinator, Farmers Development Union(FADU), Elder Victor Olowe has said.

    He said commodity exchanges could help farmers manage cropping decisions which is likely to improve their access to finance.

    He called on the government to empower the Abuja Commodity exchange so it cans become a platform to attract agricultural investments, aside from the provision of a ready market and formalisation of commercial activities.

    One of the features of the system, according to him is the warehouse receipt system, whereby farmers will be provided with receipts based on the food crops that they deposit

    With the warehouse receipt system working, he said farmers can make cropping decisions when the right demand is reflected in price signals, thus reducing inter-seasonal volatility characterising agricultural production, and smoothing producers’ incomes over time.

    He noted, however, that commodity prices are quoted in distant places and as such Nigerian farmers who are price-takers are often deprived of higher profit margin by foreign buyers using exchanges.

    To make it work, however, he said the sector needs infrastructure to improve grading and certification of commodities traded on the exchange to help streamline quality of produce to gain value for international markets.

    A Consultant to German International Co-operation (GIZ) Sustainable Cocoa Business programme, Mr Dayo Mejabi Ekundayo, said the commodity is a key part of modernisng the whole agricultural marketing system.

    According to him, improving warehousing, storage, logistics, crop quality and farmer financing are all critical to the success of the venture.

    He said promoting the commodity exchange would create an orderly, transparent and efficient marketing system for the nation’s agricultural commodities and encourage market access and fair returns for smallholder farmers.

    He said it would facilitate the formalisation of informal agricultural trading activities.