Why Nigerian Commodity Exchange should be re-positioned

The Nigerian Commodity Exchange (NCX) was established to provide a practical solution to a number of challenges that have adversely affected the growth and development of the Nigerian agricultural sector, especially the heavy post-harvest losses associated with poor warehousing and the absence of a ready market for the disposal of farm produce at realistic prices. […]

The Nigerian Commodity Exchange (NCX) was established to provide a practical solution to a number of challenges that have adversely affected the growth and development of the Nigerian agricultural sector, especially the heavy post-harvest losses associated with poor warehousing and the absence of a ready market for the disposal of farm produce at realistic prices.
The NCX is an end-to-end integrated system of decentralized trading, warehousing, quality certification of commodities, clearing, settlement, delivery and market information. It enables agro-commodity merchants, exporters and industrial end users to have access to reduced transaction costs in terms of cost of logistics and aggregation of commodities.
The exchange is very vital as it stimulates the production of surplus commodities to enable farmers and farmers’ cooperatives to bulk their agricultural commodities for trading on the Exchange.
However, it has not been able to make the necessary impact since inception due to several challenges.
Speaking at the recent 1st Daily Trust Agric Conference and Exhibition held in Abuja, the Managing Director and Chief Executive Officer (CEO) of the Nigerian Commodity Exchange, Mrs.Zaheera Baba-Ari, lamented: “Currently, NCX is operating sub-optimally as the conversion from stock to commodity exchange was done without the required structural and institutional infrastructure.”
Mrs. Baba-Ari said the Exchange lacked adequate warehousing capacity; adequate physical infrastructure (communications, transportation); and appropriate legal and regulatory infrastructure in terms of a system of grades and standards, and a credible system of contract enforcement and governance in spot markets.
Other drawbacks of the NCX, according to the CEO, are lack of supportive public policies and institutional infrastructure such as producers’ organizations as most African countries are characterized by small holder farmers.
Giving reasons why the present administration should re-position the Exchange, Mrs. Baba-Ari pointed out that the NCX is a key vehicle through which government can realize its objectives of employment generation through agriculture.
She stated that the NCX platform, if re-positioned, would encourage increased production of agro-commodities as farmers would have ready access to an efficient market.
The CEO further stated that the Exchange would enable food processors to have ready supply of traceable, quality certified inventories; be assured of timely delivery of supply, freeing them from the expense of stockpiling; and price products appropriately owing to improved operational efficiency.
“Agribusiness data collection and analysis would be enhanced for the benefit of national economic planning agencies,” she added.
The CEO suggested that all the operators in the commodity market should be mandated to participate actively in the buying and selling of their commodities on the floor of the Exchange to deepen the commodity segment of the capital market and enhance liquidity as well as increase market capitalization.