Following the sub-optimal performance of commodity exchanges in the country, President Muhammadu Buhari has approved the request of the Central Bank of Nigeria (CBN) for the restructuring of the trading platforms to international best practice.
The Securities Exchange Commission registered only two commodity exchanges in the country namely the privately-owned AFEX Commodity Exchange that was registered in 2014 and running against all odds, and the much older government-owned Nigeria Commodity Exchange (NCX) that is still struggling owing to inadequate funding.
CBN Governor Godwin Emefiele Tuesday at the end of the first meeting of the Monetary Policy Committee (MPC) in 2021 said the commodity exchanges in the country have not recorded any appreciable impact and so they must be restructured to operate like others across the world.
“We have found in the market the activities of private commodities exchange have not helped our country and it is time for the Nigeria commodity exchange to be repositioned, restructure to perform the role which by law is has been empowered to”.
“We have written to the president and luckily we have received the approval to restructure and reposition the Nigeria commodity exchange” the Apex bank governor said.
When they are finally restructured, Emefiele said they will operate like standard commodity exchanges that you can find in any part of the world which roles include stabilizing of food prices generally.
In the coming months, the CBN will unveil the agenda and framework to guide the reform exercise to reposition the exchanges.
‘We will be coming up with the agenda and framework for the restructuring and repositioning of the Nigeria commodity exchange and we will do so in a manner that prices must be stable in Nigeria. We will not allow some self-seeking private exchange commodity to be holding agriculture products and be creating problems for prices because price stability is the core mandate of CBN and we cannot shy away from the responsibility”.
The CBN owns 60 per cent of Nigeria Commodity Exchange (NCX) that is still struggling to find its feet owing to inadequate funding of its activities.
Emefiele said the apex bank will take control of it and will run it the way commodity exchanges are supposed to be run in any part of the world that is one way that we would work to stabilize prices in Nigeria.
NCX was originally incorporated as a Stock Exchange in June 1998 but was converted to a commodity Exchange in August 2001 to present an alternative institutional arrangement that would manage the effect of price fluctuations in the marketing of agricultural produce which had adversely affected the earnings of farmers following the abolishment of commodity Boards in 1986’.
The NCX despite the government backing has not realised its potential to transform the agriculture sector which it was intended to complement.
Analysts have blamed the sub-optimal performance of NCX, on several factors including the fact that the conversion from a stock exchange to commodity exchange was done without due regard to the availability of the necessary conditions while the requisite infrastructure for physical trade including warehouses and grading laboratories is also said to deficient.
They also noted that the lack of supportive government policies and institutional infrastructure has crippled and made it stagnant.
Despite controlling ownership by the CBN the NCX is also to be weighed down by weak legal and regulatory regimes especially in terms of the absence of rules that enable an efficient delivery mechanism through warehouse receipts.
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