Redefining Commodity Standards to Catalyze Economic Growth – The Sun Nigeria
By Chinwendu Obienyi
Previously, agriculture was a major source of food production, raw materials, job creation, and a means by which the government generated substantial revenue before the oil boom of the 1950s.
Following the discovery of oil in the Niger Delta region of the country in the late 1950s, this gradually pushed the contribution of non-oil export products to the background, in which economic development has escaped the country.
Furthermore, Nigeria’s efforts to establish a diversified and vibrant export continued to be mere political rhetoric, leading to a situation where research on non-oil export marketing became minimal. This is worrying given that export market research is a known correlate of export development.
The agricultural sector has the potential to be the industry and springboard from which a country’s development can take off. However, agricultural products suffer from price inelasticity because production is sometimes subject to seasonal fluctuations and climatic hazards.
Consequently, farm gate prices are relatively unstable and carry a price risk that farmers are ill-equipped to manage. To solve the problem of price instability, successive governments intervened through state trading agencies – the Commodity Marketing Boards – which were marketing monopolies that set the prices of the products they bought from farmers. and resold to processors in developed economies.
But the scale of structural distortions in the economy led to the deregulation of commodity trade and made the 1986 Structural Adjustment Program (SAP) inevitable.
Therefore, when the idea of establishing the Lagos Commodities and Futures Exchange (LCFE) was mooted in 2015, most stakeholders did not pay attention to it, as the buying and selling of commodities without structure, discovery prices and transparency had been going on for decades.
However, when the exchange received its license to trade four commodity asset classes (crude oil, solid metals, currency and agriculture) from the Securities and Exchange Commission (SEC) in 2019, market participants immediately saw a means of amassing wealth as well as investment due to the current federal administration’s focus on diversifying the economy from a crude oil dependent economy to other critical economic sectors such as the agriculture and solid minerals.
So when the exchange was officially tasked to begin trading its asset classes, stakeholders pointed out that this was indeed an opportunity for players to tap into the potential of the materials ecosystem. raw materials worth around $1 trillion.
Speaking at the official commissioning of the LCFE in Lagos, the Executive Governor of Lagos State, Babajide Sanwo-Olu said the state hosting the Nigerian Exchange (NGX) Group Plc as well as FMDQ Securities Exchange, he is proud to host Nigeria’s premier commodity and futures exchange, while adding that this is in line with state policies aimed at improving the enabling environment for businesses and businesses to thrive. investments, to attract cutting-edge ideas and innovations and a never-ending influx of financial transactions that will enable institutions to do well.
The Governor, who also unveiled the “EKO GOLD COIN” for gold trading on the stock exchange floor, revealed that the first tranche will consist of 58 units of the coin worth over N100 million .
He said: “After this proof of concept launch, I have been told that the futures listing of the EKO gold coin will take place in increments of £10 million each. This is undoubtedly the start of an exciting new chapter in the investment community in Lagos, Nigeria and globally. We are seeing a maturation of the investment market and a welcome expansion of the opportunities available to those who want to invest their money.”
While commending the SEC as well as other market participants for the drive to establish the LCFE, LCFE Managing Director Akin Akeredolu-Ale said the LCFE has spent the past three years identifying and aligning Relevant building blocks for an efficient, structured and transparent commodity ecosystem. He said the exchange is planning to trade crude notes as the country is endowed with crude oil, while adding that in the coming months, LCFE plans to have its new energy exchange.