Some professionals and investors have expressed optimism that the proposed reactivation of the Nigeria Commodity Exchange (NCX), which is saddled with the responsibilities of mopping up farm produce, bridging seasonal availability gaps, and ensuring price stability of produce, will motivate farmers, agro-commodity processors and merchants, as it will serve as a platform to reduce risks associated with production, post-harvest wastage and marketing challenges.
However, others are of the view that prevailing conditions, such as widespread insecurity, poor productivity of farmers, inadequate storage infrastructure and inaccessible crop productions hubs, as well as the lingering clashes between herders and farmers would not let the exchange work as expected.
The Central Bank of Nigeria (CBN) recently got an approval from the Federal Government to inject N50 billion into the exchange to mop up produce from farmers and aggregators and sell through an application, in the format of the normal stock exchange.
The CBN said in 90 days, the NCX would be restructured so that farmers could have access to buyers at the exchange, thus eliminating shortchange by middlemen and post-harvest management difficulties.
In the plan, the CBN as the majority shareholder will inject N50 billion to bring the exchange best global standard to play its role. The CBN Governor, Mr. Godwin Emefiele, who heads the steering committee, disclosed this at the Inaugural Meeting of the Steering Committee recently.
Other members of the committee are representatives from NSIA and AFC, as well as, the Federal Ministries of Finance, Budget & National Planning; Industry, Trade & Investment; and Agriculture.
“It is against this backdrop that Mr President considered and approved a proposal, for the repositioning of NCX, in order to consolidate on the government’s efforts aimed at strengthening the agricultural value chains, part of which includes connecting farmers to markets beyond their immediate environments,” the governor had said.
Emefiele argued that to boost agriculture in the country, fundamental challenges of marketing, storage and off-taking and linkage to industrial users must be tackled to grow the nation’s economy.
The commodity exchange
Incorporated as a Stock Exchange on June 17, 1998, the NCX started electronic security trading in May 2001 and was converted to a commodity exchange on August 8, 2001, and brought under the supervision of the Federal Ministry of Commerce.
This was premised on the imperative of managing price fluctuations of agricultural produce, which adversely affects the earnings of farmers since the abolishment of commodity boards in 1986.
Attempts to establish a Commodity Exchange and Futures market in the country dates back to 1989 when an Inter-Ministerial Technical Committee was set up at the behest of the CBN to look into how a Futures Exchange for agricultural commodities could be established to address frontally the agro-commodity marketing problems.
But NCX has remained grossly inefficient due to a number of factors, including inadequate funding, poor financial performance, as well as deficiency in physical infrastructures such as warehouses, laboratories and grading capability.
The Commodity Exchange has also claimed that 20 licenced warehouses have been secured in six geopolitical zones, specifically in Zamfara, Kano, Kaduna, Nasarawa, Benue, Bauchi, Plateau, Ebony, Ekiti, and Kogi and additional ones being emplaced in Adamawa, Globe, Taraba, Jigawa, Edo, Cross River and Ondo states.
Main produce for the exchange includes rice paddies, maize, cocoa, beans, groundnuts, cashew nuts, sesame seeds, soya beans and sorghum…
CBN funding and agro-economic implications
Implications include market access to farmers at standardised prices; sure market would stimulate more production; gap closing for manufacturers/processors in-between production and off-seasons; employment potential and food security.
With the CBN fund intervention and technical involvement, will new dawn come for farmers, aggregators and agribusiness men and women? Can this play a significant role in AFCTA and put Nigeria in a vantage position to maximise the benefits of agreement? With storage facilities and funds to mop up crops, is Nigeria likely to close the food production gaps soon? These are the questions The Guardian took experts.
Managing Director of the NCX, Mrs Zaheera Baba-Ari, declared in Abuja recently that the exchange had been positioned to facilitate efficient export of commodities, as the African Continental Free Trade Agreement (AfCFTA) took off on January 1, 2021.
She said 20 licensed delivery warehouses across major production areas in the six zones would help in the efficient receipt, storage and onward delivery of agro-commodities to be traded on the exchange.
The warehouses have a combined capacity to store 50 trillion tonnes of goods, she said, and the exchange had established fully equipped quality assurance laboratories in each of the delivery warehouses to test the quality of commodities, such as paddy rice, cocoa, sesame seed, soya beans, maize, sorghum and cashew nuts that would be traded on the exchange.
“The NCX has acquired robust Trading Application System for seamless buying and selling of commodity to ensure market integrity, price transparency and the facilitation of cross border trades.
“It has also acquired a Warehouse Management System that assures efficient management of warehouse inventories. “We have perfected Memorandum of Understanding with relevant foreign and Nigerian Commodity Associations like the Ethiopia Commodity Exchange and the Export Merchants Association of Sudan to trade in selected agro-commodities,’’ she said.
Under AfCFTA trading, tariffs on various commodities where rules of origin have been agreed will be drastically reduced and traders would have access to a much bigger market than before. It is therefore expected that the injection of funds into the system would boost both local production, storage and external trading of such commodities.
Meanwhile, a former provost, Federal College of Agriculture Kabba, Kogi State, Dr Akin Oloniruha, said the CBN intervention in commodity exchange is a laudable programme, as funding has always been a major challenge to good agro-allied policies and institutions.
But, he wonders where the commodities would be sourced as most farmers have been displayed by herders and bandits.
“Where are the commodities? Most farmers in primary production have been chased out of their farms by armed militias. So, there is nothing to mop up. Some few years ago, storage was a major constraint, but now, farmers barely produce enough to feed their families.”
He said the Anchor Borrower’s Programme of the CBN was achieving successes all over the country, and if the tempo had been stepped up or at least maintained, there would, by now, have been enough commodities to mop up for storage in the warehouses.
“The prices of maize, sorghum, soya bean and rice have gone up astronomically due to insecurity on farms and the weather issues we had last year. The government should work more on our security on farms and step up assistance to primary producers.
“As desirable as participation in the international market is, our farmers are not familiar with required standards, such as pesticide residues, use of protective coverings by farm personnel, etc. The relevant agencies must step up advocacy for farmers to meet international market standards; otherwise, our products will not see the light of day in international markets,” he advised.
The Project Manager of the Building an Economically Sustainable and Integrated Cassava Seed System, Phase 2, (BASICS-II) of the International Institute of Tropical Agriculture (IITA), Prof. Lateef Sanni, said the CBN intervention is laudable “if properly implemented and necessary infrastructure and security are put in place.”
Prof. Sanni added that there would be farmers’ productivity and closing the industrial need gap. Not only that, generating employment opportunities through the exchange and farm productivity is achievable “provided the right beneficiaries have access to the storage facilities. It is then we may gradually close the food production gap. Value addition and processing are also critical,” he said, “CBN should work with relevant private and public organisations to actualise this intervention.”
Expressing a contrary view, Mr Segun Shewoniku, the chairman of Answers Industry, manufacturer of egg powder in Ogun State, said such a move is “putting the cart before the horse.”
He said: “Good as the intention is, it’s a project that is bound to fail for reasons that include but not limited to the following. (There is) no legislative backup, hence it’s at the pleasure of anyone that lacks the understanding to set it aside again, just as it was when Babangida, by military fiat, closed down marketing and commodity boards.”
Shewoniku added that prevailing corruption and lack of awareness before embarking on the project would not let it work.
He added: “What type of crops are they to start with, and what training and facilities like light and refrigerators are provided? How many of such presidential orders were not lame-duck orders? With today’s galloping inflation, what is N50 billion when converted into dollars? The licensed warehouses are on what terms, that is, PPP, BOT, PP, etc. or what? When was it advertised for tender, according to procurement rules before getting qualified applicants?
“I don’t see this impacting positively in the short run because of lack of trust. Come to think of it: are they going to stock the warehouses with imported agricultural goods when the farms are no-go areas because of those dreaded herders?”
The chairman of the Kebbi State branch of the Rice Farmers Association of Nigeria (RIFAN), Sahabi Augie, said he had not understood the modus operandi of the exchange, but “I hope that commodity associations will be appropriately involved so that farmers will be protected against the menace of urban money bags who always connive to shield them from enjoying the intended benefits of such interventions.”
He admitted that if done properly, the CBN intervention in the exchange could mean Nigeria’s progress towards becoming food-secure, suggesting that “Issues of produce wastages with regards to the perishable crops must also be addressed in the storage arrangement to avoid glut and losses associated with it.”
This is as agricultural stakeholders have lamented that the Federal Ministry of Agriculture lacks directions on the food and agricultural agenda for the country and that if not for various interventions by the CBN, the agro-allied sectors would have completely collapsed following the inertia of the ministry.
Such interventions by the CBN include ABP in rice, cassava, livestock, and cotton, to mention but a few. Pre-2015, the Federal Ministry of Agriculture, under the leadership of Dr Adesina Akinwumi, rolled out several schemes and agro-industrial policies supporting and empowering farmers, but since the administration expired, the ministry had remained dormant amid CBN interventions.
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