Nigeria Commodities Exchange (NCX) plans to generate at least N4.3 billion from the revival of trading activities this year, even when the system framework required to guarantee that hangs in the air.
The exchange, which has been on a 20-year break, believes the revenue target is realistic if important structures such as warehouse receipt law, legislation on agricultural produce marketing, nationally acceptable grades and standards, trade incentives for commodity players such as excise tax, import and export levy rebates are installed.
Zaheera Baba-Ari, managing director/CEO, NCX, says basic infrastructural facilities required for effective trading operation were on ground but the absence of certain institutional arrangements could be a limitation, in statement responding to BusinessDay’s questions.
To this end, the exchange has based its plan on having commodities bought on the exchange floor turned over at least four times in a year by the trading members.
“At least, 30 percent of the projected agricultural production figures for 2019 will be available for sale and 15 percent of what is available for sale including maize, sorghum and paddy rice will be traded on the NCX.
“If we compute the trading commission that will accrue to the exchange from the sale of these commodities in a year and add it to the warehouse fees that will be generated as well as the membership fees payable by the trading members, NCX will realise more than N4.3 billion,” Baba-Ari states.
The exchange is set to start receiving commodities into its delivery warehouses by this month end, and has been working with New Nigeria Commodity Marketing Company (NNCMC) to grade some of the commodities in its warehouses in Kano and some other locations in the North for trading on the NCX.
If full trading commences as projected, 2019 may be heralded as the year which effective linkage of farm produce with markets and price discovery for appropriate returns on investment in agriculture will deepen enormously on the back contract trading.
Already, the Securities and Exchange Commission is planning an overarching restructuring of commodities trading through the NCX and would be rounded off by 2025.
To kick-start trading this year, NCX has specified a list of contracts including MAF1&2, MFB1&2 and MHC1&2 in the maize category and SGM1&2 in sorghum, designed for trading members either on their own accounts or on the accounts of their clients.
It will be trading in maize, sorghum, soya beans, sesame seeds, paddy rice and cocoa, and to facilitate this, the Exchange says it has renovated and equipped seven of the warehouses leased to it by the Federal Ministry of Agriculture and Rural Development (FMARD) for use as delivery warehouses.
It has also acquired Trading and Warehouse Management Software for deployment on its trading floor and delivery warehouses, respectively, in addition to rehabilitating its assaying laboratories in Abuja and Kano for pre-trade quality checks.
For settlement of trades with minimum default, Baba-Ari says the exchange has entered into a clearing and settlement agreement with the Central Securities Clearing System (CSCS) to act as a clearing house for all its trading transactions.
In addition, it has registered some trading members in different categories to carry out trading activities, either physically on its trading floor or remotely.
“One of the challenges facing us is the weak supply side. The Exchange has therefore entered into an MoU with the NNCMC to serve as a trading floor exclusively for all agricultural commodities bought by the company from farmers in the 19 Northern states. This we believe will strengthen the supply side and make commodity aggregation very easy,” she says.
