For the commodities exchange to operate optimally and contribute meaningfully to the nation’s Gross domestic Product (GDP), the Lagos Commodities and Futures Exchange (LCFE) has called for a legal framework that would enable commodities to be crossed in Nigeria before being exported to other countries.
Cross commodity is a way of hedging and managing risk for producers and speculators alike. Also referred to as cross hedging, this financial strategy involves opening positions in related markets to mitigate systemic exposure.
The Exchange, which commended the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) on their roles in ensuring uptrend of activities in the Nigerian commodities ecosystem, also stressed the need to address the dearth of fungible instruments and put a proper risk management structure in place to activate trading in the ecosystem.
A fungible instrument is a financial instrument (such as a stock, bond, or futures contract) that can be bought or sold on one market or exchange, and then sold or bought on another market or exchange.
At an interactive session with Journalists at the weekend, on “LCFE’s journey so far and outlook for 2022”, the Managing Director and Chief Executive Officer, Akin Akeredolu-Ale, said for commodities ecosystem to thrive and contribute to a country’s economic growth, instruments had to be created while rules and guidelines developed and approved.
According to him, this would also go a long way to boosting transparency and price discovery in the commodities ecosystem. He said that if commodities exchange were prioritised in Nigeria, it would accelerate growth of the manufacturing sector and enhance food security.
He restated the exchange’s commitment to advocacy as a strategy to create awareness on how the ecosystem can grow the nation’s GDP in 2022.
He said: “How much of our sovereign investments is going into the commodities space? There should be a paradigm shift between public sector financing and enabling private sector participation in the commodities exchange.
“Nigeria must have a full structure in place for commodities exchanges to operate optimally. It is like a green field in Nigeria. A lot of participants are used to trading equity and fixed income securities.”
On how to create more awareness on the existence of the securities exchange, Akeredolu-Ale said the exchange has concluded an arrangement to roll out a youths enlightenment program that would help expose millenials to the rudiments of the commodities exchange in 2022.
He said the exchange is targeting up to 10 million youths for the initiative, adding that the exchange would also build the capacity of trade dealing members to make it easy for people to access these deals whenever they want to trade.
