By Chinwendu Obienyi
Formerly, agriculture was a major source of food production, raw materials, employment generation and medium through which the government generated substantial income prior to the oil boom in the 1950s.
As a result of 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 commodities to the background, in which economic development eluded the country.
Furthermore, Nigeria’s effort at establishing vibrant diversified exporting has continued to amount to mere political rhetoric and this has led to a situation where non-oil export marketing research has become minute. This is worrisome given the fact that export market research is a known correlate of export development.
The agricultural sector has the potential to be the industrial and springboard from which a country’s development can take off. However, agric products suffer from price inelasticity as production is sometimes subject to seasonal fluctuations and vagaries of the weather.
Consequently, farm-gate prices are relatively unstable and carry a price risk which the farmers are ill-equipped to manage. To address the problem of price instability, successive governments had intervened through state trading agencies- the Commodity Marketing Boards- which were marketing monopolies that fixed prices for produce which they purchased from farmers and sold to processors in developed economies.
But, the magnitude of structural distortions in the economy led to the deregulation of commodity trade and made the 1986 Structural Adjustment Program (SAP) inevitable.
Hence, when the idea of establishing the Lagos Commodities and Futures Exchange (LCFE) was mooted in 2015, most stakeholders did not pay attention as buying and selling commodities without a structure, price discovery and transparency had been going on for decades.
However, when the exchange received its license to trade four assets classes of commodities (crude oil, solid metals, currency and agriculture) from the Securities and Exchange Commission (SEC) in 2019, players in the market immediately saw a means to amass wealth as well as investments due to the emphasis by the present Federal Administration on diversifying the economy from a crude oil-dependent economy to other critical economic sectors such as Agriculture and Solid Minerals.
Hence, when the exchange was officially commissioned to begin trading in its asset classes, stakeholders pointed out that this was indeed an opportunity for players to leverage the potential of the commodity ecosystem worth about $1 trillion.
Speaking during the official the commissioning of the LCFE in Lagos, the Executive Governor, Lagos State, Babajide Sanwo-Olu, said that with the state being home to the Nigerian Exchange (NGX) Group Plc as well as the FMDQ Securities Exchange, it is proud to be home to Nigeria’s first commodities and futures exchange while adding that this is in line with the state’s policies geared towards improving the enabling environment for businesses and investments to thrive, attracting cutting edge ideas and innovations and unending inflow of financial transactions that will enable institutions to do well.
The Governor who also unveiled the “EKO GOLD COIN” for Gold trading on the floor of the exchange, revealed that the first tranche will comprise 58 units of the coin valued at over N100 million.
He said, “After this proof of concept launch, I am told that the futures listing of the EKO Gold coin will take place in tranches of £10 million each. This is no doubt the beginning of a new and exciting chapter in the investment community in Lagos, Nigeria and around the world. We are seeing a maturing of the investment marketplace and as a welcome expansion of opportunities available for those who want to invest their money”.
Whilst commending the SEC as well as other market stakeholders for the drive in establishing the LCFE, the Managing Director, LCFE, Akin Akeredolu-Ale, said the LCFE spent the past three years identifying and aligning relevant building blocks for an effective, structured, and transparent commodities ecosystem. He said the exchange is looking at trading crude notes as the country is blessed with crude oil while adding that in the next few months, the LCFE is looking at having its new energy exchange.