- Lagos Commodities and Futures Exchange (LCFE) is urging the Nigerian government, led by Bola Tinubu, to establish a subsidy regime for stakeholders in the commodities ecosystem. This would address the challenge of limited access to cheap finance and enhance activities in the sector.
- Akeredolu-Ale, the CEO of LCFE, highlighted key challenges in the commodities ecosystem, including a lack of awareness and understanding of commodity exchanges among stakeholders. The ecosystem also faces issues like post-harvest loss and inadequate infrastructure, such as storage facilities and transportation.
- The successful operation of commodity exchanges requires a supportive regulatory environment. Although progress has been made in Nigeria, there is a need for clear rules on contract enforcement, quality standards, and market manipulation. Standardization of commodities is also crucial for trade facilitation, but inconsistencies in grading and quality standards pose difficulties in creating a seamless trade environment.
Lagos Commodities and Futures Exchange (LCFE) has called on Bola Tinubu’s government to establish a subsidy regime for stakeholders in the commodities ecosystem in Nigeria.
The Managing Director and Chief Executive Officer, LCFE Mr Akin Akeredolu-Ale stated this in an interview with Nairametrics.
Akeredolu-Ale noted that access to cheap finance is a challenge for stakeholders in the ecosystem and establishing a subsidy regime will help enhance activities in the commodities ecosystem in Nigeria.
- “The ecosystem comprises stakeholders and value chains who engage in several activities within the ecosystem.
- The value chains include high-quality inputs, farming, mining, trading, logistics, processing, and the market. These stakeholders encounter different challenges in their respective segments, and these have hindered the growth potential of this industry.
- The government must establish and enforce enabling policies to protect value chain players and provide subsidies to stakeholders in the ecosystem.
- Access to cheap finance is a challenge for stakeholders in the ecosystem, by establishing a subsidy regime to cater to the financial needs of the ecosystem the stakeholders will have access to cheap finance thereby boosting their productive activities,” he said.
Akeredolu-Ale noted that the commodity exchanges have made huge strides in recent years but there are still challenges being faced.
- “To name a few: Commodity Stakeholders are still unaware and do not understand the role and benefits of Commodity Exchanges. This cuts across farmers, dealers, and investors.
- The Commodities Ecosystem has been trading informally for many decades and we understand that they would not want to move right away to a structured system, but we are certain that with more engagement and sensitization they will adapt to this system.
- The ecosystem has struggled with post-harvest loss due to a lack of standard infrastructure. To develop a structured ecosystem, a certain level of control and standardization is required. This is what has been absent in our Commodities Ecosystem,” he said.
What you should know
Akeredolu-Ale says access to standard infrastructure like warehousing, vaults, Cold Storage, and effective transportation is limited in the ecosystem.
He added that inadequate storage facilities can lead to post-harvest losses, reduced commodity quality, and higher transaction costs.
- “All these pose significant challenges to Commodity Exchanges. The successful operation of commodity exchanges requires a strong and supportive regulatory environment.
- Nigeria has made headway in this area with the introduction of the Capital market under the supervision of the Securities and Exchange Commission and the amendment of the Investment and Securities Act that has included commodities as securities.
- There is still more to be done to ensure rules and policies with clear and comprehensive rules that address concerns like contract enforcement, quality standards, and market manipulation are still needed.
- LCFE and the Commission have developed some rules in this regard and with the guidance of the Commission.
- Standardization of commodities is critical for facilitating trade and maintaining transparency. However, in Nigeria, the lack of consistent grading and quality standards across different areas and market participants makes creating a seamless trade environment difficult,” Akeredolu-Ale said.
