The import of a commodities exchange (Comex) and how it will be of benefit to the solid minerals sub-sector was well captured in the aspirations of the botched 2002 National Assembly bill for the establishment of the Solid Minerals Development Commission.
The aspirations: “The commission shall operate joint venture arrangements with the Organised Private Sector to establish a private sector-led world-class Solid Minerals Commodities Exchange to pave the way for the entry of big time operators into Nigeria’s solid minerals sector in promoting quality control as well as deriving benefits for the nation, which include membership of well-established international commodities exchanges.”
These are times for strategic thinking. Agriculture was a major contributor to the nation’s Gross Domestic Product in the sixties, a period within which even primary and secondary schools were valuable participants in agricultural production. During those times, the plantations in still feed this country till date were developed. My maternal grandfather developed cocoa and palm oil plantations in Umuahia – an investment that still benefits his children till date. Rubber plantations were established in the Edo axis and vast cocoa and cola nut plantations spawned in the South-West and stretches of cotton farms dotted the North. Other cash crops that raked in revenue included groundnuts.
But suddenly, since after the civil war, the farms and plantations were deserted while the nation scrambled for petro-money. Restiveness in the Niger Delta has now stirred the nation to wakefulness, triggering a dash to rediscover agriculture and other natural resources this nation has been blessed with. The nation is even co-opting youths – a segment of the population that had literally disowned agriculture in yesteryears – into the reinvigoration of agribusiness. But, what would the country do with the inevitable boom in agricultural production come 2014 and beyond? This truly calls for strategic thinking!
Is it possible to achieve the expected economic proceeds from the revamp of the agricultural sector without the establishment of structures that facilitate the distribution of goods, risks and profits? A viable Commodities Exchange is one of such essentials. Production is not an end to itself. The government now has to step up its thinking into aggressively work at the reinvigoration of marketing outlets for agricultural commodities. With it firmly in place, according to Micro Patino of the International Institute for Tropical Agriculture, in a presentation at the 2006 RMRDC Technoexpo, small-scale producers will benefit from an expanded commodity market with stable and predictable prices and incomes. Traders will benefit from reduced transaction costs; agro-processors will be able to get timely, adequate and standardised or graded raw materials, while consumers will benefit from a diversified choice of products of improved quality and lower food prices.
The assurance of a steady outlet for the disposal of agricultural yields will serve a greater incentive to farmers than the distribution of free fertilizers and other carrots that have failed in the past to attract Nigerians into agric enterprises. Available statistics show that about 25 per cent of grains and up to 50 per cent of fruits and vegetable produced in the country waste as post-harvest losses. The exchange, through its linkages, would channel products to areas of need, including industries, thereby reducing post-harvest losses. Current efforts at the kick-start of a Nigerian comex are therefore especially beneficial to the agricultural sector. Thereafter, the Exchange should expand its activities to include trading in solid minerals since the idea of establishment of buying houses is beginning to appear realisable.
Farming, mining and all primary production businesses are highly risky and are even pointless where markets have not been discovered. Many became disenchanted with farming in previous times, not because they had no capital, seeds or fertilizers, but because there were no organised and ready outlets to pay them for their labours while they concentrate on farming! A commodities exchange is therefore a welcome relief and the real incentive for agriventuring.
Moreover, as in agricultural production, trading is still at the Stone Age level in this country and this makes a huge joke of export development drives. The crude oil market, which is already highly developed, with predetermined international pricing systems, is still practically the only source of revenue the country can count on for now.
Often times, goods are exported without real or internationally accepted grading and pricing standards that the buyers would respect. So, the Nigerian exporter only takes what he is given by his foreign trading partner. Undoubtedly, therefore, Nigeria’s export market would only deepen with the emergence of an acceptable exchange market.
The exchange will also specify standards and grading systems that will make even online trading possible, reducing the need for intermediaries and on spot pricing. It will also lead to the creation of new jobs for upscale participants in the market options as well as emergence of indigenous analysis laboratories that will provide jobs for the nation’s scientists and other professionals. Additionally, it will encourage the establishment of more intermediary industries that will supply the needs of local industry thereby reducing the challenges of raw materials sourcing currently faced by local industries.
A viable exchange will also empirically debunk the spurious claims of some multinationals that local raw materials are substandard as products would be graded and channelled through the exchange and this will encourage patronage of locally extracted products.
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