By Cynthia Alo
Chief Executive Officer (CEO) of Sterling Bank Plc, Mr Abubakar Suleiman, has identified lack of trust as the main problem affecting the growth and development of the Nigerian commodity market.
He disclosed this while delivering a welcome address on a webinar organised recently as part of measures to promote SABEX, a digital commodity exchange empowered by blockchain technology. The webinar held with the theme: AgroCommodities as a Viable Asset Class.
SABEX, which was designed to facilitate the exchange of agro commodities, operates through an ecosystem of buyers, financiers, warehouse operators and other players in the agro commodity trading business across Nigeria.
On SABEX, traders – typically farmers – can pledge their warehoused agricultural goods as collateral to access instant loans to facilitate their business growth.
Suleiman said the webinar had the objective of developing trust in the commodity market because there is currently no trust among players in the sub-sector, starting from farmers to micro players and exporters across the value chain.
He said there is a need to build trust in the payment, partnership, product, price and delivery elements of the agro commodity trading business. He added that “We need to financialise commodities to the point that they are similar to digital assets.”
A Senior Fellow/Associate Professor and full-time member of the Lagos Business School, Dr. Adedoyin Salami, who delivered the keynote address, noted that agriculture is a major sector that represents one-quarter of the Nigerian economy.
According to him though the agricultural sector is declining, it still accounts for a significant proportion of jobs and has remained resilient over the years despite the ravaging effects of the Covid-19 pandemic, which saw Nigeria’s economy contract in two consecutive quarters of 2020.
Salami who is also a member of the Nigerian Economic Summit Group (NESG) and Chairman of the Economic Advisory Council (EAC) of the Federal Government, said Nigerian commodities would compare favourably with all other asset classes, even though Nigeria is lagging behind other global players.
Mr. Ade Adefeko, Vice President, Corporate and Government Relations of Olam International, identified opaqueness, lack of trust, and transparency as some of the problems affecting the Nigerian commodity market.
He said that going forward, there is a need for predictability, price stability and the need to work on the distorted agricultural space, adding that although opportunities abound, there is a need to structure the market so that the farmer can get value for his produce at the right price.
Making remarks, Mr. Ayodeji Balogun, Managing Director and Chief Executive Officer of AFEX Commodities Exchange Limited, said Nigeria produces about 28 million metric tonnes of grains yearly but have storage capacity for only 1.4 million metric tonnes that can last for only two weeks in a year as against South Africa and China that have 100 percent storage capacity.
In her own remarks at the webinar, Ms Jumoke Olaniyan, Head of Market Infrastructure with FMDQ noted that while there is still a lot to be done to improve commodity trading in Nigeria, recent legislations; especially the amendment of the Companies and Allied Matters Act which defines securitisation and securities in the Nigerian financial market has given credence to further enforcing securitised asset as a financial instrument which is bankruptcy remote.
The session was moderated by Dr. Tayo Aduloju, Senior Fellow, Public Policy and Institutional Development at The Nigeria Economic Summit Group (NESG).