Stakeholders, including the Chief Executive Officer (CEO) of Sterling Bank Plc, Abubakar Suleiman, have identified lack of trust as a major challenge affecting the growth of the Nigerian commodity market.
Suleiman, while delivering a welcome address at a webinar organised recently as part of measures to promote SABEX, a digital commodity exchange empowered by blockchain technology, stated that there is currently no trust among players in the sub-sector, from farmers to micro players and exporters across the value chain.
The webinar, themed ‘Agro commodities as a viable asset class’, sought to address challenges in the exchange of agro commodities while encouraging the adoption of SABEX, which ensures that traders can pledge their warehoused agricultural goods as collateral to access instant loans.
Suleiman said there was a need to build trust in the payment, partnership, product, price and delivery elements of the agro commodity trading business, adding that “we need to financialise commodities to the point that they are similar to digital assets.”
The CEO said there is a need to get to the point of higher productivity by scaling and bringing efficiency and quality inputs into the agricultural produce space, adding that there is also the need to change the nature of the asset and increase the liquidity of commodities. He said SABEX intended to deliver on trust.
A senior fellow/associate professor of the Lagos Business School, Dr. Adedoyin Salami, who delivered the keynote address, noted that agriculture was a major sector that represents one-quarter of the Nigerian economy.
Salami, an economist and consultant, said although 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.
Salami said Nigerian commodities would compare favourably with other asset classes even though the country lagged behind other global players.
He said, from a global perspective, there is a huge potential for investments in physical assets in Nigeria, especially investments in storage and irrigation because the country’s agriculture is currently rain-fed and seasonal.
The university don explained that agriculture could also have a huge impact on the country through savings mobilisation, food security improvement, poverty reduction, increased financial inclusion, revenue diversification, and the complementary role of regulators that would ensure transparency, capital adequacy, policy consistency, constant engagement with stakeholders, encouraging innovative products and revision of regulations to global best practice.
Vice President, Corporate and Government Relations of Olam International, Ade Adefeko, 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.
Managing Director and Chief Executive Officer of AFEX Commodities Exchange Limited, Ayodeji Balogun, 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.
He observed that because of the insufficient storage capacity whenever there is a logistics challenge on the road between the North and the South, or the Covid-19 Pandemic which led to lockdown last year, food prices jumped up, adding that creation of warehouses in different parts of the country will help to solve the problem.
Head of Market Infrastructure with FMDQ, Jumoke Olaniyan, 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.