Post by Trade facilitator on Dec 20, 2020 22:08:08 GMT 1
The Importance Of Commodities Exchange In Agro-Export Business
We need to really understand what commodities exchange is before we delve into how it will boost export and improve inflow of forex into the country. A commodities exchange is an entity that is legally established to determine, enforce all rules, and procedures for buying and selling standardized commodities in a particular region.
This exchange can also be referred to as a physical place, like the stock exchange, where trading takes place. It is equally known as the commodities market where trading takes place daily.
In the commodities market, traders hardly deliver or trade in physical commodities through the exchange. Rather, they trade what is known as a futures contract. Here, parties involved in the trade agree among themselves to buy or sell any commodity at an agreed price, regardless of what the current price is. There must be in place an agreed predetermined date of the expiration of that contract in the future. The most traded futures commodity today in the market is crude oil.
The international crude oil market has consistently been shrinking, and as a result has been bringing very low foreign exchange inflows in the country. Nigeria being mono-culturally dependent on crude oil revenue has been adversely affected by this.
It was on this note that some of the high level securities dealers in Nigeria came together and urged the federal government to make use of commodities exchanges to grow the economy. The agricultural sector will experience a boom, and thereby creating jobs for the teeming unemployed youths in our country.
The chairman of the Association of Dealing Companies of Nigeria ([HASH]ASHON), Onyenwechukwu Ezeagu, advised the government that one of the major ways Nigeria can overcome some of the devastating effects of Covid-19 on the economy is to establish and develop commodities exchanges as alternative sources of revenue for the nation.
It is very important to understand that if this country can establish a functional commodities market, the economy will be highly diversified through increased foreign exchange earnings from the market.
When there is a functional commodities exchange market, all classes of assets like, various agricultural goods, crude oil, and other products will be traded in the most efficient and transparent manner with guaranteed quality of the products.
The local industries will benefit immensely from the establishment of the exchanges because manufacturers will be sure of steady supply of raw materials for their operations. Both the farmers and local miners will benefit from an efficient system that opens their eyes to better prices and also strong assurance that there is a guaranteed market for their produce.
The importance of a well-organized and efficient commodities exchange in any economy looking for avenues to increase foreign exchange earnings and diversification of earning cannot be over emphasized. Our government must make a conscious effort to key in to a viable commodities exchange market for deepening and developing the economy after the devastation caused by the Covid-19 pandemic.
Based on this, the Association of Dealing Companies of Nigeria (ASHON), and other notable Nigerians floated the Lagos Commodities and Futures Exchange (LCEF). Through this laudable effort, they have shown the way forward and pointed the light for the nation to follow. This singular action has the capability to greatly lower the staggering unemployment rate and boost the economy of the nation when it takes off.
The Managing Director and Chief Executive Officer of the Lagos Commodities and Futures Exchange, Mr. Akin Akeredolu-Ale has hinted that the exchange will soon commence operations. He also stated that on commencement, trading on [HASH]agricultural [HASH]commodities, solid minerals, currencies, and oil and gas will start immediately.
It is important that small scale agro-allied entrepreneurs will put their ears to the ground in order to know as soon as the exchange starts operation so that they can key in early.
We need to really understand what commodities exchange is before we delve into how it will boost export and improve inflow of forex into the country. A commodities exchange is an entity that is legally established to determine, enforce all rules, and procedures for buying and selling standardized commodities in a particular region.
This exchange can also be referred to as a physical place, like the stock exchange, where trading takes place. It is equally known as the commodities market where trading takes place daily.
In the commodities market, traders hardly deliver or trade in physical commodities through the exchange. Rather, they trade what is known as a futures contract. Here, parties involved in the trade agree among themselves to buy or sell any commodity at an agreed price, regardless of what the current price is. There must be in place an agreed predetermined date of the expiration of that contract in the future. The most traded futures commodity today in the market is crude oil.
The international crude oil market has consistently been shrinking, and as a result has been bringing very low foreign exchange inflows in the country. Nigeria being mono-culturally dependent on crude oil revenue has been adversely affected by this.
It was on this note that some of the high level securities dealers in Nigeria came together and urged the federal government to make use of commodities exchanges to grow the economy. The agricultural sector will experience a boom, and thereby creating jobs for the teeming unemployed youths in our country.
The chairman of the Association of Dealing Companies of Nigeria ([HASH]ASHON), Onyenwechukwu Ezeagu, advised the government that one of the major ways Nigeria can overcome some of the devastating effects of Covid-19 on the economy is to establish and develop commodities exchanges as alternative sources of revenue for the nation.
It is very important to understand that if this country can establish a functional commodities market, the economy will be highly diversified through increased foreign exchange earnings from the market.
When there is a functional commodities exchange market, all classes of assets like, various agricultural goods, crude oil, and other products will be traded in the most efficient and transparent manner with guaranteed quality of the products.
The local industries will benefit immensely from the establishment of the exchanges because manufacturers will be sure of steady supply of raw materials for their operations. Both the farmers and local miners will benefit from an efficient system that opens their eyes to better prices and also strong assurance that there is a guaranteed market for their produce.
The importance of a well-organized and efficient commodities exchange in any economy looking for avenues to increase foreign exchange earnings and diversification of earning cannot be over emphasized. Our government must make a conscious effort to key in to a viable commodities exchange market for deepening and developing the economy after the devastation caused by the Covid-19 pandemic.
Based on this, the Association of Dealing Companies of Nigeria (ASHON), and other notable Nigerians floated the Lagos Commodities and Futures Exchange (LCEF). Through this laudable effort, they have shown the way forward and pointed the light for the nation to follow. This singular action has the capability to greatly lower the staggering unemployment rate and boost the economy of the nation when it takes off.
The Managing Director and Chief Executive Officer of the Lagos Commodities and Futures Exchange, Mr. Akin Akeredolu-Ale has hinted that the exchange will soon commence operations. He also stated that on commencement, trading on [HASH]agricultural [HASH]commodities, solid minerals, currencies, and oil and gas will start immediately.
It is important that small scale agro-allied entrepreneurs will put their ears to the ground in order to know as soon as the exchange starts operation so that they can key in early.
