Commodity Exchanges Seen As Better Deal For Farmers Jun 14, 2022 10:25:23 GMT 1
Post by Trade Forum on Jun 14, 2022 10:25:23 GMT 1
Commodity Exchanges Seen As Better Deal For Farmers - Direct Buying Of Produce From Farmers By Foreigners Has Been Banned
It has been debated that Nigerian Commodity Exchanges rather than licensed buying agents will be the best option for Nigerian farmers.
Government licensed commodity buyers or what you can call commodity buying agents have been existing in the country for as long as God knows, but what has been their contribution to the National economy or to the farming community in particular?
Following the ban by the Federal Government on direct purchase of farm products by foreign buyers from farmers in Nigeria, agricultural experts have said that commodity exchanges rather than licensed agents will be the best option for the farmers of the Nation.
The Federal Government has recently announced the ban with the Minister of Industry, Trade and Investment, Niyi Adebayo saying that appropriate mechanisms have been approved to ensure competitive prices for commodities of indigenous farmers in a bid to protect them from exploitation by foreigners or local buyers.
According to him, only licensed local buying agents who must be registered by the relevant National Commodity Associations will be able to buy goods directly from the farmers and sell to the foreigners.
But the question is, is this the standard procedure all over the world? That local buying agent will be licensed to buy produce from farmers and sell to foreign buyers by themselves?
"The international practice is through licenced warehouses or the Commodity Exchanges, the ban has brought the country a step closer, but a functional Commodity Exchange is a long-term solution," according to Obiora Madu, Chief Executive of Multimix Group.
"In the long run the licensed agents will only become middlemen and would frustrate the process," according to him.
A Commodities Exchange is a legal entity that determines and enforces rules and procedures to trading standardized commodity contracts and related investment products.
Why is the case of Nigeria different?
Nigeria currently has three Commodity Exchanges that are regulated by the Securities and Exchange Commission. Two are privately owned – AFEX Commodities Exchange Limited and Lagos Commodities and Futures Exchange.
The Nigerian Commodity Exchange, formerly Abuja Securities & Commodities is the only government commodity exchange, and is yet to commence operations.
It has been discovered that in Nigeria most foreign traders and commodity buyers, especially Indians work hand-in-hand with some Nigerians in purchasing agricultural produce directly from farmers thereby causing market distortions.
Some executives participating in the value chain have been saying that the participation of foreign buyers buying directly from Nigerian farmers has been causing distortions in the market.
However, they are concerned about the implementation because they want the middleman to be regulated in the value chain so they don't distort the market anymore.
"It is easier for a foreigner to get a Nigerian to buy for him directly from the farm gate; we need a mechanism in place to ensure that they buy from Commodity Exchanges or warehouses as it is done globally."
It may surprise you that the country's exports sector is still largely unorganized, undocumented and hard to track as majority of the trade takes place in the informal sector which is prone to corruption and rob the government of the much-needed foreign exchange revenue.
Also the Nigerian Export Promotion Council (NEPC) has confirmed that about 80% of the non-oil export transactions of the country are not being recorded, accounting for the wide disparity in official statistics in the country and those provided by the ITC, a subsidiary organization of the World Trade Organization and the United Nations Conference on Trade and Development.
Therefore stakeholders in the sector had called on the government at all levels to organize the commodity value chain and regulate the activities of foreign buyers in the country.
Mr. Vincent Iyama, National President of the Federation of Agricultural Commodity Association of Nigeria commended the government for the ban but called for an effective system to ensure sustainability.
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