ASHON advises on commodities exchanges’ growth

The Association of Securities Dealing Houses of Nigeria (ASHON) has urged the Federal Government to initiate policies that would stimulate the growth of commodities exchanges.

ASHON has advocated a level playing field for all operators of commodities exchanges, saying an enabling environment would enhance the optimal performance of the commodities exchanges’ value chain.

The association’s Chairman, Onyenwechukwu Ezeagu, noted that the proposed capital injection of N50 billion into the Commodity Exchange of Nigeria (NCX) might have the unintended effect of creating an uneven playing ground for other commodities exchanges that are privately promoted.

He listed measures that would spur optimal performance in the sub-sector to include enactment of relevant policies to prevent illegal mining by foreigners, ensuring autonomy of the Securities and Exchange Commission (SEC) and protection of export proceeds.

Others are legislating laws that link agricultural commodities to financial markets and support pension funds to increase participation in the commodities ecosystem.

The ASHON boss, however, described the announcement to inject N50 billion into the NCX as a welcome development, noting that any act by the Federal Government to stimulate the growth and development of the commodities ecosystem would be appreciated.

According to him, the commodities exchanges play an important role in the commodities ecosystem because they introduce structure, transparency and price discovery into the system.

“It is important to note that commodity exchanges are not commodity traders. They are simply structured platforms that deal in both commodities spots and commodities securities in multi-asset classes as approved by SEC.

“Although this announcement is a welcome development it is also important to note that any intervention into one commodities exchange creates an uneven playing field that could defeat the benefits of healthy competition among the participants in the ecosystem.

“It is also important to note that this injection is better served within the industry to support the farmers, aggregators, miners, refiners, processors and all the other participants in the commodities ecosystem.”

To encourage privately-owned commodities exchanges, Ezeagu urged government to ensure an open liaison opportunity between its agencies and the commodities exchanges to create the opportunity for joint stakeholder sensitisation.

Also, he called for stronger engagements for the development of the legal and regulatory framework for effective commodities trading.

“Support for the ecosystem can be provided in terms of sensitisation programs for all the participants to educate them on the certification and standardisation requirements for commodities, relevant production practices, packaging best practices and cold chain equipment.

“Support can also be provided by creating programmes for leasing heavy equipment, acquiring enhanced seedlings, accessing effective storage and cold chain facilities and many other programmes that would enhance the market.”