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By Chinwendu Obienyi
In its bid to transform the agricultural value chain across the Africa especially Nigeria, Africa’s leading commodity exchange, AFEX and NG Clearing Limited, West Africa’s premier Central Counterparty, have signed an agreement to develop the infrastructure that facilitates trading and central clearing of futures contracts for commodities such as cocoa, paddy rice, maize, and soybean in Nigeria.
The agreement is a precursor to the development of technological infrastructure and the introduction of commodity futures in Nigeria.
AFEX’s commodity exchange will serve as the trading venue while NG Clearing will serve as the Central Counterparty that guarantees the settlement of trades.
Currently, trading commodities such as cocoa, maize, paddy rice, and others are limited to the spot and OTC markets.
Speaking to newsmen during the signing ceremony which held in Lagos on Wednesday, the Chief Executive Officer, AFEX, Ayodeji Balogun, said the exchange runs the largest commodity marketplace in West Africa and is building new products.
“Parts of these products are commodity derivatives. Therefore, this partnership ensures that NG Clearing would provide that guarantee for the market and ensure that whatever anybody is buying today or in the future, he would get the value for it. Likewise, whatever anyone is selling, today or in the future, he would get value for.
You look at the agricultural sector, it has a $100 billion dollar value in Nigeria alone. Having a derivatives market allows you to grow that by ten folds. Imagine being able to grow from a 100 billion to ten fold, that is a trillion dollar economy only around the agricultural-financial instruments being traded. It creates wealth, opportunities and also grows the economy at large”, Balogun said.
According to him, “this collaboration with NG Clearing is a new leap for the financial market in the country that further opens opportunities for generating shared prosperity through the commodity market. We believe that this would further position the country as a preferred capital destination with a viable path of effectively managing risks in key sectors of the economy.”
For his part, the Managing Director, NG Clearing Limited, Tapas Das, expressed excitement, noting that this partnership with AFEX will usher in a new phase in the development of Nigeria’s financial and agricultural sectors.
“As the central counterparty, we bring confidence and trust to the market as we will be guaranteeing the execution of the trades through our resilient collateral management processes.”
We are proud of this collaboration and confident it will unlock the untapped potential of commodity derivatives in Nigeria”, Das said.
Das, who was represented by the Chief Operating Officer, Ayokunle Adaralegbe, reiterated the company’s commitment to regulation and strong compliance.
