In this article, cacheblog explores the significance of Comex (Commodities Exchange) and its potential benefits for the solid minerals sub-sector in Nigeria, as outlined in the 2002 National Assembly bill aimed at establishing a Solid Minerals Development Commission.
Where We Were
Times are changing, and strategic thinking is more critical than ever. Back in the 1960s, agriculture played a significant role in Nigeria’s GDP. Even primary and secondary schools actively participated in agricultural production.
Plantations established during this period still contribute to the country’s economy today. For instance, my maternal grandfather’s cocoa and palm oil plantations in Umuahia continue to benefit his male children (I wish the Igbo people would be fair to their female children as well especially as women like my mother contributed immensely to the upliftment of the family before and after her father’s death- but then, that is a conversation for another day) probably to this day.
Similarly, rubber plantations in the Edo region, vast cocoa and cola nut plantations in the Southwest, and cotton farms in the North were major revenue sources.
Moreover, as in agricultural production, trading is still at the Stone Age level in this country, and this makes a huge joke of export development drives. The crude oil market, which is already highly developed, with predetermined international pricing systems, is still practically the only source of revenue the country can count on for now.
Post Civil War Era
However, post-Civil War, agriculture and plantations were abandoned in favour of petro-money. The unrest in the Niger Delta and the extant anorexia for fossil fuels has prompted a renewed interest in agriculture and the country’s other equally important natural resources.
Even the youth, who had shunned agriculture in the past, are now becoming actively involved in agribusiness. But what happens when agricultural production booms, can we eat it all up? This calls for strategic planning.
Maximizing the Proceeds of Our Agricultural Revival
To maximize the economic gains from the agricultural sector’s revival, we need structures that facilitate the distribution of goods, manage risks, and ensure profits. A viable Commodities Exchange is one such essential component.
Production alone is insufficient. The government must focus on creating efficient marketing outlets for agricultural commodities. According to Micro Patino of the International Institute for Tropical Agriculture (IITA), the presence of a well-established exchange ensures small-scale producers benefit from an expanded, stable, and predictable commodity market.
A well-established comex in Nigeria will reduce transaction costs for traders, provides agroprocessors with timely, standardized raw materials, and offer consumers a variety of high-quality products at lower prices.
Provision of Marketing Outlets More Beneficial Than Free Agroinputs
A guaranteed outlet for agricultural yields is a more enticing incentive for farmers than free fertilizers and other previous initiatives that failed to attract Nigerians to agriculture. Shockingly, about 25% of grains and up to 50% of fruits and vegetables in Nigeria go to waste due to post-harvest losses.
The exchange, through its linkages, can direct products to areas of need, including industries, thereby reducing these losses. The ongoing efforts to establish a Nigerian Comex are especially beneficial to the agricultural sector. In the future, the Exchange should expand to include solid minerals, as buying houses for such commodities become more feasible.
Farming, mining, and primary production businesses are risky and often seem futile without well-established markets. Many individuals lost interest in farming not due to a lack of capital, seeds, or fertilizers, but because they could not make mentionable profit from their ventures as there were no organized outlets to sell their produce. A commodities exchange is a welcome relief and a significant incentive for agribusiness ventures.
Comex Will Move Us Away from Stone Age Trading
Moreover, as in agricultural production, trading is still at the Stone Age level in this country, and this makes a huge joke of export development drives. The crude oil market, which is already highly developed, with predetermined international pricing systems, is still practically the only source of revenue the country can count on for now.
For as long as trading in Nigeria remains at a primitive level, export development will continue to be a pipe dream. While crude oil trading is practised according to international standards, it is not the same for other commodities from Nigeria as goods are exported without internationally accepted grading and pricing systems.
Often, goods are exported without real or internationally accepted grading and pricing standards that overseas buyers would respect. So, the Nigerian exporter only takes what he is given by his foreign trading partner. Undoubtedly, therefore, Nigeria’s export market would only deepen with the emergence of an acceptable exchange market.
An Established Comex Will Facilitate Development of Non-oil Sector
The exchange will also specify standards and grading systems that will make even online trading possible, reducing the need for middlemen and on-spot pricing. It will also lead to the creation of new jobs for upscale participants in the market options as well as emergence of indigenous analysis laboratories.
It is sad but true that Nigeria is yet to establish analysis laboratories whose result can be unquestionably accepted elsewhere. Therefore, product assay services are still procured overseas at very exorbitant rates.
Our export prices will be more attractive if such services could be reliably sourced within. An established exchange market will entrench such services locally and enhance Nigeria’s export capabilities by establishing grading and pricing standards; it will also reduce the need for middlemen and facilitate online trading.
Moreover, this will create jobs for professionals, scientists, and analysts, as well as encourage intermediary industries to supply local manufacturers with the raw materials they need. It will also debunk claims that local raw materials are substandard, as all products will be graded and channelled through the exchange, promoting the use of locally extracted resources.
In conclusion, the establishment of a Comex is crucial for the growth and development of both the agricultural and solid minerals sectors in Nigeria. It will not only facilitate efficient trading but also provide stability, transparency, and opportunities for economic growth.