For the Nigerian commodities market to achieve the desired growth and positively impact the economy, it is important for the country to encourage large-scale farming, an expert has said.
The Senior Vice-President, EMEA, INTL FCStone, which is listed on the NASDAQ Stock Market in the United States, Mr. Stuart Ponder, said in an exclusive interview with our correspondent on Wednesday that while the country’s commodity market had a huge potential, a lot of work had to be done.
“Because farming is small- scale here, a commodities exchange cannot flourish. It cannot flourish until you have volume. You have to have volume in order to have liquidity to trade,” he said.
Ponder, who said smaller countries had been more successful in developing exchange, explained that Malawi had been very successful in developing its commodities exchange because it had larger farms.
He said, “The advantage that Malawi has had is that its farms are larger. The difficulty with Nigeria is that the predominant agricultural producer is a small-scale farmer. I think something like 98 per cent of farming in Nigeria is small scale farming.
“The small-scale farmer is in a remote area, probably doesn’t have good roads to get into town, and doesn’t have good communication. So, when he harvests his products, and bearing in mind that he is a subsistence farmer and probably doesn’t have a bank account, he needs to sell his products immediately because he’s got people to feed, school bills to pay, medical bills to pay.
“So, he will sell his products at the point of harvest and what happens for him then, is that he gets the price that the market can give him and if it is at the point of harvest, that is the point when supply is at its highest and that is the point when the price is at its lowest.”
He, however, said it was important for the country to develop it commodities market as it would have great impact on the economy.
He said that by developing formal, structured markets were people can come and trade on an exchange without actually seeing the products, economic activities would increase.
“The benefit of being able to trade without seeing the product is that you can bring many more actors unto the stage; there buyers, sellers, people that want to take risks, and banks and finance houses that may be prepared to lend,” he said.
Ponder’s firm, INTL FCStone, and the Financial Markets Dealers Association held a seminar on commodity markets and risk management in Lagos on Wednesday with the aim of stimulating the growth of the market.
Asked about its expected impact, he said the company, which provides risk management and trading solutions in commodities and foreign exchange payments, wanted to be part of the Nigerian, and African story.
He said, “At the moment our trading on (commodities) exchanges in Africa doesn’t happen because the exchanges are not there. So, we see a future state were these markets have evolved and we want to be a partner in the development processes of these exchanges.”
He said the firm was building relationships with Nigerian partners and was open to having Nigerian stakeholders visit the US to see how a vibrant commodities market functioned.
He commended the FMDA for its role in developing the market and for partnering with INTL FCStone to hold the seminar, stressing that such partnerships were vital for the development of the market.
The Country Manager, Africa Exchange Holdings, Mr. Ayodeji, said the seminar was very educative, stressing that one of the sessions gave people an understanding of various asset classes and how they could be used in the financial and commodities market.
He added that the seminar also explained the various business models and the level of national impact the commodities market could have.
He said, “Looking at the caliber of audience that we had, I think there will be an increased understanding of the commodities exchange and the advantages that it has.”
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Source : Punch