NIGERIA – The budding agricultural commodity warehousing industry in Nigeria, which stakeholders estimate would be worth over N500 billion annually, would need legislative backing to achieve its full potential.
This is according to Sotonye Anga, coordinator, agribusiness segment of the Community of Agricultural Stakeholders of Nigeria (CASON), which comprises farmers and other investors along the agricultural value chain.
The commodity warehousing industry, which is simply a private sector form of the defunct government-owned commodity exchange boards, is relatively new in Nigeria but has contributed immensely to the growth of the economy of countries such as Ethiopia and Tanzania.
The system, which was launched earlier in July in Nigeria by Olusegun Aganga, minister of industry, trade and investment, would give farmers, processors and commodity dealers the opportunity of storing/preserving their commodities, upon which they would be issued electronic receipts, called electronic Warehouse Receipt System (e-WRS), with value equivalent to the commodities warehoused.
This receipt could be used as collateral for loans from banks, traded on the floor of the Nigerian Commodity Exchange (NCX), or the farmers could keep their commodities in the warehouses until prices appreciate, Anga said.
“The warehouse receipt is agricultural currency, but without legislative backing it may not be worth more than ordinary paper. But with the right legislation in place, it would be as useful as the share certificate of the Nigerian Stock Exchange,” he said.
At the launch of the system in July, Aganga noted that commodity warehouse receipts would make farmers, processors and other dealers to be more painstaking in processing of agricultural produce.
It would also reduce post-harvest losses and make it easier for industries that use agricultural raw materials to source quality grains, he said.
Currently, a draft bill sent some months ago by stakeholders is awaiting passage on the floor of the National Assembly.
Meanwhile, Stanbic IBTC Bank is already providing a trading platform for agricultural commodities and would be serving as the settlement bank for the Nigerian Commodity Exchange’s pilot e-WRS.
Sola David-Borha, chief executive, Stanbic IBTC Holdings, said at the launch in Abuja that Stanbic IBTC Bank had a well-structured business unit that focuses on agriculture and that the bank was accessible to all operators in the sector.
Yusuf Abdulrahim, chief executive officer, NCX, also stated that an active commodity exchange would significantly help in unlocking Nigeria’s agriculture potential, especially the revival of cocoa and cotton production for export.
Johnson Chukwu, managing director, Cowry Asset Management Limited, said the possibility of warehouse managers giving false value to the worth of the commodities brought in would not arise.
“If the farmer takes a loan based on the warehouse receipt and defaults, the warehouse managers would be held responsible if the value of the commodity falls short of the value on the receipt,” Chukwu said.
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