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Leveraging Commodity Exchange as Loss Reduction Strategy for Farmers



Zambian economy
  • Leveraging Commodity Exchange as Loss Reduction Strategy for Farmers

Over the years, smallholder farmers have been experiencing a disorganised market system where they have to sell their products for lower than the market price. This is because fragmentation can lead to farmers being exploited.

Owing to the lack of awareness from farmers, various intermediaries have taken advantage of the disorganised marketing arrangement to exploit farmers.

As a result of the monopolistic nature of such arrangements, the intermediary can enjoy being the only purchaser a farmer has contact with for his produce.

This lack of competition means that a farmer has no choice but to take whatever price is offered. Sometimes, the amount offered to such a farmer for his produce maybe as low as 30 per cent of the on-going market price.

To address this problem, experts say a commodity exchange system offers a more stable, ethical trading platforms whereby farmers can benefit from fairer transactions and learn how to make wiser marketing and investment decisions.

They contend that organised and regulated commodity exchanges can therefore provide revolutionary changes to the way smallholder farmers market their produce.

A commodity exchange is highly efficient platforms for buyers and sellers to meet primarily to manage their price risks better. It is also a system that helps to improve the marketing of their physical products. It makes the economy more inclusive, boosting the links between agriculture and finance, and making the commodity sector more efficient and competitive.

Experts also say the exchange helps to disseminate market price and other information which farmers will not otherwise have access to. This, according to them, will help to stem the tide of post-harvest losses which the Nigerian Stored Products Research Institute estimated to be at $8.9bn (About N2.71trn based on the N305 to a dollar official exchange rate of the Central Bank of Nigeria).

Experts add that once farmers know what the market price is, they can enjoy fairer negotiations with purchasers and can make more informed judgements on what to invest in the future and how to market it. A commodity exchange also facilitates a free and open auction system that helps farmers sell their goods close to the market price, or even above it.

This, according to experts, is another feature that can help farmers make more informed decisions on their future farming activities such as what to invest in and how to diversify their sources of income. This is because the execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal.

The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of commodity exchange is to make available these prices as far as possible, it is very likely to benefit the farmers.

Also, due to the time lag between planning and production, the market-determined price information disseminated by the exchange would be crucial for their production decisions. Some of the agricultural produce being traded on the Nigeria Commodity Exchange are maize, sesame seed, gum arabic, sorghum, cocoa, palm produce, and soyabeans among others.

The Managing Director, New Nigeria Commodity Marketing Company, Mr. Abubakar Musa, says farmers can reduce post harvest losses when they take advantage of the trading opportunities in the commodity exchange. He says already, NNCMC has entered into an agreement with the Nigeria Commodity Exchange to improve marketing of agricultural produce in Nigeria.

This, he says, will enable farmers reduce losses usually caused by price fluctuation. Apart from being able to trade their produce on the exchange, adding that farmers can use the trading platform of the exchange to discover better competitive prices for their produce.

The Managing Director, Nigeria Commodity Exchange, Zaheera Baba-Ari, says that the exchange has been repositioned to a manner where agricultural produce brought to the exchange will not stay more than a week before being sold.

She says, “The basic reasons why commodity exchange are established are to provide market for your commodities and to provide you with storage. Because you find out that the basic problem of most farmers all over the world is storage, market and finance and with the exchange the way it has been developed, we take care of the marketing, we are into warehousing.

“We also ensure that farmers have money to do other things and go back to the farms. We do that through the warehouse receipting system.

“You use your commodities, you don’t have to sell them at harvest time, you use them as collateral, you go to the bank and then you get some money to be able to do some other things and when it’s time for you to sell, you come back take your commodities which have been well preserved and sell it on the Exchange.”

She adds that with the trading platform provided by the commodity exchange, the business of farming will become lucrative.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Electricity Consumers Get 611,231 Meters Under MAP Scheme



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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed



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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN



petrol Oil

N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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