The
Nigerian Sovereign Investment Authority (NSIA), managers of the nation’s
Sovereign Wealth Fund (SWF) has expressed interest in reviving the
country’s Commodity Exchange, a process which government authorities estimate could cost as much as $20 million.
The government has scheduled the
comatose Abuja Securities and Commodity Exchange (ASCE) for
privatisation, but the NSIA and industry experts fear that selling the
company at its present state would come at a loss, since the assets are
almost worthless.
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| NSIA Manager |
The NSIA’s interest is therefore in
pre-privatisation investments which would mean fixing the software to
drive an efficient trading platform and putting proper processes and procedures in place, till a point that the Exchange can start trading.
The Abuja Securities Commodity Exchange
(ASCE) is no longer functional, having stopped trading several years
back, but it has up to 60 staff who do nothing but collect salaries at
the end of each month, BusinessDay discovered.
NSIA authorities are already in early
talks with the government to allow them make that very important
pre-privatisation investment and bring the Commodity Exchange to an
operational level, in exchange for shares in the company before it is
finally privatised.
“The scope of our interest is in what we defined as pre-privatisation investment, which is to revive the Commodity Exchange by investing in the platform and making sure
that the systems and processes work, so that people can actually see
what the value in the asset is, and then the government can go ahead and
privatise the company,” Uche Orji, Managing Director, NSIA said in an
interview with BusinessDay.
“We have expressed interest to the Bureau
for Private Enterprise (BPE) and the former Vice President (Namadi
Sambo). We are re-engaging with the government now to drive that plan,”
he added.
The purpose for which the ASCE was
established in 2010 has hardly been achieved because of the dominance of
the stock market and Nigeria’s attitude towards agriculture. Lack of
proper understanding of how the commodity market works has also been
been an issue for poor patronage, among other challenges.
Nigerian governments, past and present
continue to express commitment to revamp the agricultural sector which
is seen as critical to boosting the economy and creating jobs, but there
is still the struggle of getting produce to a level where they can
trade in a features market and create more income for poor farmers.
But the NSIA has identified agriculture as one of the choicest sectors in which it can invest part of the nation’s $1bn Sovereign Wealth Fund because of the sector’s capacity to create jobs and boost economic activities.
And according to Orji, the Commodity
Exchange is one agriculture sector investments that the NSIA is
considering committing part of the $400 million infrastructure component
of the nation’s SWF. “With a
Commodity Exchange, you can have a futures market which allows you to
discount future cash flow,” he argued. “Hence it reduces cost of
borrowing. It is viable in Ethiopia, it should be in Nigeria,” he
stated.
The Exchange is also one of four
government businesses/institutions that the NSIA would be investing in.
The NSIA has already made some $10 million investments in the Nigerian
Mortgage Refinance Company (NMRC); and is also acting as a co-developer
of the nation’s Credit Enhancement Facility. It has also invested in the
Development Bank of Nigeria (DBN).
Experts believe that reviving the Commodity Exchange is
critical, especially at this point that the government thinks it could
resort to agriculture, in the face of dwindling oil revenue.
Idris Adamu, CEO, Daura farms, said the ASCE, when put back
into business could even serve as a regional commodity exchange, noting
that there is now a “race as to who would be the first to establish
one, especially in West Africa.”
“We cannot have have a credible agricultural sector if our products cannot trade on the Exchange,” Adamu observed.
“Ghana is about to set up one, so we have to move really fast with revitalising our own Exchange,” he further suggested.
by Onyinye Nwachukwu
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