[ad_1]
AFEX, Africa’s leading commodity exchange, and NG Clearing Limited, West Africa’s premier Central Counterparty, have signed an agreement to develop the infrastructure that facilitates trading and central clearing of futures contracts for commodities such as cocoa, paddy rice, maize, and soybean in Nigeria.
The partnership, aimed at transforming the agricultural value chain, was formalised at a signing ceremony, held in Lagos.
The agreement is a precursor to the development of technological infrastructure and the introduction of commodity futures in Nigeria. AFEX’s commodity exchange would serve as the trading venue while NG Clearing would serve as the Central Counterparty that guarantees the settlement of trades.
Speaking at the ceremony, Ayodeji Balogun, CEO of AFEX, highlighted the significance of the agreement in light of AFEX’s mission of being a reference point for commodities in Africa.
He said that “We share a drive with market regulators and other players in Nigeria’s capital market to deepen the market and unlock financing options and alternative investment classes for players in the commodities ecosystem.
“This collaboration with NG Clearing is a new leap for the financial market in the country that further opens opportunities for generating shared prosperity through the commodity market. We believe that this would further position the country as a preferred capital destination with a viable path of effectively managing risks in key sectors of the economy.”
At the ceremony, Mr Taps Das, CEO of NG Clearing Limited, said the partnership with AFEX would usher in a new phase in the development of Nigeria’s financial and agricultural sectors.
“As the Central Counterparty, we bring confidence and trust to the market as we will be guaranteeing the execution of the trades through our resilient collateral management processes,” Das said.
In his comment, Mr Ayokunle Adaralegbe, the Chief Operating Officer of NG Clearing Limited noted that by ensuring the right infrastructure is in place, NG Clearing is an enabler of growth for the derivatives market and the economy as a whole.
“We are proud of this collaboration and confident it will unlock the untapped potential of commodity derivatives in Nigeria,” he said.
The agreement between AFEX and NG Clearing comes at a time when unlocking value in Nigeria’s agricultural sector is at the front burner of government initiatives.
The AFEX market turnover currently stands at N123.72 billion while NG Clearing earlier facilitated the introduction of equity index derivatives in April 2022, serving as a Central Counterparty to the NGX Exchange.
Currently, trading commodities such as cocoa, maize, paddy rice, and others are limited to the spot and OTC markets. The spot and OTC market exposes market participants to frequent price movements and counterparty risk. With the futures market, participants can lock in prices and positions of various commodities ahead of time without facing the risk of default by a counterparty.
Beyond helping market participants mitigate price risk, the commodity futures market would deepen the financial system while acting as a catalyst for the continued development of the agricultural sector.
[ad_2]
