Need for legislative backing in commodity warehousing industry

The budding agricultural commodity warehousing industry in Nigeria, stakeholders estimate would be worth over N500 billion annually, would need legislative backing to achieve its full potential.

This is according to agribusiness segment of the Community of Agricultural Stakeholders of Nigeria (CASON), which comprises of farmers and other investors along the agricultural value chain.

This 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.

This system launched in July in Nigeria by Olusegun Aganga, minister of trade and industry, would give farmers, processors and commodity dealers the opportunity of storing/preserving their commodities upon which they would be issued an electronic receipt called e-WRS with value equivalent to the price of the commodity they have warehoused. This receipt can be used as collateral in taking loans from banks, can be traded on the floor of the Nigeria Commodity Exchange or the farmers can keep their commodities in the warehouses until prices appreciate.

Sotonye Anga, coordinator, agribusiness segment of CASAON, 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.“

Anga also noted that commodity warehouse receipts would make farmers, processors and other dealers to be more painstaking in processing of agricultural produce and it would reduce post-harvest losses and make it easier for industries that use agricultural raw materials to source quality grains.

Currently, a draft bill, sent some months ago by stakeholders is before the National Assembly awaiting passage.

Johnson Chukwu, managing director, Cowry Asset Management Limited, said the possibility of warehouse managers giving false values to the worth of the commodities brought in would not arise, saying “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.”

Meanwhile, Stanbic IBTC Bank is already providing a trading platform for agricultural commodities and would be serving as the settlement bank for the Nigeria Commodity Exchange’s (NCX) pilot electronic Warehouse Receipt System (e-WRS).

Sola David-Borha, chief executive of Stanbic IBTC Holdings, explained at the launch of the Electronic Warehousing System in Abuja recently that “Stanbic IBTC has a well-structured business unit that focuses on agriculture and that the bank is accessible to all operators in the sector.”

Yusuf Abdulrahim, CEO, Nigeria Commodity Exchange, also stated at the launching recently that an active commodity exchange will significantly help in unlocking Nigeria’s agriculture potential, especially the revival of cocoa and cotton production for export.

OLUYINKA ALAWODE