Benefits of NCX
NCX will provide the following benefits to the actors in the commodity value chains.
To Farmers
- Provides assured market for farmers to sell their commodities at market determined prices and earn more income which can be reinvested to increase production
- Provison of efficient storage facilities through the network of warehouses accredited by the Exchange and which reduces postharvest losses in the country.
- The increased awareness that graded and certified commodities are traded on the Exchange at premium prices will make farmers imbibe the culture of good agricultural practices and become proficient in the production of high quality produce.
- The of electronic Warehouse Receipt System (eWRS) of NCX will open a new financing window for farmers to have access to credit using their commodities as collateral securities.
- The eWRS will eliminate the need for farmers to sell produce at harvest period when prices are too low to cover production costs.
To Solid Minerals Sector
- Formalize trading of solid minerals in a centralized market for miners and buyers of solid minerals to transact solid mineral contracts expediently, efficiently and transparently
- Price transparency and default proof clearing and settlement process on the Exchange will promote foreign direct investment in the solid minerals sector
- This will also stimulate interest of local banks in funding solid mineral development and projects in Nigeria
- The efficient market offers by the Exchange will engender growth and transformation of artisanal mining into mechanized mining.
To Agro Processing Companies
- The Exchange is a veritable platform for agro processing companies to procure good quality commodities as industrial raw materials because quality certification and issuance of warehouse receipts in the accredited warehouses precede trading on the NCX.
- The Exchange stands as a counterparty to every transaction which helps to eliminate every form of trading default.
- The Exchange enables agro processors to procure raw materials at reduced transaction costs and helps them to overcome physical market constraints
- Sourcing of commodities through the NCX will guarantee a regular supply of industrial raw material to the agro processing companies all year round at reduced transaction and carrying costs.
To the Exporters
This arrangement will benefit the the exporters as explained below
- Reduces the transaction costs and assisting the exporters to overcome constraints in the over-the-counter markets.
- Adoption of Commodity Exchange in the marketing of cash and export commodities will shorten the marketing chain and eliminates dubious dealings of some actors whose actions impact negatively on product quality.
- Delivery default is eliminated because the underlying assets from which the contracts are created and listed for trading on the Exchange are physically present in the accreditted warehouses.
- Export produce listed on the floor of NCX are competitive in the international market in term of quality and packaging because they have passed through international certification process by the internationally recognised assayers in the Exchange warehouses.
- The eWRS of NCX is negotiable and useful for export financing.
To the Nigerian Economy
A functional Commodity Exchange in Nigeria that is patronised by farmers/farmer groups, merchants, agro processing companies, exporters and government agencies will lead to price discovery which will:
- Promote mechanization and growth of agricultural sector,
- Derisk and mobilise funds from private sector for agricultural investment,
- Foster private sector investment in warehousing, assaying laboratory, value addition and agro processing
- Enhance the competitiveness and market share of Nigerian agro produce in the international market
- Increase foreign exchange earning through export of high quality farm produce
- Make agriculture attractive to the youths
- Create more jobs for the youths and
- Promote gathering of reliable data on crops production and solid minerals which will be useful for policy formulation
- Significantly increase the contribution of agricultural sector to the GDP