As part of its support to the Central Bank of Nigeria (CBN) to raise $200 billion in foreign exchange repatriation from the non-oil exports over the next three to five years, Heritage Bank Plc, Lagos Commodities and Futures Exchange (LCFE) and other participating financial institutions have explored opportunities in export revenue from the commodities Ecosystem.
This was disclosed at a breakfast meeting organized by LCFE with bankers, tagged, “The CBN RT200 FX Programme: And Potential of Export Revenue from the Commodities Ecosystem”.
The Divisional Head, Agribusiness, Natural Resources & Project Development, Heritage Bank, Mr Olugbenga Awe, said the promotion of investment in commodities ecosystem by financial institutions in partnership with LCFE in its various assets trade in agric commodities, energy and solid minerals would increase liquidity support from local commodity exportation.
According to him, it will also boost the race for the $200 billion in foreign exchange repatriation and reduce the pressure on exchange rate.
Awe identified challenges which may hinder financial institution’s efforts in supporting the commodities ecosystem to drive the CBN’s RT200 FX target.
He added that the challenges include inadequate export finance resources, lack of dependable source of local product prices, risk of haulage to bad roads amongst others.
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He said in a bid to significantly boost local production of exportable commodities and drastically reduce the country’s dependence of oil revenue, financial institutions must play the role of market markers to the Commodity Exchange (COMEX), thereby bringing liquidity to the exchange.
“With COMEX as a risk mitigation platform, there is need for the Warehouse (WR) finance structure to be registered with LCFE and the collateral management in place, which is within the parameters set by banks.
“Banks must actively participate in crop receipts, liaise with its brokers to develop the value chain around a well market structure warehouse receipts systems (WRS).
“This would help stimulate demand amongst players from the aggregators, off-takers for standardized contracts that help deepen the value chain while providing financing that increased volumes traded.
“Promoting investment in commodities ecosystem via structured WR finance would bring about value addition to commodities with the help to moderate the prices, as the expected increase in demand would increase revenue export and make deposit money banks self-sufficient in meeting the FX needs of their customers,” he said in a press statement given to Persecondnews.
Awe, who enumerated how financial institutions can partner with commodity exchange especially LCFE to deepen their foot prints in various asset classes traded by LCFE, also referenced what Heritage Bank is doing in the Wheat Value Chain together with CBN investing N40 billion which will scale up wheat production during harvest season.
According to him, whatever can be achieved in wheat can be replicated across various value chain in rice, maize, others and ensuring that there is link to the commodity exchange.
In his remarks, the MD of LCFE, Mr Akin Akeredolu-Ale, who commended Heritage Bank for its sterling efforts in deepening its footprints in agribusiness, called on banks and other organisations to take advantage of the “catalytic and transformational approach” to support CBN RT200 FX initiative.
He stressed that to achieve the target, there was need for creation and registration of Bank Commodity Desks with LCFE and Central Securities Clearing System (CSCS).
Akeredolu-Ale also noted that the stakeholders’ structure in financing the commodities ecosystem include Commodity Exchange, Commercial Banks, Non-Interest Banking, Merchant Bank.
The LCFE boss decried that Nigerian economy was still import driven and depended largely on export of petroleum to meet FX earnings.
He, however, said LCFE has lined up products such as commodity instrument, commodity backed notes, Exchange traded funds, Commodity Spot Contracts amongst others, as a bumper for driving huge export revenue from commodities ecosystem to fast track the actualisation of $200 billion in FX repatriation.