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| The officials. |
Heritage Bank Plc, Lagos Commodities and Futures Exchange (LCFE) and other participating financial institutions explored opportunities on export revenue from the Commodities Ecosystem as part of its supports to the Central Bank of Nigeria’s (CBN) to raise $200billion in foreign exchange repatriation from the non-oil exports over the next three to five years.
At a breakfast meeting organised by LCFE with bankers,
tagged, “The CBN RT200 FX Programme: And Potential of Export Revenue from the
Commodities Ecosystem,” had in attendance representatives from Heritage Bank,
FSDH, Agvest Limited, Novo Merchant Bank amongst others.
Speaking on the opportunities for financial institutions
in the CBN RT200 FX Programme, Olugbenga Awe, Divisional Head, Agribusiness,
Natural Resources & Project Development, Heritage Bank stated that the
promotion of investment in commodities ecosystem by financial institutions in
partnership with LCFE in its various assets traded in Agric commodities, energy
and solid minerals would increase liquidity support from local commodity
exportation to boost the race for the $200billion in FX repatriation and reduce
the pressure on exchange rate.
Meanwhile, he identified challenges expediently needed to
be addressed which may likely hinder financial institution’s efforts on
supporting the commodities ecosystem to drive the CBN’s RT200 FX target, such
as inadequate export finance resources, lack of dependable source of local
product prices, risk of haulage to bad roads amongst others.
Awe explained that 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.
According to him, 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.
He further explained that 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, he said 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.
Awe, however, reiterated that 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.
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 N40billion, 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.
MD of LCFE, Akin Akeredolu-Ale, who commended Heritage
Bank for its sterling efforts in deepening its footprints in agrobusiness,
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).
He noted that the stakeholders’ structure in financing
the commodities ecosystem include Commodity Exchange, Commercial Banks,
Non-Interest Banking, Merchant Bank.
Akeredolu-Ale, who decried that Nigerian economy was
still import driven and depended largely on export of petroleum to meet FX
earnings, revealed that 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 $200billion in FX
repatriation.
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