Heritage Bank Plc, Lagos Commodities and Futures Exchange (LCFE) and other participating financial institutions are exploring opportunities from the Commodities Ecosystem as part of their supports to the Central Bank of Nigeria’s (CBN) $200 billion FX repatriation from the non-oil exports.
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 would increase liquidity support from local commodity exportation to boost the race for the $200 billion in FX repatriation and reduce the pressure on exchange rate.
He identified challenges 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.
He listed the challenges to include 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).
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.