Commodity exchange as a solution to the government’s food security policy

The primary responsibility of any government is to provide the necessary physical and social security (including food security) for its citizens. The stability of a political system depends on how the average person can access their basic needs, such as food.

Food security is the foundation of any nation’s stability. History shows that many governments/regimes have fallen to their knees due to their inability to secure and ensure food security for their citizens.

For the average person on the street, access to food is a priority and its absence can lead to many social problems, which in turn lead governments to spend more on security systems and devices.

Many scientists and politicians have appealed to the administration of President Bola Ahmed Tinubu to urgently allocate the necessary resources (financial and aid) for an agro-based economy.

Transformation of the agricultural sector of the economy will certainly create a new dawn of financial activity for citizens at all levels. This will encourage other levels of government (state and local) to pay special attention to the agricultural sector to serve as a new source of income and also reduce dependence on allocation from the Federation Account (FAAC).

However, the cheapest and fastest way to effectively implement a food security policy in Nigeria is to have a functioning commodity exchange (Commex). Commex is designed to serve as a catalyst by providing an organized platform for trading with a warehouse receipt document. The use of trading documents eliminates the cost of moving physical goods (agricultural products) from one spot market to another. The transaction process (buying and selling) is instantaneous, the buyer will be charged and the seller will easily receive the value, making the system transparent and reliable.

Transparency and reliability of the transaction system under commex operation will inspire economic operators to take up storage activities. Availability of storage operations will encourage farmers to increase production, as the fear of post-harvest losses is taken over by professionals (warehouse operators/insurance companies).

It is known that the main factor limiting farmers from maximizing their production potential is the fear of post-harvest losses resulting from the lack of appropriate facilities for storing surpluses.

The United States Agency for International Development (USAID) has found that about 50 percent of fresh agricultural produce is lost at the post-harvest stage. Such losses are partly responsible for the country’s rising food inflation, which reached 40.01 percent in March 2024.

With the existence of an operating company, the process and financing of food security operations will be mostly financed and covered by the private sector as it is a promising venture with a guaranteed Return on Investment (RoI).

Operational Commodity Exchange can serve as a catalyst not only for food security but also for the economic, social and infrastructural development of the country. Furthermore, the Commodity Exchange platform can be used to encourage farmers and investors to collectively join forces to increase food production by transforming the traditional agricultural process into a mechanized one. This transformation will have a positive impact on sustainable food security and wealth creation among citizens.

Other economic sectors that the transformation will develop directly or indirectly include:

1. Farmers/investors will produce/invest more based on guaranteed profits;
2. Farmers will be exempt from post-harvest exposure because the risks associated with storing their crops are handled by professionals (warehouse operators and insurance companies);

iii. With the increase in activity on stock exchange floors, more transactions (buying/selling) will be formalized, which will lead to an increase in government tax revenues;

1. Increased production in the agricultural sector (food security activities) will lead to an increased demand for more workers, which in turn will engage our youth who pose a hidden threat to the security of our common peace;
2. Reducing spending on security will allow the authorities to allocate these funds to other development projects;
3. As jobs are created, the level of well-being among citizens will also increase;

vii. Peace and stability in the country will encourage foreign investors to invest in other sectors of the economy; and

viii. It will serve as a catalyst for governments (federal and state) to achieve the desired outcomes of the Sustainable Development Goals (SDGs)

In summary, a functioning Commodity Exchange is the secret behind the success of the path followed by developed countries, as Chuck Kowalski rightly noted:

“It is unlikely that the United States of America (USA) would have experienced as much economic growth over the last 100 years as it did without it (commodity exchange)” – Chuck Kowalski: renowned commodity and futures professional and president of Stoik Futures Inc. in the United States of America.

The above statement may serve as a leaked secret of the United States’ developmental success in commodities trading, from which the federal government can draw lessons to support and encourage the five registered commodities exchanges (NCX, Afex, LCFE, GCMX and Prime Commex) to become fully operational.

Aminu-Daneji, mcpn, mcban, fimc can be contacted via email (email protected)