Nigerian brokers to start commodities trading as stocks plunge

Nigerian stockbrokers struggling with one of the world’s worst equity market routs plan to trade commodities in a bid to diversity earnings and boost income.

The Association of Securities Dealing Houses of Nigeria plans to start the Lagos Commodities and Futures Exchange later this month, Managing Director Akinsola Akeredolu-Ale said in an interview. The organization is seeking to help its members broaden their sources of income.

Nigeria’s benchmark index has declined 17% this year, while trading volumes for 2019 are lagging behind those in the same period for 2017 and 2018, according to data compiled by Bloomberg. Africa’s top oil producer is struggling to jump-start an economy that’s yet to fully recover from the 2014 crash in crude prices.

“It’s been quite difficult,” the industry body’s chairman, Onyenwechukwu Ezeagu, said in a separate interview.

The exchange will begin operating after a final mock exercise scheduled for Nov. 15, said Akeredolu-Ale. At inception, the bourse will list contracts on 40 agricultural commodities including sesame, sorghum, millet and maize, as well as 10 crude-oil producers, he said, declining to identify the companies.

The market is starting amid a push by President Muhammadu Buhari’s administration to diversify from crude by encouraging investments in agriculture and minerals.

Lagos Commodities and Futures Exchange will compete with the Abuja Securities and Commodities Exchange, which also trades agricultural products. Calls to the state-owned bourse’s office in Abuja weren’t answered. Some of the data on the Abuja exchange’s website hasn’t been updated since 2007.

The Lagos bourse is in talks with banks, underwriters and certification agencies including Geneva-based SGS SA, Cotecna SA and Bureau Veritas SA to facilitate transactions and settlement ahead the commencement of trading, Akeredolu-Ale said.

Trading will probably be flat in the first two years of operations and is expected to jump 25% by the third year, he said.

© 2019 Bloomberg L.P.