Dear reader, the "Abuja Securities and Commodity Exchange notes" is a bi-monthly column that will dedicate itself principally to discussing and disseminating information related to commodity trading industry from within and outside the country. It will also serve as a medium for the dissemination of Commodity Price Information in the form of a daily Exchange price bulletin.

Experts in the various segments of agriculture and solid minerals production, prominent farmers as well as merchants, including commodity exporters, quality control/assaying practitioners and warehouse operators will be featured in the column from time to time.

The Federal Government established the Abuja Securities and Commodity Exchange to help address the numerous problems that have continued to make agriculture unprofitable and unpopular in the country.

The Agricultural sector in Nigeria currently contributes about 30% to the country's GDP. This contribution is a far cry from what the position was before and immediately after independence. This dismal performance is partly as a result of the discovery of oil in commercial quantity in the country in the late 50s, which led to the gradual and steady neglect of our once cherished agricultural sector. The neglect accounts for some of the problems highlighted below:
* Low agricultural output in the country
* Very limited access to short term financing for farming operations
* High price of agricultural inputs
* Poor quality standards
* High seasonal price variability
* Lack of adequate warehouses in the country
* Absence of a nation-wide market price information service

These problems have led to the high poverty rate among farmers and solid minerals producers. In order to help solve these problems, the Federal Government felt it imperative to establish a Commodity Exchange.

In order to assist in creating a virile market for Nigeria's agricultural produce and address low rural income, Abuja Securities and Commodity Exchange is commencing operation on its cash market segment as from July this year. On this segment, members can buy and sell commodities on two trading platforms, Manual or On-line Platforms.

For a start, trading on the Exchange's Cash Market will be carried out manually on the floor or through remote negotiation. Remote negotiated trading will afford market participants who are registered members of the Exchange the opportunity of sourcing a market for their commodities without difficulty. All they need to do would be to put a call to the market desk officers of the Exchange disclosing their identities and giving the volume, the name, the delivery location, the grade and price of commodities they are willing to buy or sell.

On receipt of this request, the officer will disseminate this information by posting it on the Exchange's website and notice boards for prospective buyers and sellers of the commodities the world over to see and indicate their interest. The Exchange will also reach out to its members on phone about the request it has received. All those that are interested in the bid or offer will get back to the Exchange so as to be linked up with the buyer or the seller. The Exchange will facilitate the meeting of the two parties and get them to negotiate the contract. Once a deal is struck, they will both draw a contract document that will be jointly signed by both the buyer and seller with the Exchange as a witness.

To make the contract effective and in consonance with the Exchange's Trading Rules and Regulations, both parties will deposit a margin of 5% of the contract value with the clearing bank. This is done to ensure that both parties will honour the contract irrespective of price movement.

The contract may be spot or forward. If it is a spot contract, clearing and settlement of the transaction shall be carried out within T+10 trading days while the settlement period for a forward contract shall be mutually agreed by both the buyer and the seller. However, to ensure the sanctity of forward contracts and promote market integrity, the parties to the transaction will deposit a variation margin, which will serve to provide cover for unexpected price movement.

Members are also free to trade on the floor through the call over system, which will be discussed in detail in a subsequent edition.