‘Effective warehouse system helps commodities exchange’

There is need for an effective warehouse receipt system and a robust market information system before the establishment of a commodities exchange can be viable, Mr. Bernard Otabil, Managing Director, Esoko Ghana, a commodity price index analyst, has observed.

The development of a commodities exchange, however, could be an uphill task without these platforms, he said.

In an interview with B&FT, Mr. Otabil proposed an efficient centralised cash market to provide the underlying market prices which will reflect futures and forward prices.

Ghana has suffered three failed attempts towards the establishment of a commodities exchange, due to the unavailability of a regulatory framework.

The Securities and Exchange Commission (SEC), the lead promoter of a commodities exchange, is expected to develop the need­ed regulatory framework to facilitate establishment of the exchange once gov­ernment accepts the recommendations.

When adopted, Ghana will be the third country in Africa after Kenya and Ethiopia to embark on an aggressive over­haul of its agricultural sector.

Mr. Otabil bemoaned the delay in establishing a commodities exchange in the West Africa region, as it has the tendency of alleviating poverty and increasing the incomes of farmers.

“There is no doubt that a commodity exchange is necessary for the efficient functioning of an economy.

“In West Africa and across sub-Saharan Africa, it is rightly envisaged that a properly functioning exchange could play a big role in poverty alleviation initiatives, as it would increase the incomes of producers.”

All major commodities such as grains, metals and petroleum are produced in West Africa - and that makes the region viable for a commodity exchange, he stated.

A commodities market or exchange is a platform where various commodities and derivatives products are traded. Most commodities exchange trade in agricultural products and other raw materials like wheat, barley, sugar, maize, cocoa, coffee, cotton, milk products, pork bellies, oil and the metals.

The prime objective is to bring produc­ers, buyers and consumers together to trade on a common platform by providing a ready market for farm-gate products from the agricultural centres.

The country’s agricultural produce constitutes 55 percent of the national basket of the Consumer Price Index. Therefore, high prices of agricultural produce are likely to trigger inflation.