AFEX Commodities Exchange and NG Clearing Sign a Partnership on Commodity Derivatives in Nigeria

AFEX Commodities Exchange and NG Clearing Sign a Partnership on Commodity Derivatives in Nigeria

AFEX Commodities Exchange Limited, Nigeria’s first licensed private commodities exchange, and NG Clearing Limited, West Africa’s Premier Central Counterparty (CCP), a Financial market Infrastructure (FMI) driving the Clearing and Settlement of Exchange Traded Derivatives instruments in the Nigerian Capital Market have announced signing a partnership agreement to develop the infrastructure that facilitates trading and central clearing of futures contracts for commodities such as cocoa, paddy rice, maize, and soybean in Nigeria.

Ayodeji Balogun, CEO of AFEX, and Tapas Das, CEO of NG Clearing, signed the partnership on behalf of their respective companies on Wednesday, November 9, 2022, in Lagos.

The partnership will accelerate efforts to build the technological infrastructure that will power the introduction of commodity futures in Nigeria.

AFEX Commodities Exchange will serve as the trading venue in this transaction, while NG Clearing will act as the Central Counterparty, ensuring trade settlement.

Currently, trading commodities such as cocoa, maize, paddy rice, and others are restricted to the spot and OTC markets, exposing market participants to frequent price movements and counterparty risk. However, with the futures market, participants can now lock in prices and positions for a variety of commodities ahead of time without the risk of counterparty default.

Furthermore, in addition to assisting market participants in mitigating price risk, the commodity futures market will deepen the financial system while acting as a catalyst for the agricultural sector’s continued development.

What AFEX Commodities and NG Clearing CEOs are saying

Speaking on the essence of the partnership, AFEX CEO said that his company shares a drive with market regulators and other players in Nigeria’s capital market to deepen the market and unlock financing options and alternative investment classes for players in the commodities ecosystem. “This collaboration with NG Clearing is a new leap for the financial market in the country that further opens opportunities for generating shared prosperity through the commodity market. We believe that this would further position the country as a preferred capital destination with a viable path of effectively managing risks in key sectors of the economy.”

While Taps Das, CEO of NG Clearing expressed optimism that the partnership with AFEX will usher in a new phase in the development of Nigeria’s financial and agricultural sectors. “As the central counterparty, we bring confidence and trust to the market as we will be guaranteeing the execution of the trades through our resilient collateral management processes.”