The Managing Director/Chief Executive Officer of Lagos Commodities and Futures Exchange, Mr Akin Akeredolu-Ale, has identified, bad roads and a poor turnaround time for commodities as the major drivers of food inflation in the country.
He disclosed this during a chat with journalists on Wednesday at the exchange’s office in Lagos.
Akeredolu-Ale said, “On food inflation, there was a retreat that was organised by the SEC for the senate committee on the capital market recently, and one of the senators that came said that when a truck is coming from Yola to Lagos, because of the various stops on the road, you will discover that they spend about N1.5m on produce inspectors here and there.
“When people are bringing paddy to us to Imota when they are entering Oyo from Ilorin, they pay produce inspectors; when they are entering Ibadan and they get to Ogere, Lagos/Ibadan Expressway, to enter Ogun State, they pay. As they leave Ogun State and head to Lagos, they pay the local government levy too.
“And when they enter Lagos, some of them would rather go through a particular route. By the time they get to their destination, they will have spent over N2m. They don’t mind spending the money because they are going to pass the cost on to the commodity and when they do that, it will be passed on to the final consumer so effectively.”
According to the National Bureau of Statistics, the headline inflation rose to 31.70 per cent in February from 29.90 per cent in January with the food inflation rate racing to 37.92 per cent on a year-on-year basis, which was 13.57 per cent points higher than the rate recorded in February 2023 (24.35 per cent).
According to the Lagos Commodities and Futures Exchange boss, Nigerians are eating the skin on our heads.
“There are three things there: the people on the road, the bad roads and turnaround time. When you remove these three things, prices will drop. There are some countries in Africa that have told everyone that any truck moving commodities from one location to another, no matter the offence, they must allow the truck to get to its destination because it is the truck you are arresting, not the commodities,” he stated.
Akeredolu -Ale also commended the efforts of the Federal Government in addressing the issue of food security but explained that the government could achieve better if commodities exchanges were involved in the process.
“Commodities exchanges connect smallholder farmers in rural areas to large markets. This increases earning income capacity, a key aspect of household food security. They facilitate food storage through their warehouses. Through warehouse receipts, smallholder farmers can access input loans to purchase fertilisers and other materials.
“Commodities exchanges reduce default risks in trading and encourage investment in food systems and they manage price risks in food systems by offering future trading. They disseminate market information that enhances. They can promote competition, reduce transaction costs and make food available amongst others,” he explained.
Calling for the collaboration of players to boost the commodities ecosystem, the LCFE boss said that was the way to go to milk the potential of the market segment.
“People need to understand what the commodity ecosystem is about. At the level of the exchange, we are at the stage where we are determining and selecting the players who are fit and proper, which bankers, trustees, and commodities brokers are fit and proper. We have done that and have selected some for real physical transactions.
“We have started engaging some subnationals on how we can engage and work with them in how we can build up the commodities ecosystem,” he said.
Speaking on the exchange’s outlook for 2024, the LCFE boss declared, “For 2024, our focus at the beginning of the year was to ensure there is stabilisation in the rice paddy space. For the rice paddy space, we have approval from the Securities and Exchange Commission to trade spots for rice paddy.
“The biggest problem for rice mills in Nigeria is the paddy itself. We have a mill that will consume about 150,000 metric tonnes of paddy. What we have decided to do is activate the states with arable land for integration so that structured finance can go in to activate farmers.”