Lagos State Launch N5bn Forward Contracts at Lagos Commodities and Futures Exchange

To promote agricultural productivity and enhance food security, the Lagos state Governor formally launched the N5 billion series 1 of the N30bn Eko Rice Forward Contract. The contract is to ensure the continuous supply of paddy rice to the newly built Imota Rice Mill. The Lagos State-owned Imota Rice Mill is a 32-metric tonne per hour mill with a capacity of 2.5 million tonnes annually. The mill is expected to be the biggest in Nigeria, West Africa, and possibly the third largest globally. Rice produced from the Lagos State Imota Rice Mill will be listed for futures trade on Lagos Commodities and Futures Exchange (LCFE). The offer for 50kg of Eko Rice opened at the rate of N33,000 per Note. The tenor of the Note is 60 days.

Value proposition includes guaranteed access to the quantity and quality of paddy rice leveraging a network of strategic aggregating partners. Opportunity for local suppliers of paddy rice of Lagos origin to participate. Support the establishment of procedures, processes, and governance services delivery for consistency and conformity with global best practices.

Analysts believe that the idea of commodity trade will provide price stability where buyers and sellers are allowed to lock prices in advance. This will secure a guaranteed price for producers and consumers can hedge against price volatility. It is expected that the production from Imota rice mill should meet the annual rice consumption rate, which is estimated to be about 1 million metric tons. Analysts further raised concerns over farmers’ heavy reliance on commodities covered by future contracts for guaranteed prices. There is a need for crop diversification to avoid over-production.