Reintroduction of Commodity Marketing Boards sketchy on market efficiency concerns

The federal government is tinkering a return to a knitted trading system governed by marketing boards as part of its efforts to fill the vacuum in commodities price control and production adherence to quality standards. But stakeholders do not see this responding to the current demands of an efficient market. The structure, they believe, is antiquated for a liberalised market and government lacks the infrastructural and financing commitment, if it’s anything to go by. TEMITAYO AYETOTO writes.

There is no gainsaying that revitalising the agriculture sector is a hardcore of the economic development agenda of the current administration.  From the ignition of interest in the expansion of domestic production of highly-sort agricultural commodities, to establishing conducive conditions for growth, attracting investments and increasing the country’s stakes in the global market, the government appears nearing repositioning of the sector as a significant contributor to the country’s gross domestic product (GDP).

To cap these efforts, however, such loose ends as poor quality control and grading of produce, a challenge which has continued to deface Nigerian export commodities and lack of common price measure among other issues, infrastructure and finance, the government is considering the revival of commodity marketing boards as being clamoured for by some stakeholders.

Audu Ogbeh, the minister of agriculture and rural development, at a forum in Lagos recently, said the boards may return to address these  challenges with Nigeria produce, as quality measures have consistently dwindled since the scrapping of the boards.

By October consultation with various industry stakeholders will be held to understand  their assessment of the reintroduction and the likely impact on their activities.

“We are about to call a national seminar because there are people who want the commodities boards to come back and there are those who don’t. But I am tempted to bring them back, but I’ll wait to hear the majority opinion because we need to know so that we can have a price, and farmers will not sell below that price. Then, the boards were trained to deal with quality. When the boards went, quality control became a very bad issue. People were selling beans preserved with all kinds of chemicals and the beans reached Europe and people threw them back and then we got into an embarrassment. Commodities board may return, but I have a seminar on that in October. If not then we’ll move them to the exchanges,” he said.

Tunji Owoeye, managing director, Elephant Group Plc. is one of the subscribers to the reintroduction of CMB who believes that bringing back the marketing boards is necessary to sustain the tempo of revitalisation in the sector and ensuring the efficient running of commodity exchanges.

Calling on states and federal governments to embark on the initiative last week, he said: “marketing boards should be brought back and run efficiently and responsibly because Nigeria’s production and sales are cyclical. During harvest, you have a lot of glut of most commodities because all of a sudden you have so much production that the market cannot absorb. And after harvest is gone you have scarcity. What the board used to do then was to look at times of scarcity and glut, intervene in those markets to ensure that farmers and the value chain stakeholders were not short-changed”.

However, some stakeholders find it hard to match the framework of CMB with the current demands of Nigeria’s liberalised markets. The activities of production, trading, processing or export are largely dominated by private sector investors, a trend which gives flexibility to trading especially as the forces of demand and supply require.

Ayodeji Balogun, country manager, AFEX Commodities Exchange Limited (AFEX) Nigeria in an interview with business a.m. said modern and efficient market structures have departed from monopolistic systems run by the government, as an appreciable level of efficiency were now being injected by huge private sector players that have dominated the scene of trading.

He also stated that given the demonstrated inability of the government to stay committed to courses that require huge financial and infrastructural commitment, the sustainability of marketing boards would be slim in chances.

“Commodities boards are outdated because basically what they are is a single government entity that buys up all the commodities and sells it. It is a single government run monopoly and everywhere in the world, people are running away from a monopolistic structure. Secondly, we understand how inefficient our government can be and as a general position, government has no business in business; why then bring them back into the commodities business?” Balogun asked.

According to the director of the leading private commodities exchange, government needs to devote more attention to persisting challenges of infrastructure which he describe as key to de-risking the operating environment. This, he explained will encourage individual large trading corporations and exporters to embark on backward integration while transparent commodities exchanges works to favour of producers.

He said: “First, you need adequate type of financing for both the producer and the marketing corporation, the exporters basically. The second is infrastructure and logistics. We need good storages. The country has over 30 exporter processing centres and they are all in comatose. If they can put those to life, and farmers can access them to aggregate products, then it would go a long way to support. So infrastructure and logistics are necessary.”

Apart from the Ghanaian example which still functions today, most marketing boards across Africa have died from lack of sustainability, including Nigeria’s. The government of Ghana syndicates huge funds yearly to its marketing boards, but Balogun doubts that Nigeria would be able to finance the boards if reintroduced.

But for Fredrick Thomas, a veteran cocoa intermediary, the reintroduction of the marketing boards is essential to repair the international perception of Nigeria’s cocoa as poor quality. The respect for Nigerian cocoa began to dwindle following the scrapping of the marketing boards in 1986, after the liberalization of  the  economy under the    Structural Adjustment Programme (SAP).

The abolition of  the commodity  boards   affected the standards and quality of commodities particularly,     export produce, as there was no strong quality control      and grading agency to ensure standards of the commodities. The private sector leveraged the liberalized commodities business, but paid little attention to quality.

“We were able to monitor the quality of cocoa. During the days of marketing boards, there was what we call grade A, grade B and C. As a farmer, if you do not perfect your cocoa or do the necessary things, in regards to post harvest condition, fermentation and drying, your cocoa will not meet grade A and as such you will not get a better price. During that time, cocoa was rejected if they were of poor quality. The boards gave the farmer the ground to perfect their cocoa. After the abolishing of cocoa boards, under the military era of Babangida, licenses were given to independent marketers and the control of quality dropped. The produce department stopped doing the vetting to check the quality of cocoa or issue grading papers. That gave bad image to Nigerian cocoa,” Thomas explained.

Touching on concerns that the monopolistic structure of CMB may dispossess farmers of their bargaining power, Thomas said the regulation of the commodities does necessary put farmers at loss.

Unlike the era of commodity boards when farmers knew the buying price of all commodities under each board’s control, farmers nowadays     suffer from price information asymmetry as they don’t know what the price of what they are selling goes for in the next village or the next rural market.

These and other challenges reinforced the need for the establishment of commodities exchange as an alternative marketing platform       for  commodities.

Thomas, however, believes the profitability of farming will not be threatened, if the government guarantees the subsidy of farming input as being done in Ghana and Cote d’Ivoire.

He said: “In terms of price, under marketing boards there was a benchmark like what is happening in Ghana, Ivory Coast which are controlling their price but here, you hear that somebody is buying for N500, another N600 and another N700. As a farmer, it’s an advantage because he or she is in control of negotiations. But as a Nation it is not good. At the world cocoa conference at Berlin, it was revealed Nigerian cocoa has not gained entry into the international market in the last five years because they are not buying. What happens is that our cocoa is sold to Cote d’voire which then sells under its own label and that has been affecting the country.  When the CMB existed, the government controlled the price but also subsidized the input they used. It is just give and take.”