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For the commodities exchange to operate optimally and contribute meaningfully to the nation’s Gross domestic Product (GDP), the Lagos Commodities and Futures Exchange (LCFE) has called for a legal framework that would enable commodities to be crossed in Nigeria before being exported to other countries.
Cross commodity is a way of hedging and managing risk for producers and speculators alike. Also referred to as cross hedging, this financial strategy involves opening positions in related markets to mitigate systemic exposure.
The Exchange, which commended the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) on their roles in ensuring uptrend of activities in the Nigerian commodities ecosystem, also stressed the need to address the dearth of fungible instruments and put a proper risk management structure in place to activate trading in the ecosystem.
A fungible instrument is a financial instrument (such as a stock, bond, or futures contract) that can be bought or sold on one market or exchange, and then sold or bought on another market or exchange.
Source: The Guardian