Nigeria’s new regulatory Act will enhance commodity trading environment – Experts
The Nigeria Investments and Securities Act (ISA) 2025, amended earlier in the year by the National Assembly, designed to strengthen the commodity trading environment, has been described as a major step in modernising and formalising the regulation of the commodity market in the country.
Under the amended law, the role of the Nigeria Commodity Exchange (NCX) has been significantly reinforced and formalised within a modernised, regulated framework, a development that will impact agriculture production across the value chain.
The NCX and its various trading floors have a history of underperformance, partially due to limited funding and inefficient management. Lack of public investment data may reflect the Exchange`s low profile since its establishment in 2006, industry experts said.
President Bola Ahmed Tinubu had appended his signature to the new Act enacted by the National Assembly in the first quarter of the year (March 2025), which repeals and replaces the 2007 version.
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The amended Act explicitly empowers the Securities and Exchange Commission (SEC) to oversee and regulate all commodities exchanges, a development that now makes the agency the cornerstone of the regulatory framework for commodities trading in the country.
Across sections of commodity brokers in Kano, who confided information to BusinessDay, on the amended Act, said the law has expanded the definition of ‘securities’ to explicitly include commodities, futures, options, and derivatives.
One of the industry experts, Ali Ahmad Ali, CEO, Ahalson General Enterprises Limited, a commodity broker based in Kano, noted that the Act has placed under the purview of the SEC a framework for the regulation of commodities exchanges and their registration, as well as made provisions for self-regulation by the commodities exchanges.
SEC, as an apex regulator of Nigeria’s capital market, will now be overseeing and supervising all commodities exchanges, including the NCX, as well as regulating exchanges, approving operators, setting capital requirements, and issuing rules to maintain market integrity, Ali said.
“The SEC also now have the power to cancel or suspend the license of a market operator; as well as empowered to collaborate with the Central Bank of Nigeria (CBN) in regulating all matters related to financial market settlement and stability.
“The amended Act rules against fraud and market manipulation, such as provisions on insider dealings and fraudulent inducement, and provides guidelines on settlement procedures and timelines for commodities spot market”, he explained.
Evolution of the regulatory landscape:
Nigeria’s legislative framework for commodities trading has evolved. The SEC has developed regulatory structures in phases, such as setting up a Technical Committee on Commodities Trading Ecosystem in 2017 to improve the market.
Abubakar Maidawa, a commodity broker, based in Funtua, Katsina state, said the role and function of the NCX’s trading platforms under the new law has been enhanced, as the ISA 2025 provides statutory recognition for the commodity exchanges, and categorizes them as either “composite” or “non-composite” (mono-product) exchanges, ensuring they operate within a clear, SEC-regulated structure.
Abubakar stated that with the amended law, NCX is now fully integrated into the official Nigerian capital market ecosystem. Noted that with the SEC’s expanded authority, the agency now faces stricter compliance responsibilities.
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“The law imposes penalties and empowers the SEC to suspend or fine exchanges that do not comply with regulatory directives, which was less potent under the old legislation. The law will make NCX a transparent and organised marketplace, as well as provide a structured and secure platform for buyers and sellers of agricultural and extractive commodities.
“The amended act is also expected to foster market stability and price discovery, leading to more efficient and fair transactions, as NCX is now responsible for implementing a comprehensive system for testing and grading commodities to ensure they meet high-quality standards.
“This creates trust, consistency, and a reliable valuation mechanism in trade. Under the ISA 2025, the NCX is expected to deploy the use of electronic warehouse receipts for commodities stored in SEC-registered warehouses. These receipts serve as collateral, allowing farmers to access financing from banks more easily. The law explicitly provides a legal framework for the trading and use of these receipts.
“The Act now places NCX in a position to help market participants, particularly smallholder farmers, manage price volatility and other risks through its structured trading sessions and contracts that will ensure transparency and efficient settlement, and reduce the risk of distress selling and provide a more secure trading environment.
“With the ISA 2025 now covering commodities, futures, and derivatives, the NCX is positioned to grow its offerings beyond the spot market. This will provide more sophisticated risk management tools for traders and investors, attracting greater investment”, he explained.
Broader economic role:
The NCX’s revitalised role under the new law is key to Nigeria’s goal of diversifying its economy away from oil through creating a robust, regulated market for agricultural and mineral resources, which will attract more private sector investment into these key sectors.
As a national export trading platform, NCX is a key partner in the Federal Government’s initiative to establish a National Export Trading Company (NETC), and the law will stimulate partnerships with private players to streamline Nigeria’s commodity exports by providing services like aggregation, modern storage, quality control, and market access for SMEs and large corporates.
The amended Act will enhance access for smallholder farmers through partnerships and technology (such as its Smallholder Farmer Management System), as it empowers NCX platforms to connect smallholder farmers to the market, improve their access to finance, and implement a system that reduces post-harvest losses.
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History of NCX:
NCX is formerly known as Abuja Security and Commodity Exchange, a federal government-established market for sellers and buyers of agricultural commodities and solid mineral products. Before now was in a state of dormancy due to a lack of experts attributed to inadequate legislative instruments to regulate its operations.
The Exchange, which was officially inaugurated in 2006, almost the same time as the Ethiopia Commodity Exchange (ECX), remained, despite having functional warehouses in seven states of the federation, as well as a multi-million-naira automated trading platform in the commercial city of Kano.
As a result of the lack of legislative backup, Nigeria, which is one of the hubs of commodities production in Sub-Saharan Africa (SSA), continued to trade the bulk of the commodities produced in the country, in the open market, where major Processors, who are dominantly foreign firms, leverage their advantage.
Several tons of locally produced commodities, namely: Maize, Sorghum, Millet, and Sesame, are being openly traded daily in markets, such as Wanke, Shinkafi, Kasuwar Daji, and Gada Maiwa, which are situated in the Northwest state of Zamfara, one of the grain-producing belts in northern Nigeria.
Commodities, such as soya bean, sunflower, maize, sorghum, millet, and sesame, are also openly traded informally in ADP Premises in the Northeast state of Bauchi, while commodities, like Rice, Cocoa, Maize, Cashew, and Serami Seed, are also being traded informally in states such as Ekiti, Kogi, and Ebonyi.
