Developing an organized commodity exchange in Ghana: Challenges and economic prospects

Authors

  • Mohammed Iddrisu Ngmenipuo Wa Polytechnic Business School
  • Osman Issah University for Development Studies School of Business and Law

DOI:

https://doi.org/10.18533/jefs.v3i02.155

Keywords:

Commodity exchange, Price discovery, Price risk management, Warehouse receipt system.

Abstract

We have examined challenges and economic prospects of establishing an organized Commodity Exchange in Ghana. We find that such a market will result in reduction in post-harvest losses through price stability, improvement in commodity price risk and credit risk management, provision of a transparent and competitive price discovery mechanism, reduction in transaction and marketing costs, and avoidance of making the mistakes of others. However, we also identify the challenges that should be resolved such as lack of laws and regulations specifically pertaining to the commodity exchange; inadequate financial support; lack of trading infrastructure; inadequate volume; liquidity problem; smallholder farms; lack of understanding of trading instruments; and government/political interference to this end. Overall policy implications suggest inadequate infrastructure and capacity building of market participants should be enhanced.

References

Adendorff, A., (2007). Applying the franchising concept to commodity exchange development: the Pan-African Commodities & Derivatives Exchange, in UNCTAD, The World’s Commodity Exchanges: Past, Present and Future, Geneva 2007.

African Development Bank Group, (2013). Guidebook on African Commodity and Derivatives Exchanges.

Aning, A., (2007). Development of Ghana Commodity Exchange - Expected impacts and benefits, Expert Meeting on the Trade and Development Implications of Financial Services and Commodity Exchanges, UNCTAD.

Belozertsev, A., Rutten, L., & Hollinger, F., (2011). Commodity exchanges in Europe and Central Asia. A means for management of price risk. FAO Investment center working paper.

Channels TV, (2014). No trading at Nigerian Stock Exchange (NSE) owing to technical hitch, July 24, 2014.

Dana, J., (2005). Managing Commodity Price Risks: A Technical Overview

East Africa Trade Hub, (2010). Preconditions for a Successful Commodity Exchange – A comparison between ACE and ZAMACE. Retrieved from www.competeafrica.org.

Eleni Gabre-Madhin, (2007). An Eye on the Future: Can the Ethiopia Commodity Exchange Succeed Without Futures?

Ghana News Agency, (2014). NGO-worried-over-privatization-of-national-buffer-stock-company. Retrieved on July 20, 2014 from: http://www.ghananewsagency.org/economics/

Ghana Statistical Service, (2013). 2010 Population and Housing Census: Summary Report of Final Results Accra: Ghana Statistical Service. Available: http://www.statsghana.gov.gh/

Ghana Statistical Service, (2014). Final 2012 Gross Domestic Product & Revised 2013 Gross Domestic Product. http://www.statsghana.gov.gh/

Herrmann, R., Burger, K. and Smit, H.P, (1993). International Commodity Policy: A quantitative analysis, London, Routledge.

Julius B. Baer & Olin Glenn Saxon, (1949). Commodity exchanges and futures trading: Principles and operating methods. Harper & Brothers.

Meijerink et al, (2010). Price and prejudice: Why food prices are so high? LEI Report 2011-035, June 2011.

MOFEP, (2014). Mid-Year Review and Supplementary Estimates. Available: www.mofep.gov.gh/

Morgan, C.W., (2000). Commodity Futures Markets in LDCs: A Review and Prospects. Centre for Research in Economic Development and International Trade, University of Nottingham.

Nicholas J. Sitko and T.S. Jayne, (2011). Constraints to the Development of Commodity Exchanges in Africa: A Case Study of ZAMACE.

Onumah, G., (2010). Promoting Agricultural Commodity Exchanges in Ghana and Nigeria: A Review Report, UNCTAD, December 2010.

Paul, I., (2011). An assessment of the opportunities and challenges of the Ethiopian Commodity Exchange, Journal of Sustainable Development in Africa, Vol. 13, No. 1, 2011

Rashid, S., A. Winter-Nelson, and P. Garcia., (2010). Purpose and Potential for Commodity Exchanges in African Economies. IFPRI Discussion Paper No. 01035. Washington, Services in Cotton Marketing, Bulletin No. 1445 (Washington: U. S. Department of Agriculture) pp. 23. 24.

UNCTAD, (2005a). Overview of the World’s Commodity Exchanges, 2004. UNCTAD/DITC/COM/2005/8, Geneva, UNCTAD.

UNCTAD, (2005b). Progress in the Development of African Commodity Exchanges. UNCTAD/DITC/COM/2005/9, Geneva, UNCTAD.

UNCTAD, (2006). Overview of the World’s Commodity Exchanges, 2006. 27th International SFOA Bürgenstock Conference, 6-10th September 2006

UNCTAD, (2009). Development Impacts of Commodity Exchanges in Emerging Markets, 2009. UNCTAD/DITC/COM/2008/9.

Varangis, P., (2003). “Market-Based Commodity Risk Management Approaches”, UNDP.

Downloads

Published

2015-04-27

Issue

Section

Articles