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ECX is about to start the trading of wheat after 15 years break

by Radarr Africa
written by Radarr Africa

The Ethiopian Commodity Exchange (ECX) is in the process of starting to facilitate the trading of wheat on its floor. The crop will return to the Exchange’s trading floor after 15 years of break, if the decision is approved by the regulators at the Ministry of Trade & Regional Integration.

It is a proposal that has come to the surface at a time when the country is gearing up to export wheat to neighboring countries, including Kenya, which is a net importer of the commodity. Officials expect a surplus of wheat this year, as the grand initiative to produce the crop throughout the country is close to bearing fruit.

Almost 15 years ago, the Exchange began trading wheat and corn when it became operational, but the trading of both commodities didn’t continue for very long, according to Netsanet.

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“The decision comes following the government’s measure to produce more wheat. The more it is produced, the more there will be a need for export and growing demand from local companies that add value,” said Netsanet Tesfaye, communications director at the Exchange, explaining how his office is ready to work on trading of the commodity.

The Exchange has now prepared a contractual manual and discussed it with stakeholders, including researchers from the Ministry of Agriculture. The next discussion will take place with exporters, producers, associations and concerned regional officials.

Once the ECX board approves the manual, it will be forwarded to officials at the Trade Ministry for their final approval. “The preparation isn’t only for this year. It will be for many more years,” Netsanet told The Reporter.

Waiting for the decision by the Trade Ministry, which the Exchange reports to, its officials expect to begin trading wheat this year.

A sample has been collected from wheat-growing regions to prepare the manual, which was designed with consultation among relevant authorities across the country, according to the announcement from the Exchange.

Regional states are expecting to harvest over 100 million quintals of wheat for the ending Meher season and have been given instruction to produce over 52 million quintals for the Belg harvest on a national level. The production for the Meher season will be 40 million quintals, an increase from last year.

Officials expect to save USD 600 million annually if they succeed in fully substituting wheat this year. This year’s total production will exceed the 107 million quintal yearly demand, with the excess to be exported. In light of this, the ECX has already defined a grade for each variety of wheat that is eligible for export.

“The manual specifies each type of wheat and identifies the trade centre that will grade it,” the Exchange said in its announcement.

SOURCE: The reporter

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Banking, Finance & InvestmentEthiopiaInsurance

Independent regulatory body to set free insurers from central bank’s shadow

by Radarr Africa
written by Radarr Africa

The Insurance Supervision Directorate at the National Bank of Ethiopia (NBE) is set to become an independent insurance regulatory body separate from the central bank. It will evolve into a commission, authority, or agency with a mandate to oversee the insurance industry autonomously.

A committee and a team of experts formed at the central bank a month ago are assessing final recommendations for the decision. The final decision will be made by the board of NBE, chaired by Girma Biru, economic advisor to the Prime Minister.

“A committee has been established and is working on studying the viability of establishing an independent body to regulate the insurance industry. The body will be independent from the NBE,” Fikadu Degife, chief economist and vice governor of NBE, told The Reporter.

The decision will be made by the NBE’s board after the committee finalizes its studies, according to Fikadu. “The committee cannot make a decision but recommends it to the board. The board is considering the issue, but there has been no decision made so far. It has been a month since the committee was formed and embarked on the work. They have already finalized their assignment,” Fikadu told The Reporter.

The independent institution will not necessarily be a commission, according to Fikadu. The committee took into account other countries’ trends and used a World Bank study as an input, finally presenting their proposals.

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The World Bank presented a study on separating insurance regulation from the NBE four years ago. For almost a decade now, Ethiopian insurance players have been requesting the government to have an independent regulator separate from the NBE. This is mainly because NBE’s focus is more occupied by banks, and the insurance industry remains marginalized due to a lack of proper attention, incentives, support and close nurturing by the central bank.

Though both the banking and insurance sectors existed for over half a century, the banking industry grew by leaps and bounds, while the insurance industry merely survives.

Insurance penetration in Ethiopia also remains nascent, as insurance firms struggle to sell policies by slashing premiums. But after hearing the progress at the NBE after the committee was established last month, insurers have high expectations that the government is finally close to giving freedom to the insurance industry.

“We heard the government is finally considering establishing an independent regulatory body for the insurance sector. The World Bank has studied the issue and put forward recommendations. It will bring tremendous advantages for the industry’s growth if the decision materializes this time,” Yared Molla, CEO of Nyala insurance and president of the insurance association, said.

Meseret Bezabih, CEO of United Insurance, also shares the same view. Meseret hopes the insurance industry will be led by a separate institution, which will also help the central bank to fully focus on banks instead of regulating various sectors at the same time.

Given the preparations to open up the banking industry, the establishment of a stock exchange, and the upcoming new financial service code underway, separating the insurance industry regulation will ease the burden on the NBE, according to experts.

SOURCE: The Reporter

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