Commodities exchange plan takes shape as NSE joins body

The Nairobi Securities Exchange (NSE) has joined the futures exchange fraternity, taking Kenya closer to establishing a commodities market.

The NSE is now an associate member of the Association of Futures Markets (AFM), a Budapest-based organisation that helps in the developing and establishment of derivatives and related markets globally.

NSE chief executive Peter Mwangi made the announcement at the AFM’s meeting in South Africa.

“We are elated at joining the AFM as it is the industry trade association, supporting members and particularly emerging and frontier markets in the establishment of derivative and futures markets, according to international best practice,” said Mr Mwangi in a statement.

The derivatives market will especially assist farmers who are at the mercy of seasonal fluctuations of grain and meat prices.

“The establishment of a derivatives market will enable Kenyan corporates and individuals to manage risk such as fluctuating produce prices, currencies and interest rates more effectively,” said the statement.

(Read: Futures market promises farmers stable product prices)

NSE’s membership to AFM coincides with the industry regulator, the Capital Markets Authority’s recent appointment of Assim Jang, a futures expert who has worked in the United Kingdom, the United States, and Pakistan, to develop a market for Kenya.

“The authority has brought on board a long-term futures and derivatives expert, Assim Jang, to provide technical assistance in the development of the long-awaited futures exchange, the first in East Africa,” said CMA chairman Kung’u Gatabaki at the time.

Mr Jang has a year to engage policy planners at the finance, trade, energy, agriculture, environment and mineral resources ministries. He will also talk with commodity exchanges in the country, warehousing institutions, fund managers and other financial intermediaries on how Kenya can have a functioning futures market.

The Central Bank of Kenya is already working on building institutions that can buy surplus farm produce through an organised exchange.

“We can then develop this into a futures market,” said CBK governor Njuguna Ndung’u last month.