By MICHAEL EBOH & RITA OBODOECHINA

As the Nigerian Stock Exchange, NSE, plans to introduce derivatives trading within the next couple of years, the African Development Bank has raised an alarm over the need for stricter regulation of the derivatives and commodities market in the African continent to forestall a recurrence of the global financial crisis.

The AfDB, in a statement signed by Chawki Chahed, Senior Communications Officer, AfDB, said it is aware that derivatives, if properly structured, will help in the growth and development of financial systems across the African economic landscape.

“Considered as one of the most important causes of the global financial crisis that broke out in 2008, derivatives could enhance the liquidity, stability and robustness of financial systems, as long as they are structured and regulated in an appropriate manner.

“They are critically important risk management instruments for commodity chains, companies, banks, financial institutions and investors,” Chahed said.

On the need for stricter regulation of derivatives trading, Chahed noted that global regulatory reform recommends that derivative contracts are traded through Exchanges, derivative obligations are cleared through Central Counterparty Clearinghouses (CCPs) by end 2012 at the latest.

According to him, except South Africa, derivatives exchanges and CCPs do not yet exist in Africa, adding however, that there has been growing realisation that efficient financial and commodity markets are a prerequisite for equitable, inclusive and sustainable development.

This, he said, has been manifested in key policy documents, including the African Union’s Arusha Plan of Action and Declaration on African Commodities, 2005, as well as in the Final Communique the Tripartite Summit of Heads of State and Government, 2008.

To this end, Chahed disclosed that the AfDB is organizing a ‘Pan-African Workshop for Regulators of Derivatives and Commodity Exchanges,’ that will see more than 100 high level experts from across Africa discussing ways and means to develop the derivatives and commodity exchanges in Africa, through the alignment of the African regulatory framework with global standards.

Chahed said the workshop will bring together in Gaborone, Botswana, representatives of ministries of finance and central banks, commodity exchanges, securities and capital markets authorities as well as representatives of multilateral organizations.