Reducing Risk For West African Farmers Through The Ghana Commodity Exchange

Words By Adekunele Abiona and Fraser Mitchell

For the smallholder farmers who make up over 60% of Sub-saharan Africa’s population, the volatility of commodity prices continues to prevent their economic security.

Speaking in May 2021 Victor Iyama, a cocoa farmer in Nigeria and the President of Nigeria’s Federation of Agricultural Commodity Association (FACAN), highlighted that the inconsistent price of cocoa is a cause of concern for many farmers. 

“Even where the terminal markets are open like in cocoa, the price has really nosedived. The cocoa that most of us have bought for 1 million Naira (2330 USD), if you sell now you will lose between ₦350,000 (850 USD) and ₦400,000 (970USD)”, Iyama explained, stressing that the international price for cocoa was making it difficult for exporters to make a profit.

In neighbouring Ghana, the Ghana Commodity Exchange (GCX) was established to prevent farmers from suffering such economic hardship.

Incorporated in 2018, GCX’s aim is to bring agricultural producers and buyers together to secure competitive prices for commodities and assure market quantity, quality and timely settlement of the trade.

Smallholder Farmers Victims of Price Volatility

GCX Engages Trading Members image

Since its inception, GCX has reached about 25% of Ghana’s smallholder farmers, with a drive in place to meet even more farmers both in Ghana and in neighbouring West African nations. The exchange is looking to smoothen many frictions of commodity trading between farmers and produce buyers in West Africa.

Commodities are raw materials like gold and coffee and they account for more than 80% of exports in 35 African countries. Yet, the impact of commodity exports by African countries on global trade flows is less than 5%. In fact, out of Africa’s 48 countries, only Algeria, Angola, Côte D’Ivoire, Egypt, Ghana, Libya, Nigeria and South Africa export significantly more than $10 billion in commodities yearly.

The problems of commodity trading in Africa are numerous. The role of the GCX is to facilitate the trade of agricultural commodities via an electronic trading system. Another critical issue, the deterioration of crops after harvest, is solved by storing harvested commodities in its standardised warehouses. 

Further, GCX exists to provide market access to commodities, create a system of contract enforcement, make sure that commodities are up to high-quality standards and create transparency in the quantity and pricing of commodities.

GCX solves the challenges facing the commodities market in West Africa by providing an electronic trading platform powered by a provider trading system. GCX also provides warehouse storage operations linked to the exchange through an electronic warehouse receipt system (e-WRS) backed up by collateral management services.

Through the GCX trading system, all the relevant stakeholders in commodity trade, including farmers, cooperatives, buyers, brokers and merchants can trade from anywhere, be it from Ghana, West Africa or any other place outside Africa.

Also, the trading platform provides a real-time price discovery mechanism that allows market participants to negotiate better prices, thereby adding transparency and confidence to the system.

At GCX’s warehouses, value is added to the stored commodities. The commodities are secured, dried, graded and re-packaged, and electronic warehouse receipts (e-WRs) are issued to farmers. 

According to Tucci Ivowi, the CEO of GCX: “We operate just like a stock exchange, except instead of stocks, we facilitate the trade of agricultural commodities via an electronic trading system. GCX has warehouses where commodities are stored so that we can ensure high quality”.

On the unique pricing plan of GCX, Ivowi added, “We have commodities standardised into grades for buyers to choose from. Buyers are, therefore, very clear about the quality they are buying when they decide to go for grade “1” or “4”, for example. GCX also takes good care of sellers by guaranteeing payment. We have instituted a T plus one model of payment which ensures that sellers are paid 24 hours after delivery”.

Ms Ivowi is also certain that, in GCX’s warehouses, post-harvest losses caused by moisture and other factors make up only 1.5% of the total produce, whereas post-harvest losses in other warehouses in Ghana make up between 30% – 90% of the entire agricultural products. Concluding, she added that “our intervention here is to try and manage more warehouses so that we can equip them adequately.”

Commodity exchanges are organised markets that function under established rules and regulations, to facilitate the purchase and sale of raw materials. And they have been relevant since time immemorial.

In earlier times, the rise of the Roman and Greek empires brought about sophisticated commodity trading systems across wide expanses of land. Today, commodity exchanges like the Carbon Trade Exchange (CTX), the Chicago Board of Trade (CBOT), the New York Mercantile Exchange (NYMEX) and the Shanghai Futures Exchange (SHFE) make use of high-powered electronic systems to trade commodity spot prices, futures, forwards and options.

The GCX is proving that seamless integration of agricultural activities in West Africa is achievable. 

Take the issue of market access of agricultural produce in West Africa. In Niger, agricultural production of cereals and cash crops comprise more than 40% of the Gross Domestic Product (GDP) and provides one form of economic benefit to over 80% of the country’s rural population.

Yet, millet consumption demands in Niger far outstrips production stocks, a situation that underscores the need for mechanised farming and advanced warehousing systems.

In Ghana, it is estimated that 85% of cereals, 40% of rice and 100% of starch staple food, including important raw materials for local industries, are produced by smallholder farmers. 

However, it is estimated that about 16% of the challenges smallholder farmers in Ghana face are marketing related, occasioned by a lack of access to a ready market, lack of access to storage facilities and poor road infrastructure, all of which lead to a cheap price of commodity products.

Given the market access challenges outlined above, GCX is bridging the economic gap by connecting farmers to a ready market through an electronic trading system of produce where prices of commodities are displayed in real-time and through the provision of standardised warehouses where much agricultural produce will not continue to surfer post-harvest losses.

The World Bank estimates that post-harvest losses increase with humidity and temperature, and decrease with better market access, higher seasonal price differences and improved storage practices — problems the GCX is well-positioned to solve.

And smallholder farmers are seeing the results of GCX’s interventions for themselves. Ms Ivowi confirms that “farmers are thrilled by the fast payments, and those who aren’t comfortable using the technology (electronic trading system) are co-opting their children to be floor trading representatives for them”.

Tackling Access to Finance for African Farmers


In other areas of commodity trade development, GCX is also making giant strides. It is estimated that there are over 80 million smallholder farmers in Africa, many of whom cannot access credit facilities because they do not have collateral. This situation is exacerbated by the fact that the deed of title to land is often nearly impossible for many smallholder farmers to produce.

However, through the electronic warehouse receipts (e-WRs) provided to farmers who store their produce in any of GCX’s warehouses, banks can provide loans to farmers by using the e-WRs as proof of ownership of production, and therefore collateral.

In the areas of contract enforcement, quality standards and transparency in quantity and pricing, GCX’s interventions are well noted. Not only is GCX regulated by the Ghana Securities and Exchange Commission (SEC), a situation that gives a lot of people the confidence to trade with the exchange, GCX also works to ensure that all its warehoused produce meet international standards, including national ones set by the Ghana Standards Authority.

Further, through its T plus one model of payment, GCX ensures that sellers are paid within 24 hours of a spot trade and buyers are often aware of the quality of the commodity they are trying to purchase because of the transparent grade “1” to “4” system of the commodities in the GCX warehouse. GCX also shares information about prices with its members through text messages daily.

Gearing Up For Expansion

Ghana Commodity Exchange welcomes UGBS students image

GCX has ambitious plans, and it is not stopping in Ghana. In the age of the Africa Continental Free Trade Agreement (AfCFTA), the exchange is looking to expand into Ghana’s neighbouring countries like Niger, Burkina Faso and Mali who already conduct a lot of informal commodity trade but are in critical need of a formal commodity exchange like GCX to organise and structure their commodity market.

According to Tucci Ivowi, the CEO of GCX, after moving into these neighbouring countries “we will then move to serve other countries within the wider sub-region. Talks are already underway with players in these other countries, and we have a few potential members from this group”. 

Ivowi notes that for regional trade to work within the GCX platform, all the relevant stakeholders will have to study each country’s regulatory system and work on harmonisation of laws, even though she does not rule out attracting the entire continent and the rest of the world to GCX, even from participants in other continents. According to Ms Ivowi, “GCX is not limited to Africa; we have had some interest from Vietnam for cashew, that we appreciate”.

GCX also has a plan to add forwards and futures contracts, later on, having started with spot trading. Ms Ivowi points out that opportunities currently exist for creating partnerships, but that they must be constructed in a way that adds value to all the parties involved.

Even though GCX started as a government institution, its ultimate goal is to open up itself to the private sector. According to Ms Ivowi, “Though we started as an institution wholly owned by the government, there are plans to open ourselves up to private sector investment. The government has plans of funding the agency until we break even to ensure that the interests of smallholders are preserved”. 

After all, according to Tucci Ivowi, “our priority is social good first, and that should signal trust among all actors and the general public”.


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