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Introduction
The commodity market is a significant driver of Nigeria's economic output, contributing between one - third and two - fifths of the national GDP .1 But its growth and stability are hindered by systemic challenges such as inflation, market volatility, climate - related risks, insecurity, and regulatory unpredictability. These factors create financing gaps for producers and traders, making it difficult to obtain capital through conventional means.
In response, the Investment and Securities Act 2025 (ISA 2025) introduced legal recognition of warehouse receipts as a means of leveraging assets by commodity owners and derisking investment in the commodity market. This article examines how the ISA 2025 framework supports the classification of warehouse receipts as tradable securities and assesses the extent to which this innovation enhances financial inclusion and deepens market efficiency in Nigeria's commodities ecosystem.
Legal Framework for Warehouse Receipts Under ISA 2025
The Act defines warehouse receipts as documents of title to commodities in whatever form issued by a warehouse operator, collateral manager, or other persons permitted by the Securities and Exchange Commission to issue a warehouse receipt in respect of commodities deposited in a warehouse. By this provision, commodities could be produce , item, article, right or interest of any nature in such commodities. When a person, natural or otherwise, has title to such, the commodity can be deposited with a registered warehouse and the receipt which is essentially the proof of such deposit2 can be used to secure funding for business. The receipts attest to the existence and quality of the commodity for which they are issued.
In respect of the warehouses that can validly issue receipts, section 240 of the Act provides for prior registration with the Securities and Exchange Commission. Where a warehouse is registered, it can issue warehouse receipts which are tradable on the floor of an exchange in Nigeria or another jurisdiction3 . The Act further provides for the conditions to be fulfilled before a warehouse can become a tradable receipt issuing warehouse.
The conditions for a warehouse to be registered with the Commission are as follows.4
a. It is suitable for the proper storage of the particular commodities ;
b. The operator meets the conditions for eligibility to operate a registered warehouse of the kind applied for as may be prescribed in the rules and regulations made under this Act; and
c. The operator agrees, as a condition to the granting of the registration, to comply with and abide by the provisions of regulations made under this Act.
Operating while failing to meet these requirements is an offence which carries a stiff penalty of N3 million or imprisonment for not less than five (5) years.
Regulatory Framework for Warehouse Receipts
The successful implementation and integrity of the warehouse receipt system under the ISA 2025 relies heavily on the coordinated efforts of key regulatory institutions. They include,
a. The Securities and Exchange Commission
b. The Central Bank of Nigeria
c. The Nigerian Agricultural Insurance Corporation
A. The Securities and Exchange Commission
The Securities and Exchange Commission is the primary regulator of the warehouse receipt system as it administers the Investments and Securities Act which provides legal basis for the system. The Commission in regulating the warehouse receipt system is to ensure all warehouses intending to issue receipts are registered. An application for registration of the warehouse can be submitted by its operators in the form prescribed in the Commission's rules and regulations.5
Beyond guiding the registration of warehouses under section 240 of ISA 2025, the Commission also licenses and supervises the commodity exchanges in Nigeria where such warehouse receipts can be traded. Some of the registered commodities exchanges in Nigeria include the Nigeria Commodity Exchange (NCX), Afex Commodities Exchange Limited (AFEX), Lagos Commodities and Futures Exchange (LCFE), and the Gezawa Commodity Market (GCMX).
With its supervisory role over the operations of warehouse operators and the exchanges as well as the transactions and interactions of sellers and buyers in the commodities exchange, the Securities and Exchange Commission is a major regulatory body whose policies affect market behaviour and outcome.
B. The Central Bank of Nigeria (CBN)
The Central Bank of Nigeria (CBN) plays a vital role in ensuring that warehouse receipts are not just recognized but usable within the broader financial system. One of the ways it does this is by allowing banks and finance companies to treat properly issued warehouse receipts as acceptable collateral for loans.
Through its revised guidelines for finance companies, the CBN has formally permitted "warehouse receipt financing", which enables farmers, traders, and agribusinesses to access credit using their stored commodities without needing to sell immediately.6 This is a significant step toward reducing the financial pressure that often leads to post - harvest losses and low farmgate prices.
Beyond policy, the CBN has also shown institutional support for warehouse receipt systems through its involvement with the Nigeria Commodity Exchange (NCX). It holds a major stake in the NCX and has backed pilot programs aimed at linking warehouse receipts to structured commodity trading. In addition, the CBN's broader push for digital financial systems aligns well with the electronic warehouse receipt systems (e - WRS) being rolled out. Whether it's the introduction of e - invoicing for exports, the growth of QR - based payments, or the development of bank - neutral cash hubs, the central bank is working to ensure that warehouse receipts can easily fit into modern, tech - enabled finance. This digital alignment helps farmers and traders use receipts in real - time to access loans, make payments, or even trade electronically, making the warehouse receipt system more than just a piece of paper, but a tool for real economic empowerment.
C. The Nigerian Agricultural Insurance Corporation (NAIC)
The Nigerian Agricultural Insurance Corporation also plays a critical role in the success of the warehouse receipt ecosystem. The Corporation is a wholly owned Federal Government of Nigeria insurance company set up to provide insurance cover to producers of agricultural produce in Nigeria. It offers insurance for both the commodities and the warehouses where they are stored thus reducing financial risks that could arise in the course of business. Since ISA 2025 mandates that all commodities in a warehouse under the warehouse receipt system is to be insured, insurance must be taken with the Corporation as the Corporation helps build a system of trust and accountability which are attractive to potential investors.7
Footnotes
1 AFEX Commodities Exchange, 2025 Annual Commodities Outlook (AFEX 2025) https://blog.afex.africa/uploads/Annual_Commodities_Outlook_2025_6640b936a7.pdf accessed 2 July 2025
2 Section 246(1) of the Investments and Securities Act, 2025.
3 Section 248(1) of the Investments and Securities Act, 2025.
4 Section 240(3) of the Investments and Securities Act, 2025.
5 Rule 3, Rule on Warehousing and Collateral Management, Securities and Exchange Commission (Nigeria), Executed Rules and Amend me nts (22 March 2021) https://sec.gov.ng/executed - rules - and - amendments - 22 - march - 2021/
6 Guideline 2, Central Bank of Nigeria, Revised Guidelines for Finance Companies in Nigeria (10 September 2014) 4, National Mon et ary Policy Department, CBN https://www.cbn.gov.ng/out/2014/ccd/revised%20guidelines%20for%20finance%20companies%20in%20nigeria.pdf
7 Section 3(e) of the Nigerian Agricultural Insurance Corporation Act 1993
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