30 Aug 2019
ETHIOPIA: Cotton and Other Commodities Required to Trade on Official Exchange
The Ethiopian government is combatting its contraband problem by requiring that all pulses and some other crop-based commodities are traded only on the Ethiopian Commodity Exchange (ECX). Among the other commodities that must now be traded on the ECX are cotton and niger (also known as nug). Cotton trading will start on the exchange floor during the coming harvest season this autumn, according to Wondimagegnehu Negera, CEO of ECX.
The government hopes that the discipline and transparency resulting from using exchange-only trading will have a significant impact on the country’s contraband problem. Ethiopia loses not only significant foreign exchange earnings, but also substantial amounts of its commodities due to contraband, resulting in fierce competition from some Kenyan exporters who manage to get hold of Ethiopia’s products illegally. A signed contract with exporters will now be required, compelling them to reveal to the government the commodities’ price, quality and export time, according to a statement from Ethiopia's Ministry of Trade and Industry.
The ECX has been operating since 2008, and is already engaged in trading major agricultural commodities, such as coffee, sesame seeds, green mung beans and soybeans. It has exclusive trading rights for coffee, the export of which earns one-third of the country’s hard currency. The introduction of cotton, however, will be the first time non-edible products are traded on the ECX.
The Ethiopian government banned the export of cotton in 2010, hoping to protect the local textile industry, but cotton production subsequently fell to an all-time low of 30,000 tons. For the past two years, however, cotton producers have again obtained access to export markets after the government dropped the ban, following almost seven years in operation. Despite current local market prices being attractive, many commercial growers are still targeting exports in order to earn foreign currency.