By Exness Kenya

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In recent years, the commodity market has emerged as a critical trading avenue. While prospects for other trading options have never looked more uncertain, commodities have not only weathered the storm but enjoy a particularly sunny outlook.

The worldwide commodities market is expected to reach a nominal value of more than $131 billion before the end of 2024. With a forecasted growth rate of 1.49 percent, the market value is expected to soar beyond $139 billion by 2028.

More than many other countries, Kenya looks set to benefit from this boom time for commodities, with the country’s favorable geography putting it in prime place for international trade.

However, there’s far more to the soaring popularity of commodities trading than this. An evolving regulatory framework, considerable outside investment, and a younger demographic with an appetite for online trading are all driving the trend.

Trading commodities in Kenya

Commodities trading is an increasingly attractive prospect for traders looking for an alternative to traditional options like forex. Commodities, which refer to any number of economically important materials, are broadly split into two categories: soft commodities and hard commodities.

When we talk about soft commodities, we’re usually referring to agricultural products. This typically includes things like crops or livestock.

Hard commodities are usually material resources that are extracted or mined, such as precious metals and fossil fuels. What makes commodities such an enticing prospect for traders? The market is particularly volatile, providing excellent profit opportunities for successful traders.

A dynamic market and new opportunities

In recent years, Kenya’s agricultural sector has undergone a seismic shift. Modernization of the sector has occurred at a rapid pace, with the changes benefiting the commodities market.

In February 2024, the Kenya National Multi Commodities Exchange (Komex) was launched, bringing a centralised platform and greater structure to commodities trading, including commodities produced by the agricultural sector.

Why is Komex so important?

Structured trading aside, Komex also promises to promote a fairer distribution of resources and encourage fair pricing. While experienced traders themselves ultimately benefit, a new generation of digital natives is emerging.

Armed with readily accessible tools and a trading calculator, these aspiring traders are set to shake up what has been, up until now, a relatively closed loop. These initiatives are also poised to put money in the pocket of farmers and producers, with the pricing of commodities on the exchange market now more transparent than ever.

Eventually, the consumer reaps significant benefits from this evolving landscape, enjoying a wider array of choices on the supermarket shelves, alongside more competitive pricing. This dynamic not only fosters a vibrant market environment but also encourages innovation among producers to meet diverse consumer preferences.

The economic advantage of such a development is clear, leading to enhanced consumer satisfaction and a more robust market competition. Beyond the immediate financial benefits, there's the added luxury of increased food security for Kenya and the broader East African region.

Kenya’s commodities market: Obstacles to success

While there’s plenty of potential for Kenya to emerge as a pioneer in Africa for commodities trading, the road to success and international recognition is littered with pitfalls. Political corruption still remains a prevalent issue, while scams that prey on international investors continue to be rife, threatening to tarnish Kenya’s image as a reputable trading partner on the world stage.

There also remains a relatively threadbare regulatory framework in place. This opens up the floodgates to all manner of issues, chief of which is an environment neither designed for nor particularly hospitable to small to medium-sized businesses. For anyone other than enterprise-level entities to succeed, change needs to happen.

What’s being done to tackle these issues?

Fortunately, many of the challenges and issues outlined above are already on the path to resolution, thanks to the proactive measures being taken.

The trade finance gap, a significant barrier that has long existed between smaller businesses and their larger enterprise counterparts, has not gone unnoticed by policymakers and economic strategists. In an effort to bridge this divide and foster a more inclusive economic landscape, the Kenyan government has taken a commendable step with the introduction of the Nairobi International Financial Centre (NIFC). 

This initiative is specifically designed to level the playing field by facilitating access to finance for businesses of all sizes, thereby encouraging growth and innovation across the board. The NIFC aims to serve as a catalyst for economic development, attracting both domestic and international investment and enhancing Kenya's position as a global financial hub.

The future of commodity trading in East Africa

There’s no denying that Kenya’s unique advantages put the country in prime position as far as the commodity market is concerned.

However, Kenya can also emerge as a pack leader for other African nations, although collaboration with other countries must be forthcoming. Thankfully, the African Continental Free Trade Agreement (AfCFTA) provides the perfect trading infrastructure for exactly this purpose.

The online world has already paved the way for a new era in forex trading. Buoyed by a modernizing agricultural sector and stricter regulations, commodities look set to join forex as a lucrative and increasingly accessible trading opportunity.