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Baghdad was a flourishing trade center in the middle of the north and southern areas of the Silk Road. The geography of the city is a flat area, built on the banks of either side of the Tigris river, allowing goods to reach it by ship.
Lapis Lazuli is mined in the Wakhan Corridor, and then was smoothed and rounded until it could be used to make jewelry and other things.
Baghdad was a significant trade city, and didn't produce any goods of it's own. It really got it's lapis from Egypt.
Lapis was discovered about 6000 years go in Afghanistan. Afghanistan still produces the finest lapis today.
In exchange for these precious stones, Baghdad wanted building materials, food, and cloth. They also traded for other tradeable goods. Baghdad was a trade city, so it didn't really produce much on its own.
http://lapislazuli.jewelry/lapis-lazuli-magical-trade-routes/
https://en.unesco.org/silkroad/sites/silkroad/files/knowledge-bank-article/baghdad_and_silk_route.pdf