LCFE goes live for harnessing Nigeria’s $1trn commodities ecosystem

It was a historic event on Thursday in Nigeria’s history as the Lagos Commodities and Futures Exchange (LCFE) officially goes live.

The debut of LCFE through sweat, hard work and unrelenting dedication of the stakeholders helps to harness the potentials of the commodities ecosystem.

“As we are all aware, the Capital size of the Nigerian Commodities Ecosystem is so large and like I have said in the past, it can be considered as a $1trillion economy cutting across Agriculture, Oil and Gas, Solid Minerals and Currency. With a capitalisation this large, it was important to lay the right foundation as the means determined the end for us and we could not afford not to get it right,” said Akin Akeredolu-Ale, Managing Director/CEO, Lagos Commodities and Futures Exchange.

He noted further that prior to LCFE incorporation in 2015 and receipt of “our license to trade Four (4) asset classes of Commodities from the Securities and Exchange Commission in 2019, the Nigerian Commodities Ecosystem was a greenfield. Stakeholders have been buying and selling commodities for many decades without structure, without price discovery and without transparency.”

The CEO said the Exchange and its competent team spent the past three (3) years identifying and aligning relevant building blocks for an effective, structured, and transparent commodities ecosystem.

The Exchange launched Gold products. Participants at the event witnessed the launch and trade of the Gold instruments.

“We have sensitized, trained, and educated relevant stakeholders to ensure that the participants of this market are adequately prepared to participate effectively on the Exchange. At this point the Exchange has registered and onboarded over one hundred (100) stakeholders such as Dealing member firms, Commodity Brokers, Issuing Houses, solicitors, Insurance Companies, Trustees, Custodians, Settlement Banks and many more,” Akeredolu-Ale said.
He said the Exchange identified that Nigeria’s crude oil has been traded extensively outside the country in Switzerland and other areas by large scale trading companies.

“Nigeria produces only high value, low sulphur content, light crude oils – Antan Blend, Bonny Light, Bonny Medium, Brass Blend, Escravos Light, Forcados Blend, IMA, Odudu Blend, Pennington Light, Qua-Iboe Light and Ukpokiti This makes Nigeria’s crude very desirable.

By way of sovereignty, our oil and gas products should be traded and priced within Nigeria. 400,000bbls on arbitrage can be traded on the LCFE. Whenever prices drops we can plan for our trades in the future. This will boost the balance sheet, enhance liquidity and shore up the value of the Naira; External reserve will become both external and internal reserves. The Exchange is currently setting up frameworks and structures to achieve this and more details will unfold in due time.”

According to him, “I would like to answer the big question that has circulated among the capital market and the commodities market “Why has it taken LCFE so long to commence active consistent trading”?

“We appreciate the support and the commitment of the Securities and Exchange Commission in the building of this ecosystem. The Commission has been a guide to the Exchange, a listening ear and a regulator to ensure that every rule and regulation governing the Exchange, risk management procedure, instrument or product that will be traded on the Exchange will be in the interest of the investors, capital market operators and the Nigerian Economy.”

He noted that one of the asset classes in which LCFE has made tremendous giant strides in is the Solid Minerals asset class.

“We noticed there was an urgent need for structure, regulation, funding and data collation in this sector and this is where Commodities Exchanges play strategic roles in introducing structure to this ecosystem.

“A quick glance at the Solid Mineral Mapping of Nigeria, shows a very robust distribution of solid minerals. Nigeria is heavily blessed with over 40 different mineral types spread across more than 450 deposits across the country, of which seven, including Gold have been identified by the Ministry of Mines and Steel Development, as the most strategic towards a rehabilitation of the Solid Minerals sector. We are proud to be the first Exchange in Nigeria licensed by the Securities and Exchange Commission to commence trading of gold contracts backed by physical Gold.

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Also speaking, Onyenwechukwu Ezeagu, Chairman, Board of Directors Lagos Commodities & Futures Exchange said “In 2015, LCFE was incorporated under the initiative of Association of Securities Dealing Houses of Nigeria (ASHON). Our vision was to transform the Nigerian commodities market and redefine practice standards which would catalyse economic growth in Nigeria.

“In 2019, we were granted full operating license by the Securities & Exchange Commission (SEC) to trade 4 asset classes namely Agriculture, Solid Minerals, Oil and Gas and Currencies. We sincerely appreciate the Securities & Exchange Commission for your encouragement and support to accomplish this feat.”

He noted that, “The journey to accomplish this has been long but fulfilling. Since 2015, there has been a lot of emphasis by the present Federal Administration on diversifying the economy from a crude oil dependent economy to other critical economic sectors such as Agriculture and Solid Minerals. We keyed into the vision and identified the need for a platform to facilitate transparent and orderly trade of these commodities. It was out of this that the Lagos Commodities and Futures Exchange was founded with the intention to create a platform that encourages transparent price discovery, mitigate price risks and bridge the gap between the Financial and Commodities sectors of the economy.”

Ezeagu said: “We did this through establishing partnerships with key stakeholders that are critical for our success in this project namely:
The Capital Market; These comprise Dealing Member Firms, Commodity Brokers, Settlement Banks, Issuing Houses, Regulators and other stakeholders. A lot of building blocks have been worked on over the past two years to ensure that the capital market is ready to play its pivotal role in the Commodities Ecosystem.

The Commodities Ecosystem: This comprises relationships with the Commodities sector through our partnerships with Aggregators, Warehouse owners, Assayers, Logistic companies, Farmers, Miners and Commodities-based firms.

The Technology Providers: These include, ICT partners, the CSCS (Clearing & Depository) the NG Clear for derivatives and counter party, risk bearing, and the other service providers.
The Banks; I need not elaborate their important roles.”

He noted that the Exchange has conducted series of system tests and successful trades through its Trade Matching Engine, “and this is a first step in fulfilling our mission to catalyse and transform the Nigerian economy and creating value as well as wealth for all the stakeholders. We have conducted numerous trainings, capacity building and sensitization sessions to help our stakeholders navigate and harness the full potential of the Nigerian Commodities ecosystem geared towards transforming the Nigerian Economy at large.”

“Our gratitude today goes to our Regulators, SEC, for giving us the opportunity to operate in the commodities ecosystem by granting us the license as an Exchange, The Minister of Solid Minerals, The Lagos State Government, our project managers, Stockbrokers, Association of Securities Dealing Houses of Nigeria (ASHON), Dukia Gold and Precious Metal Refining Co. Ltd, our distinguished and multitalented Board of Directors, our indefatigable Shareholders and very many others too numerous to mention here. We are indeed grateful for your support in our journey as an Exchange so far.

“From 2019 till this point, we remain focused on laying the foundation for a structured and transparent Commodities trading platform and today we will be launching Nigeria’s first Exchange Traded Gold Instruments backed by real Gold.

With this feat, the Board and Management of LCFE decided it is ripe to commemorate our efforts and journey so far with the full commissioning and official launch of the Lagos Commodities and Futures Exchange. We are delighted that the day has finally come. We thank you all for your support and look forward to your continuing and sustained partnerships with you our esteemed stakeholders in transforming the Nigeria commodities ecosystem.”