Market | Commodities

Understanding the Lagos Commodities Market Metaphor

Aug 02, 2022   •   by   •   Source: Sola Oni   •   eye-icon 172 views

At the weekend, the Lagos State Governor, Babajide Olusola  Sanwo-Olu, demonstrated a clear understanding of the pivotal role of a commodities exchange towards accelerated economic growth and development. He firmly believed that Lagos was a significant commercial hub in Nigeria and should take a leadership position in leveraging the commodities ecosystem to grow the Nigerian Gross Domestic Product (GDP) through trading agricultural and mineral products in a transparent and well-regulated exchange.


Sanwo-Olu understands that the emergence of LCFE has brought to the fore the issue of performance indicators of a commodity exchange. At the basic level, the specialized market is about electronic trading of receipts of commodities products as against trading the products directly. Such an exchange must have a proper structure, including Dealing member firms, Commodity Brokers, Issuing Houses, solicitors, Insurance Companies, Trustees, Settlement Banks, aggregators, assayers and other market operators. As countries battle with rising inflation globally, commodities trading, primarily through commodities exchanges, is fast becoming the last option to revive economies.  


Making Commodities Exchange History

Sanwo-Olu, in his remarks, observed that “Today…history is being made with the formal commissioning of this Securities and Exchange Commission (SEC)-regulated marketplace, Lagos Commodities and Futures Exchange (LCFE), dedicated to the electronic trading of Nigerian agricultural commodities, solid minerals, and oil and gas, and to globalizing this trade, through partnerships with other Commodity Exchanges around the world.” 


“My task today is to unveil and launch these new Gold products: the Gold Spot Contract Series and the Eko Gold Coin, the first of many gold and gold-backed products that will feature on the trading floor of Lagos Commodities and Futures Exchange. Those gold coins will be known as the “EKO GOLD COIN,” and this first tranche designed as a proof-of-concept will comprise 58 units of the Coin, valued at over 100 million Naira”.       


Twenty-four hours after the inauguration and launch of Eko Gold Coins, the LCFE’s Managing Director, Akeredolu-Ale, confirmed in an interview with Bloomberg that the bourse had started trading gold with the specification of the London Bullion Market Association’s 99.9 % purity. He noted that the market was targeting globally acceptable pricing and quality.   


Jumpstarting  a Futures Exchange 

Akeredolu-Ale underscored the substance and essence of what led to the setting up of LCFE, saying, “ The Exchange, having 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. Our oil and gas products should be traded and priced within Nigeria by sovereignty. 400,000bbls on arbitrage can be traded on the LCFE. 


“ Whenever prices drop, 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 reserves 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.” said Akeredolu-Ale


 Sanwo-Olu explains Newly Traded Eko Gold Coins

“ The benefits of launching this tradeable gold coin here on the floor of the LCFE are immense. The Nigerian Diaspora and foreign individual and institutional investors now have an opportunity to invest in and trade Nigerian gold in a fully regulated and credible marketplace. As a state, Lagos will also benefit from paying royalties and taxes associated with the trade in precious metals.

I am also confident that we will see a deepening of our emerging commodities trading ecosystem, as well as increased investment in agriculture, mining, and oil and gas exploration in Nigeria, to take advantage of the numerous opportunities offered by the existence of the Lagos Commodities and Futures Exchange (LCFE).


“ After this proof-of-concept launch,  listing the EkoGold Coin will occur in tranches of 10 million Pounds Sterling. This is undoubtedly the beginning of a new and exciting chapter for the investment community in Nigeria and abroad. We are seeing a maturing of the investment marketplace, and a welcome expansion of the opportunities available for those who want to invest their money


“ Against the backdrop of increasingly volatile economic conditions around the world, it is evident that gold and other precious metals are enjoying renewed attention on account of their relative stability and their ability to serve as a hedge against inflation.


Lagos and the Spirit of Gold

According to Sanwo-Olu, the “EKO COIN” was “a representation of Lagos, our spirit, our culture, our infrastructure, our heritage. The symbol of the Lekki- Ikoyi Link bridge on one side of the Coin represents the modern megacity that this great State is while also symbolizing the bridge that unites all the residents of Lagos, from all walks of life, across ethnic, religious, partisan and class divides”.


“ The symbol of the three Wise Men on the other side of the Coin represents the deep-rooted cultural and value systems upon which Lagos State was founded and is a reminder of where we are coming from and how important those values remain, even in a rapidly changing and modernizing world. Therefore, the “EKO COIN” represents Culture, Values, Inclusivity, and Modernization. It will further position Lagos State as a Center of financial innovation and excellence, as well as a gold-trading hub that can rival any other across the world.”, he said.


Oni, an Integrated Communication Strategist, Chartered Stockbroker and Commodities Trader, Is the Chief Executive Officer of Sofunix Investment and Communications.

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