June 13, 2024
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The Lagos Commodities and Futures Exchange (LCFE) will start trading crude oil and gas on its exchange.

This was disclosed by Akinsola  Akeredolu-Ale, Chief Executive Officer of LCFE, during an interview in Lagos on Friday.

This will mark the first time any Nigerian exchange will trade crude oil.

Akeredolu-Ale noted that the exchange is working with the Securities and Exchanges Commission (SEC) to meet the trading requirements.

He stated, “The consideration is that 10 to 20% of Nigeria’s crude oil production be provisioned for trading on the floor of the Lagos Commodities and Futures Exchange,”

The exchange anticipates trading approximately 50 million barrels annually, equating to roughly $4 billion at current market prices.

As of March 2024, Nigeria’s crude oil production, excluding condensates, hit 1.23 million barrels per day, a significant shortfall from the budget benchmark of 1.78 million bpd. In the past, almost all of Nigeria’s crude oil was exported. However, with the rise of the country’s refining capacity, part of its oil output has been going to local refining, particularly to Dangote Refinery.

According to Akeredolu-Ale, the move by LCFE is expected to expose oil producers with both domestic and international markets, mitigate default risks, enhance product accessibility, and foster increased investment opportunities.

He noted “This will afford Nigerians the opportunity to take direct benefits and further aid the growth of the capital market by trading on both crude and refined product contracts.”

The Lagos Commodities and Futures Exchange is one of the licensed commodities and futures exchanges in Nigeria. Others include Nigerian Commodity Exchange, AFEX Commodities Exchange, and Gezawa Commodity Exchange.

The LCFE received operating license from the SEC in 2019 and started trading in 2022 with gold. To date, it has facilitated transactions exceeding $58,000 through licensed commodity brokers.

Some of the commodities that trade on the platform include agricultural produce such as soya beans, paddy rice, maize, sorghum, sesame seeds, ginger, cassava, palm oil, and shea (dry nut and butter). Solid minerals such as lithium, lead ore, florite, zinc, iron ore, kunzite, as well as gold also currently traded on the exchange.

The move to trade crude oil on LCFE implies that traders can buy or sell crude oil futures contracts in Nigeria, hence providing some hedging against price fluctuation. This move is expected to be beneficial to crude oil refiners in the country.

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