Commodities ecosystem livens up as Dukia trade gold on LCFE

PHILLIP ISAKPA

Nigeria’s commodities trading ecosystem for solid minerals is gaining traction providing a good sign for the economy, especially with regards to diversification, said Akin Akeredolu-Ale, managing director, Lagos Commodities & Futures Exchange (LCFE), at a recent virtual seminar.

That assessment will soon be buttressed by an impending activity on the floor of the LCFE involving Dukia Gold & Precious Metals Refining Company Limited, which has completed arrangements for the trading of fully refined London Bullion Market Association (LBMA) investment grade gold bullion bars, its derivatives and related products.

The virtual seminar at which the disclosure was made had as its focus investing in gold, which Akeredolu-Ale said groundwork started as far back as 2019.

According to him, both the LCFE and Dukia Gold had long focused on how Nigerians can invest and trade in responsibly sourced gold on a structured and regulated platform such as the LCFE.

The solid mineral trading ecosystem is gaining traction as the Nigerian economy is taking off, he said, expressing his optimism that the take off was on a good note, adding that it’s a move that will further diversify the nation’s economy.

The virtual seminar was organised by the licensed precious metals mining and refining company and bullion merchant, in conjunction with LCFE and the Ministry of Mines and Steel Development (MMSD).

In attendance, among others, were member firms of the Pension Operators Association of Nigeria (PenOps), licensed commodities exchange operators, commodities broking and trading firms and asset managers.

Olamilekan Adegbite, minister of mines and steel development, who delivered the keynote address, remarked that gold investments are said to be a unique, time-tested wealth preservation instrument, thus creating a vehicle for Nigerians to build and preserve wealth over the long term.

He noted that Good Delivery Gold bars and their derivatives are unlike jewellery, ornaments or Raw Gold, are investment grade precious metals (IPM), which are essentially financial assets that are actively traded, similar to financial instruments such as stocks and bonds.

Adegbite said it is such an IPM product that a proudly Nigerian gold and precious metal refinery, the Dukia Gold and Precious Metals Refining Company Limited, one of the organisers of the webinar, was introducing it in Nigeria through the Lagos Commodities and Futures Exchange.

He urged participants and the public who are discerning and desirous of owning gold assets, to proudly consider and invest in the investment grade products of Dukia Gold, in order to add tremendous value to Nigeria’s precious metal value chain.

Oyindasola Oni, chairman, National Pension Commission (PenCom), highlighted the wish of the industry to have more investment grade financial instruments, which will offer more diversifications of available financial assets, necessary to improve the portfolio results of pension funds and asset managers.

Oni noted that the demand for safe-haven assets by investors following record-high global uncertainty on performance of the stocks and bonds market are well documented. He went on to point out the requirements of investment grade assets as stipulated within Sections 3, 4, and 5 of the regulations on the Investment of Pension Fund Assets.

These sections, he said, specify the authorised markets, allowable instruments and minimum quality requirements for investment instruments/securities to qualify for pension fund investments.

“Investment of pension assets in gold instruments, therefore, depends on compliance with these requirements. Needless to reiterate that the safety of pension assets remains a fundamental objective of pension fund investments, always.”

He said pension fund operators play a critical role as institutional investors in developing the financial market, adding that he particularly charged the PFAs to give serious considerations to investing part of the almost N14 trillion in their coffers in investment grade gold bullion bars, an investment option which Dukia Gold is promoting through its DGETC.

Oni made this charge against the backdrop that the rapid growth of the pension assets has not seen corresponding increases in investment outlets within the domestic market, the government has been the largest beneficiary of pension funds investment with more than 61 percent of the accumulated assets devoted to it.

Bose Owolabi, managing director, Dukia Gold & Precious Metals Refining Company Limited, in her address stated that the seminar was one of the many initiatives along with other partners conducted ahead of the introduction of the Dukia Gold Exchange Traded Certificate (DGETC).

Two key lecture presentations to enlighten participants on the benefits and implications of investing their assets in investment grade gold were given by Morohunke Bammeke, a former managing director of PAL Pensions and David Adeyinka, an investment analyst based in the United Kingdom.

The two speakers presented on the benefits which investments in good delivery gold bars mean for investors in terms of wealth preservation, reliability and assurance of non-depreciation of the value of assets held in LBMA-grade gold bars even during turbulent economic times and many more advantages.

They shared and supported the view that gold was traditionally used by investors to hedge against inflation, currency risks and systemic risks that may affect entire financial markets such as the Covid-19 pandemic and the 2007/2008 financial crisis when gold returned over 31 percent price appreciation, and noted that this was because gold investments have traditionally exhibited negative correlation with stock markets and tend to do better in times of financial crisis.

Seun Osomo of Vetiva Securities, who presented on behalf of DGETC, referred to the unique exchange-traded gold-backed product as a game changer.

He listed the product features and its trading dynamics, in particular, he emphasised the fact that the commodity to be traded on the LCFE will be ethically sourced in accordance with global standards set by the LBMA and OECD.

The trading features include settlement through CSCS.
The investing public was urged to look forward to the formal launching of the Dukia Gold Exchange Traded Certificates, a gold-backed product exchange traded spot gold that will soon be presented and traded on the floor of the Lagos Commodities & Futures Exchange (LCFE).