Role of Lagos as metaphor of commodities ecosystem

BY SOLA ONI.

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

Sanwo-Olu understands that the emergence of Lagos Commodities and Futures Exchange (LCFE) has brought into 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, especially through commodities exchanges, is fast becoming the last option to revive the economy.

“Today, ladies and gentlemen, 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 here 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 the 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.”

With the above pronouncement by the Executive Governor of Lagos State, Babajide Olusola Sanwo-Olu on the first floor of the famous UAC building at Odunlami Street, Lagos, at the weekend, LCFE was inaugurated and The Eko Gold Coins launched by the governor, thus marking the commencement of real time trading on the pan African Exchange.

Despite his tight schedule, Sanwo-Olu stayed till the end of the programme. The High Priest of Alausa strongly believes that Lagos is Nigeria’s center of commerce and the gateway to the global market, hence it must play on the front lane of the new commodities market.

About 24 hours to the inauguration and launch of Eko Gold Coins, 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 percent purity, targeting globally acceptable pricing and quality. This is the first of its type in Nigeria.

Motivation for setting up LCFE

Akeredolu-Ale underscored the substance and essence of what led to the setting up of LCFE saying: “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 that are 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.” says Akeredolu-Ale

Sanwo-Olu explains 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. Lagos as a state, will also benefit from the payment of 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, the listing of the EkoGold Coin will take place in tranches of 10 million Pounds Sterling. This is no doubt the beginning of a new and exciting chapter for the investment community in Nigeria and even 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 obvious 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.

…Symbolism of the Eko Gold Coins

“This “EKO COIN” is 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. The “EKO COIN” therefore represents Culture, Values, Inclusivity, Modernisation. 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.