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Plans in progress for local trade of oil/gas

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By Mercy Kelani

LCFE revealed aim to make a portion of Nig.'s crude oil available for trading.

A significant development is on the horizon as there are plans to have Nigeria’s oil and gas traded locally on the Lagos Commodities and Futures Exchange. This move aims to grant the general investing public access to the largest foreign-exchange sector. Mr. Akinsola Akeredolu-Ale, the Chief Executive Officer of the Lagos Commodities and Futures Exchange (LCFE), announced the intention to make a portion of Nigeria’s crude oil available for trading, targeting a range of 10 to 20 percent allocation on the LCFE platform.

He mentioned that the Lagos Commodities and Futures Exchange (LCFE) has collaborated with Nigeria’s top regulatory body for the capital market, the Securities and Exchange Commission (SEC), in order to ensure compliance with trading standards as outlined by the SEC. He believes that the LCFE will create a link between oil producers and both local and international markets, thereby ensuring reduction in the possibility of default, increasing the availability of products, and promoting investment growth.

Nigerians will have a chance to directly reap the rewards of crude oil.

According to him, the LCFE plans to trade approximately 50 million barrels per year at the current prices, totalling $4 billion in annual revenue. According to Akeredolu-Ale, this will provide Nigerians with a chance to directly reap the rewards and contribute to the expansion of the capital market through the trading of crude and refined product contracts. According to a report, this marks the inaugural occasion in which the fossil fuel will be exchanged on a market within the top oil producing country in Africa.

In 2022, the LCFE entered the market by trading with gold, surpassing over 66 million naira or $58,000 worth of the metal through authorized commodity brokers. Within a span of two years, the price of a gram of gold coin on the exchange had risen from 42,500 naira to 65,000 naira by the end of February. LCFE is involved in the trading of various agricultural products, including soya beans, paddy rice, maize, sorghum, sesame seeds, palm oil, and cassava.

The nation has a strategy to engage in trading involving its energy sector.

It was reported that President Bola Ahmed Tinubu is actively promoting investments from both the public and private sectors in the extractive industry as a means to increase revenues and reduce the reliance on imports. In a recent development, the government implemented regulations that will require oil producers to prioritize selling crude to local refineries before considering exports. Nigeria recently initiated a strategy to engage in trading involving the country’s energy sector and related products.

More so, the SEC is leading the initial steps to create an Energy Exchange, in alignment with a broader plan to enhance the extensive commodities trading environment as part of a national development agenda. The commission assembled a group, known as the Technical Committee on the Commodities Trading Ecosystem, to work with Nigerian Bulk Electricity Trading (NBET) Plc in creating plans for an Energy Exchange. Over the years, the energy industry has seen significant growth in Energy Exchange services, which play a crucial role in the energy value chain.

Related Article: Increase in Prices of 2 Types of Crude Oil

Additionally, a prominent player in this field is the European Energy Exchange (EEX), known for offering a wide range of contracts related to power, natural gas, emission allowances, freight, and agricultural products. In addition, EEX also offers registry services and conducts auctions for guarantees of origin on behalf of the French government. IEX, also known as the Indian Energy Exchange, stands out as the top energy marketplace in India. With a technologically advanced trading platform, it facilitates the exchange of electricity, renewable energy, and certificates across the country. IEX has also taken a bold step by venturing into cross border electricity trade, aiming to establish a unified power market in South Asia.

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