The Lagos Commodity and Futures Exchange (LCFE) has obtained a license from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to facilitate trading and clearing of petroleum liquids, a development that is expected to further price discovery, transparency and investment in the Nigerian energy market.
The approval provides the LCFE with the regulatory basis to establish a structured market for petroleum liquids, linking the physical petroleum market with the Nigerian capital market through a regulated trading, clearing and settlement infrastructure.
The license was unveiled in Abuja on Tuesday at a stakeholder event attended by senior representatives of the NMDPRA, the Securities and Exchange Commission (SEC), S&P Global Ratings, the Central Securities Clearing System (CSCS), Alliance Law Firm and other participants in the capital and oil markets.
Already, no less than 10 petroleum liquids traders have committed to participate in the Exchange, providing an initial group of market participants for the development of the new trading ecosystem.
LCFE Managing Director and CEO Akin-Akeredolu-Ale said the approval marked a watershed moment for Nigeria’s commodities market, noting that the infrastructure needed to support trading in petroleum liquids was increasingly coming together.
“The issuance of this license marks a watershed moment for the Nigerian commodities market. It provides us with the regulatory basis to bring petroleum liquids into a transparent, structured and technology-based market, connecting the physical energy market with the Nigerian capital market,” he said.
Akeredolu-Ale said the emerging market architecture would incorporate technology-based trading, two-way quoting, contract trading and settlement, as well as licensed collateral managers to strengthen oversight and risk management.
This development comes at a time when the Nigerian oil industry is undergoing major structural changes following the implementation of the Petroleum Industry Act (PIA), deregulation of the downstream market and the commencement of operations of the Dangote Refinery.
NMDPRA Chief Executive Officer Mallam Rabiu Abdullahi Umar said the Authority’s priority was to create a predictable, equitable and transparent regulatory environment capable of attracting investments and supporting sustainable growth of the energy market.
According to him, the PIA, market deregulation and the emergence of large-scale domestic refining capacity have fundamentally altered Nigeria’s position in the global energy market.
The Director General of the Securities and Exchange Commission (SEC), Dr. Emomotimi Agama, commended the LCFE for carrying out the initiative, describing it as an opportunity capable of transforming Nigeria’s capital and commodity markets.
S&P Global Ratings Africa Research and Analysis Managing Director and South Africa Country Head Samera Mensah highlighted the importance of credible market infrastructure, transparent pricing, benchmarks and credit ratings in building investor confidence.
According to Mensah, S&P has reclassified Nigeria from a frontier market to an emerging market, a development that aligns with President Bola Ahmed Tinubu’s ambition to grow the Nigerian economy to $1 trillion.
Onome Komolafe, division head of trading services and customer experience at CSCS, said the financial market infrastructure provider would support the new market through its depository, clearing and settlement capabilities, including digital asset depository and registry services.
Founder and Managing Partner of Alliance Law Firm, Uche Obi, described the license as an important legal and regulatory milestone for the Nigerian commodities market, noting that it gives the LCFE the authority to facilitate approved trading and clearing activities and underlines the regulatory and institutional capacity supporting the new market.
Market observers described the reception of the approval of the NMDPRA as a major milestone in the LCFE’s broader ambition to transform Nigeria’s commodities market and position the Exchange as a leading commodities trading platform in Africa.
WATCH THE BEST VIDEOS FROM Newslodge TV