FG will earn $4 billion annually from trading crude oil and gas

The federal government is expected to generate $4 billion annually from trading about 50 million barrels on the Nigerian Commodity Exchange.

The exchange plans to offer trading in crude oil and gas to deepen access to financing for the industry that is the biggest currency earner for the country.

The Lagos Commodities and Futures Exchange is working with the Securities and Exchange Commission (SEC) to comply with trading requirements after receiving advice from the Abuja-based agency, according to its Chief Executive Officer (CEO), Akinsola Akeredolu-Ale.

“The consideration is that 10 to 20 percent of Nigeria’s crude oil production is supplied for trading on the Lagos Commodities and Futures Exchange,” he said in an interview, without knowing when that would start.
It will be the first time the fossil fuel is traded on an exchange in Africa’s largest oil producer.

Oil production averaged more than 1.4 million barrels per day last month, with most of it exported directly to foreign buyers and the rest sold to local refineries.
Nigeria has failed to meet its OPEC+ quotas for years, partly due to underinvestment in the industry, crude oil theft and vandalism.

A recovery in the sector is crucial for President Bola Tinubu to achieve his long-term target of economic growth of 6 percent or more in the coming years. Growth slowed from 3.1 percent a year earlier to 2.7 percent in 2023.

Tinubu has encouraged public and private sector investment in the extractive industry to increase revenues and reduce imports. This month, his government released a set of rules that will force oil producers to sell crude to domestic refiners before exporting.
The LCFE will connect oil producers to local and offshore markets, limit default risk, increase product availability and encourage more investment, Akeredolu-Ale said.

The exchange expects to trade about 50 million barrels, which at current prices amounts to $4 billion a year, the CEO said.

“This will provide an opportunity for Nigerians to reap immediate benefits and further support the growth of the capital market by trading contracts for both crude and refined products,” he said.

The LCFE started trading gold in 2022. It has since traded more than 66 million naira ($58,000) of the metal through registered commodity brokers, Akeredolu-Ale said, adding that a gram gold coin listed at 42,500 naira two years ago closed at 65,000 naira at the end of February.

The exchange also trades agricultural products such as soybeans, paddy, corn, sorghum, sesame seeds, palm oil and cassava.