Akin Akeredolu-Ale, Managing Director, Lagos Commodities and Futures Exchange (LCFE) speaks on policy issues on commodities ecosystem, writes IHEANYI NWACHUKWU. Excerpts
How can a commodities exchange enhance market efficiency, transparency, and price discovery, ultimately contributing to a country’s GDP growth?
A commodities exchange like Lagos Commodities and Futures Exchange (LCFE) plays a vital role in enabling the buying and selling of commodities in a way that ensures structured trading and fair pricing. By providing a central trading platform, LCFE helps eliminate the informal middlemen who often distort prices. This ensures that prices are determined transparently based on real supply and demand, a process known as price discovery.
In its growth strategy, LCFE is positioning itself to further enhance market efficiency through initiatives such as structured auction markets across agriculture, livestock, and other sectors. These kinds of markets promote standardised transactions, ensure proper documentation, and foster confidence among both local and international participants. As these structures develop, they will improve Nigeria’s trading environment, increase investor participation, and drive industrial growth, all of which contribute directly to GDP expansion.
What government policies and incentives can encourage increased participation from the investing public in a commodities exchange?
Government policies play a crucial role in building trust and encouraging participation in the commodities market. One major positive development is the fact that the Investment and Securities Act (ISA) 2025 is already in force.
This new law provides an updated, clear, and comprehensive legal framework that governs the Nigerian capital market, including commodities exchanges like LCFE.
The ISA 2025 helps to: the roles and responsibilities of all market participants, strengthen regulatory oversight and investor protection, create legal certainty for commodity-backed instruments and support the development of new products and asset classes.
With this solid legal foundation now established, it becomes easier for both local and foreign investors to participate, knowing that their investments are protected under clear, enforceable rules.
Beyond the ISA, additional government policies can further encourage participation, such as: reduced taxes on profits from commodities trading, educating farmers, SMEs, and retail investors on the benefits of structured commodities trading, simplifying registration and licensing processes, especially for smallholder farmers and cooperatives and financing Government-backed credit schemes that enable producers to scale up and participate actively.
LCFE, through planned stakeholder engagements — including future policy dialogues and partnerships with regulators like SEC, Customs, Immigration, and the Senate — is actively positioning itself to support and align with these government initiatives, ensuring a more inclusive and robust commodities market.
In what ways can a well-developed commodities exchange attract foreign investment and stimulate economic activity in a country?
Foreign investors are attracted to markets where trading is transparent, regulations are clear, and systems follow international standards. LCFE is positioning itself to meet these expectations by aligning its operational structures with global best practices. For example, as the exchange explores product listings in sectors like refined petroleum (similar to the potential Dangote Refinery product listing model), it demonstrates Nigeria’s readiness to trade complex commodity contracts.
Additionally, LCFE’s long-term Pan-African Commodities Strategy is designed to tap into regional trade opportunities under the African Continental Free Trade Area (AfCFTA), making Nigeria a strategic hub for cross-border commodity investments.
As these initiatives mature, they will stimulate economic activity by attracting foreign capital, enhancing production capacity, increasing exports, and creating jobs across multiple sectors.
How can a commodities exchange support the development of related industries, such as agriculture or mining, and thereby contribute to GDP growth?
A functional commodities exchange strengthens the entire value chain of industries like agriculture, mining, and energy by providing reliable market access, price stability, and access to financing. The Exchange supports standardised contracts like forwards, futures and capital raising contracts, which allow farmers to access financing upfront, hedge against price fluctuations, stabilise income, and plan production confidently.
LCFE’s continuous Commodities Ecosystem Review supports the mining sector by providing up-to-date market information that guides investment and production decisions.
By building trading platforms for sectors like agriculture, mining, and refined petroleum, LCFE will encourage producers to scale operations, attract industrial processing investments, create employment, and ultimately boost Nigeria’s GDP.
What role can tax policies, subsidies, or other incentives play in encouraging market participants to engage with a commodities exchange?
Tax policies, subsidies, and incentives are powerful tools for driving participation in commodities exchanges like LCFE. They help reduce financial barriers and encourage both producers and investors to use structured platforms rather than informal or unregulated markets.
Some key examples include: Reducing or exempting capital gains taxes on profits from commodities trading will encourage more investors, both retail and institutional to participate actively on LCFE, Government support in the form of input subsidies (example, for seeds, fertilizers, mining equipment, or processing technology) can increase production volumes and making producers more confident to bring their products into formal trading systems like LCFE.
By offering government-backed credit facilities or loan guarantees tied to commodities contracts, producers will have better access to capital, which will allow them to scale production and meet the volume and quality standards required by structured exchanges. Also, supporting warehouse receipt systems allows farmers and producers to use stored commodities as collateral to access financing while waiting for better market prices on LCFE.
