NMDPRA licence: Lagos Commodities and Futures Exchange targets transparent petroleum pricing

The Lagos Commodities and Futures Exchange (LCFE) is targeting more transparent petroleum pricing, stronger competition and improved investment decisions following its licensing to facilitate trading and clearing of petroleum liquids in Nigeria.

In a statement at the weekend, LCFE Managing Director and Chief Executive Officer Akin Akeredolu-Ale said the licence from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) would support the development of an organised marketplace for petroleum products.

The Exchange plans to connect the physical petroleum market with the capital market through a technology-enabled platform designed to improve price discovery, trading information, clearing and settlement.

LCFE targets transparent petroleum pricing:

Akeredolu-Ale said the initiative would address the fragmented process through which petroleum prices are currently determined in the domestic market. He explained that organised trading could provide reference prices based on observable transactions rather than individual commercial negotiations.

According to him, bringing buyers and sellers together through competing bids and offers would allow market participants to assess prices against more reliable information.

• “At the heart of the initiative is the need to establish reliable domestic reference prices for petroleum products based on observable market activity rather than fragmented quotations and individual commercial negotiations.”
• “An organised exchange can help address this challenge by providing a common marketplace in which transactions and quotations can be assessed against more transparent market information.”
• “The broader objective is to move businesses away from decisions based largely on fragmented information towards decisions supported by observable market evidence.”

The proposed framework would incorporate two-way quotations, standardised contracts and transparent transaction processes to help businesses compare supplier prices and assess procurement costs.

Akeredolu-Ale said manufacturers, transport operators, airlines and distributors could use credible market references for budgeting, procurement planning and cost forecasting.

He added that exchange-based pricing would not eliminate differences arising from transportation costs, product specifications, location or taxes, but could provide a common reference against which those differences are assessed.

LCFE expands beyond Gold Trading:

The petroleum trading licence represents another step in LCFE’s efforts to broaden its activities beyond its initial commodities market operations. The Securities and Exchange Commission (SEC) approved the Exchange in June 2019 as a full commodities and futures exchange, and trading began in 2022 with gold.

• The Exchange, promoted by the Lagos State Government and the Association of Securities Dealing Houses of Nigeria, had previously disclosed plans to extend its activities into crude oil and gas trading.
• In April 2024, Akeredolu-Ale proposed making between 10% and 20% of Nigeria’s crude oil production available for trading on the Exchange.
• The proposed volume was estimated at approximately 50 million barrels annually, valued at about $4 billion at the time.
• In July 2026, Dangote Refinery reduced its petrol ex-depot price by N50 to N1,075 per litre, its fourth reduction within a month.

The National Bureau of Statistics reported that Nigeria’s average retail petrol price increased 55.31% year on year to N1,596.25 per litre in May 2026.

Akeredolu-Ale said the proposed trading platform could also create opportunities for collateral management, trade finance and greater participation by financial institutions.

He added that reliable petroleum market data could improve investment analysis, commercial risk assessments and the evaluation of opportunities across the petroleum value chain.

However, these potential benefits would depend on the development of an active marketplace rather than the regulatory approval alone.

Petroleum benchmarks depend on liquidity:

Akeredolu-Ale acknowledged that securing regulatory approval does not automatically establish a credible petroleum pricing benchmark. He said the reliability of any reference price would depend on sustained market activity and the participation of a broad range of buyers and sellers.

The Exchange would also need dependable clearing and settlement arrangements, appropriate risk controls and consistent publication of trading information.

• “However, the development of a credible benchmark will depend on sustained trading activity, sufficient market liquidity, reliable transaction reporting and the participation of a broad range of buyers and sellers.”
• “The licensing milestone provides the regulatory foundation, but the depth and reliability of the eventual benchmark will depend on how effectively the market develops.”
• “The broader proposition is clear: a well-functioning commodities exchange does not dictate what petroleum products should cost. Rather, it provides an organised mechanism through which market forces can establish more transparent, verifiable and credible prices.”

The LCFE chief executive said participation by refiners, marketers, traders and other qualified market operators would be necessary to deepen liquidity and improve confidence in the platform.

He also noted that regulators could use exchange-generated information to complement existing market data and compare reported prices with observable trading references.

The licence therefore provides a regulatory foundation for exchange-based petroleum trading, but the credibility of future benchmarks will depend on actual transactions, reliable reporting and sustained market participation.