Lagos Commodities and Futures Exchange (LCFE) has presented the Eko Gold Coin to the Securities and Exchange Commission (SEC), the apex regulatory body of the Nigerian capital market, in a bid to drive confidence, structure the gold market and deepen the commodity ecosystem.
The Eko Gold Coin was created out of the need to have an alternative asset class that investors can invest in apart from equities and fixed income instruments. Each of the coins is 24-carat, weighing 50 grams with 99.99 percent purity.
At the event, where Paddy Rice Spots and Forwards Contracts were also presented, Patrick Ezeagu, Chairman of LCFE, said the commodities ecosystem was being reformed and transformed with the development of innovative products and fungible instruments that are being introduced into the market.
According to him, one of such innovative products developed by the LCFE is the Eko Gold Coin which, he commended SEC for helping to drive.
He explained that the core vision of setting up the LCFE was to provide a viable structure that would transform the Nigerian commodities market and redefine practice standards which would catalyse economic growth in Nigeria.
He recalled that the LCFE was commissioned by the Governor of Lagos State, Babajide Sanwo-Olu, in July 2022 with the momentous launch and unveiling of the first physical gold asset tradeable on a commodities exchange in Nigeria, “The Eko Gold Coin.”
“It is greatest honour and elation to present the first tranche of these exclusive gold coins which is available for purchase at LCFE to you and your esteemed team at the Commission,” Ezeagu told the meeting which also had officials of SEC, LCFE, Sterling Bank, Central Securities and Clearing Services (CSCS) and the merchants, among other stakeholders present.
He noted that the Exchange has committed to propagating information about thd novel achievement in the wider market with the assistance and support of SEC saying, “There is no better place to start than the corridors of policy makers and entities that are at the helm of managing national affairs.”
He appealed to the Director General of the SEC, Lamido Yuguda, to lead a delegation of the Commission, management of the LCFE and its project partners, to present the coin to the National Assembly, Ministry of Finance, Ministry of Mines and Steel Development, National Pension Commission, Debt Management Office, and the Central Bank of Nigeria (CBN).
In his remarks, Olugbenga Awe, Group Head, Agric Finance & Solid Minerals with Sterling Alternative Finance (SAF), which is the Non-interest arm of Sterling Bank Plc, noted the bank’s excitement at being part of the Eko Gold Coin innovation and commended the LCFE for championing it.
“It is important to take it to the market to drive awareness and ensure participation,” Awe noted, adding that the visit to the SEC was to present the coins to them as the apex regulator of the capital market.
According to him, Sterling Bank partnered with IAC Global Investment Limited to aggregate the gold, refined and minted it to acceptable trading instrument. Sterling Bank is also the settlement bank for gold trading in addition to provision of vaulting services, he said.
On how the initiative would benefit the market and the economy, Awe explained that, “Gold is a natural hedge against inflation and in an inflationary period we are currently in, it provides a haven for investors.”
According to him, “Whilst most investments have suffered losses, gold has outperformed most market instruments compared to fixed income investments that have been ravaged by inflation.”
Responding, Yuguda said urged commodities exchanges in the country to have investor protection at the centre of their operations in a bid to improve confidence and attract more investments, noting more importantly that “this is what will make the product succeed.”
“The gold itself has great value. Once you put out your money and buy it, you have value. That is incontrovertible but where we need to be careful is the associated investment product, the derivatives,” Yuguda stated.
“The derivatives products are built around the product itself. We must have investor protection at heart because they need to have confidence that anytime they want to sell this investment, they’ll actually likely to get more than they put in which is the true meaning of investment.”
The SEC DG added that when people invest, they are postponing current consumption for future consumption, and need to be paid some returns as a price for that postponement of current consumption.
He said, “When you sell this product in the future and make gain, you are actually being rewarded, but when you sell the product in the future and you make a loss, you are making two losses. One, you are postponing current consumption and two, you have not recovered your principal in the future. When people do that, as it happened in the stock market in 2008, you find out that the investor confidence wanes.”
Yuguda commended the LCFE on the demonstration and presentation of the coin and assured them of the Commission’s support in the development of the product and assistance in the efforts to enlighten both the market participants and the investors.
“I wish you all the best in this market and whatever the SEC can do to support the development of this gold market, we will do. This is an important consideration because this is something that has a dual use. You can use gold as store of value, i.e monetary gold or as jewelry.
“This is one product that does not get old, because you buy at a cheap price and sell at a much higher price. So this is something that we truly want to support,” he said.
Babangida Yahaya, Head of Depository Services, CSCS, described the Eko Gold Coin as a novel idea which is already gaining traction in the market.
Yahaya who represented Jalo Waziri, Managing Director of CSCS, at the event, spoke about the collaboration brought into the initiative, led by SEC, pointing out that so much could be unlocked in the market if the level of collaboration is sustained.
