Emefiele Unveils Naira-Settled OTC FX Futures | Independent Newspapers Limited
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Emefiele Unveils Naira-Settled OTC FX Futures

Economic Rebound
Posted: Jun 28, 2016 at 6:10 am   /   by   /   comments (0)

Bamidele Ogunwusi

Lagos – The naira-settled OTC FX futures market kicked off on Monday with the CBN selling OTC FX futures contracts of non-standardised amounts for different tenors from one month through to twelve months which will settle on bespoke maturity dates, providing liquidity in the product that will enable corporate treasurers effectively and efficiently manage their FX risk.

The Central Bank of Nigeria (CBN) has said that the launch of the naira-settled OTC FX futures market would offer foreign investors the opportunity to channel their foreign exchange inflow into the country, thereby enhancing liquidity.

The CBN governor, Mr. Godwin Emefiele, who stated this at the unveiling of the product at the FMDQ OTC Securities Exchange (FMDQ) in Lagos explained that the product would offer Nigerians and investors the opportunity to rebuild the volatility witnessed in the FX market in the past.

The unveiling of the product comes exactly one week after two-way quote trading commenced in the Nigerian FX market on the back of the recent release of the revised CBN guidelines for the operation of the Nigerian Inter-Bank FX Market (the guidelines), essentially transitioning the market from a pegged FX rate regime to a floating one.

Emefiele, who was represented by the Special Adviser to the CBN governor on financial markets and the Securities and Exchange Commission (SEC), Mr. Mr. Emmanuel Ukeje, said that manufacturers should take advantage of the product to plan their business through Future FX instead of rushing to the spot FX market to maximise cost.

“The CBN remains steadfast in its purpose to position the Nigerian FX market to be competitive, transparent, liquid and diversified, thereby ensuring requisite fundamentals that make for a thriving economy. The launching of the first naira-settled OTC FX Futures contracts demonstrates this intent in a significant way, and I am honoured that the CBN is able to pave the way for what I believe will be an important innovation in Nigeria’s financial markets,” he said.

Managing Director/CEO of FMDQ, Mr. Bola Onadele Koko, said: “The naira-settled OTC FX Futures product is a major milestone development in the evolution of the Nigerian financial markets. The futures market is an opportunity to transform risk into certainty – a major paradigm shift in the financial markets landscape. This innovation provides opportunities for government, businesses, pension fund administrators, investors, individuals etc. to hedge (not speculate) to cope with exchange rate risk. It also affords the CBN a greater opportunity to manage exchange rate volatility, thus achieving greater market confidence, liquidity, improvement in business planning, job security, employment, better allocation of resources, global competitiveness of the Nigerian financial markets, and all in all, a thriving economy.”

FMDQ chairman and CBN Deputy Governor, Economic Policy, Dr. Sarah Alade, also said: “Today, the Nigerian financial market is celebrating a significant milestone, as the CBN launches its first set of OTC FX Futures quotes on FMDQ OTC Securities Exchange. This innovative product will bring liquidity, transparency, price formation and diversification into the foreign exchange market, making the market globally competitive. FMDQ, the market organiser and the ‘OTC FX Futures Exchange,’ in collaboration with the CBN and other stakeholders, is adequately equipped to deliver the needed transformation in the Nigerian financial market. I am very proud to be part of the two institutions that made this day possible.”