FMDQ, CBN launch naira-settled OTC FX Futures Market in Lagos

FMDQ OTC Securities Exchange on Monday in Lagos launched the first naira-settled OTC FX Futures Market in partnership with the Central Bank of Nigeria.
The News Agency of Nigeria reports that the aim of the naira-settled OTC FX Futures Market is to minimise the disequilibrium in the Spot FX market and cause the naira rate to moderate.
It will also attract significant capital inflows to the Nigerian fixed income and equity markets apart from achieving naira exchange rate stability.
During the launch, the CBN Governor, Godwin Emefiele, said the bank remained steadfast to position the Nigerian foreign exchange market to be competitive, transparent, liquid and diversified.
Emefiele, who was represented by Emmanuel Ukeje, Special Adviser to the Governor on Financial Markets, said the product would offer Nigerians and investors the opportunity to hedge against foreign exchange rise.
“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,” Emefiele said.
He said the launching of the first naira-settled OTC FX Futures contracts was an important innovation in Nigeria’s financial market.
Emefiele explained that the product would offer Nigerians and investors the opportunity to rebuild the volatility witnessed in the FX market in the past.
He added that the product would offer foreign investors the opportunity to channel their foreign exchange inflow to the country and thereby enhance liquidity.
Emefiele urged manufacturers to take advantage of the product to expand their businesses to minimise cost instead of rushing to the spot FX market.
He said CBN would continue to support the growth of the money and capital markets by introducing more friendly products for economic growth and development.
Dr. Sarah Alade, the Deputy Governor, Economic Policy of CBN and Chairman, FMDQ, described the launch as a significant milestone in the financial market industry.
Alade, who was represented by Yinka Sanni, Non-Executive Director, FMDQ, said the innovation would make the market competitive globally.
She said: “FMDQ, the market organiser, and the OTC FX Futures Exchange, in collaboration with the CBN and other stakeholders are adequately equipped to deliver the needed transformation in the Nigerian financial market.”
Bola Onadele, the Managing Director of FMDQ, said the OTC FX Futures would no longer allow front-load FX requirements, which had put immense pressure on the naira rate.
Onadele said: “The demand for the dollar by end-users can be staggered appropriately as there will be no need for panic-buying.
“This is because end-users are guaranteed a fixed rate for their FX needs when required.”