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Market Digest Nigeria

Business

13th Naira-Settled OTC FX Futures Market Settles on FMDQ

As  the  sophistication  of  the  global  financial  markets  remains on  the  rise,  the  need to maximise the opportunities which abound in these vis-à-vis the risks inherent becomes increasingly  important.

Hedging  against  risks of  price  movements  in  the  market,  therefore,  remains  strategically  important owing to the volatile nature of currencies and the possible level of business exposures to these.Progressively, therefore, following the 1-year anniversary of the launch of the Naira-settled OTC FXFutures market in Nigeria, $657.57 million of the 13th OTC FX Futures contract, NGUS JUL 19 2017 at $/₦363.67 matured and was settled on FMDQ on Wednesday, July 19, 2017.The matured contract, which settled at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate of $/₦365.33, had, unlike the 12th contract in  June  2017,  settled  at  a  rate  higher  than  the respective contract prices agreed at the point of execution of the contracts, resulting in a net payout to holders  of  the  contract.

The  credibility  of  the  market  and  its  operational  modalities  are  again highlighted; and the effectiveness in and indeed importance of risk management for the Nigerian FX market are further demonstrated.Till date,  over  $7.00 billion worth  of  contracts  have  so  far  traded  on  the  FMDQ  platform,  with  about $5.00 billion matured, whilst $2.00bn remain open.Undoubtedly, the resilience in maintaining this market and ensuring its viability and sustainability, have remained of paramount importance to the CBN, market participants and FMDQ.Steps and requisite infrastructure shall continually be put in place to support the FMDQ objective of making the Nigerian markets globally competitive.

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