Naira-Settled OTC FX Futures will boost foreign portfolio investment - Experts

Some financial experts on Monday said that the first Naira-Settled OTC FX Futures Market launched by the Central Bank of Nigeria (CBN) and FMDQ OTC Securities Exchange if well implemented would enhance foreign portfolio investment in the country.

They told the News Agency of Nigeria (NAN) in Lagos that the Nigerian stock market and the economy would benefit from the initiative when properly handled.

Mr Emeka Madubuike, President, Association of Stockbroking Houses of Nigeria (ASHON), said that proper implementation of the initiative would boost foreign portfolio investment.

Madubuike said that the product would accord foreign investors the ability to repatriate their funds without any restriction, adding tha, it would bring transparency to the foreign exchange market.

"It will be easier for people to move their funds from one place to the other with the introduction of the Naira-Settled OTC FX Futures Market," he added.

He explained that the stock market would benefit more from the product if it was properly implemented.

Madubuike stated that the country's productivity level would be efficient because importers would be able to continue with their production with enhanced access to forex.

He stated further that the product would enable to country to clear backlog of forex incurred in the past.

The ASHON president said that the backlog was as a result of the nation's dependent on importation which put pressure on the foreign exchange market.

"We are still watching its implementation process but if well implemented will affect the stock market and the economy positively," Madubuike said.

Mr Akeem Oyewale, the Chief Executive Officer, Stanbic IBTC Nominee,said the product would give certainty to investors especially the institutional portfolio investors to invest in Nigeria.

"It will allow them to get an idea of how much they can get their dollar whenever they so desired.

It allows investors to be more comfortable dealing with equities market in Nigeria.

"So if you are planning to get dividend of certain amount in the next three months and you want to fix your dollar you can go to the futures market to do it based on the offers and quote that you have in the market," Adewale said.

Adewale said that the futures market in Nigeria would be a sustainable and stable market because of the credibility of the institutions driving the products.

NAN reports that the apex bank and FMDQ on Monday recorded another feat with the launch of the first Naira-Settled OTC FX Futures Market.

The Naira-Settled OTC FX Futures Market would serve to minimise the disequilibrium in the Spot FX market and cause the rate to moderate.

It will also attract significant capital flows to the Nigerian fixed income and equity markets and achieve exchange rate stability.

Speaking about the launch, Mr Godwin Emefiele, CBN Governor, said that the apex bank remained steadfast to position the Nigerian foreign exchange market to be competitive, transparent, liquid and diversified.

Emefiele, who was represented by Mr Emmanuel Ukeje, Special Adviser to the Governor on Financial Markets, said that 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 that the launching of the first Naira-Settled OTC FX Futures contracts would be an important innovation in Nigeria's financial markets.

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 in flow into the country, thereby enhancing liquidity.