Experts say Naira-Settled OTC Forex will attract foreign investment
He also said that the rush to stockpile FX at all costs and the uncertainty it brings would naturally disappear.
They told the News Agency of Nigeria (NAN) in Abuja that foreign investors would be encouraged to come in because they will no longer worry about getting FX at non-competitive rates.
Mr Tony Ejinkeonye, President, Abuja Chamber of Commerce and Industry (ACCI) said that the new product would enable the Central Bank of Nigeria (CBN) manage exchange rate volatility.
According to him, uncertainties in the Nigerian foreign exchange market over the last one year are major contributors to the distortions in the economy.
``The Naira-settled OTC FX Futures contracts will enable the CBN a greater opportunity to manage exchange rate volatility, thereby achieving greater market confidence, liquidity and improvement in business planning.
``It would also ensure job security, employment, better allocation of resources, global competitiveness of the Nigerian financial markets, and all in all, a thriving economy which will of course attract foreign investors.’’
The Chamber president also said that the innovation would provide opportunities manufactures, importers and exporters, who are the end-users, to cope with exchange rate risk.
The President, Times Economics Ltd., Dr Ogho Okiti applauded the innovation adding that it would help to improve business confidence and promote trade relations between Nigerian businesses and their foreign partners.
Okiti said that companies and other users of FX could now go ahead to plan and conduct their businesses without having to worry about daily movements in the exchange rate even when the exchange rate moves up.
``By locking into a futures contract at a given rate, say N250 to a dollar over a given period, the rate will remain guaranteed upon maturity.’’
NAN reports that FMDQ OTC Securities Exchange launched the first naira-settled OTC FX Futures Market on Monday in Lagos in partnership with the CBN.
The aim of the product 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.
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