FX futures will improve market liquidity

intern

June 28, 2016 10:35 AM

NAN reports that FMDQ OTC Securities Exchange in partnership with Central Bank of Nigeria (CBN) on Monday in Lagos launched the first naira-settled OTC FX Futures Market.

An economic expert, Prof Uche Uwaleke, has commended the launch of the FX futures, saying it will improve market liquidity.

Uwaleke made the statement in an interview with the News Agency of Nigeria (NAN) on Monday on Abuja.

NAN reports that FMDQOTC Securities Exchange in partnership with Central Bank of Nigeria (CBN) on Monday in Lagos launched the first naira-settled OTC FX Futures Market.

According to Uwaleke, the introduction of the naira-settled OTC FX Futures contracts portends a good omen for the country's financial markets.

He said, "I see FX futures as a good product which the CBN has introduced in the Nigerian forex market.

"FX futures is a contract that specifies the price at which forex can be bought or sold at a future date.

"With this product, investors can hedge against exchange rate risk and the menu of options in the forex market is increased.

"This will have the effect of improving liquidity in the market by making it more attractive to investors and moderating the pressure in the spot market.

Uwaleke explained that the pressure in the spot market would be moderated through the curtailing of panic-purchase of dollars.

He said it would minimise exchange rate volatility and the associated uncertainties enabling corporate bodies to make better decisions regarding the management of their liquidity positions.

intern