Derivatives Can Enhance Liquidity, Funding Solutions in Nigerian Capital Markets – FBN Capital

FBN Capital Limited, a subsidiary of FBN Holdings and one of the leading players in the Nigerian Capital Markets, has stated that derivatives offer the potential for enhanced liquidity and increased funding solutions in the capital market. This contribution was made during discussions at the inaugural edition of the Nigerian Structured Product Summit by the Capital Market Solicitors Association (CMSA), aimed at addressing the fundamental issues around structured products and derivatives in Nigeria.

The Summit which held in Lagos on Tuesday, February 21, 2017 was a convergence of legal and financial sector stakeholders in the capital market. It provided a platform for professionals to deliberate on the derivatives market in Nigeria, its regulations and other financial instruments in the sector.

Organised by CMSA, an independent self-regulated association of solicitors and commercial law firms engaged in capital market practice, the event featured paper presentations and interactive panel discussions by financial market experts from across the globe. The summit aimed to facilitate discourse within the Nigerian markets on issues relating to structured products such as derivatives; explain their value as risk management tools, and foster a stronger regulatory framework which is expected to result in enhanced local knowledge and expertise.

In a discourse addressing the basics of derivatives, the panel made up of the Head, Structured Products of FBN Capital, Michael Okon; CEO, Graeme Blaque Advisory Nigeria, Zeal Akaraiwe; Managing Partner, Radix Legal & Consulting Ltd, Elizabeth Uwaifo and Managing Associate, Jackson Etti & Edu explained the concept and use of derivatives while also highlighting the seemingly complicated areas of financial markets in Nigeria.

According to Okon, “Existing financial securities coupled with derivatives can be used to address the needs of clients either for risk management, yield enhancements or funding purposes. He further stated, “Due to the absence of a robust regulatory and legal framework to accommodate the peculiarities of derivatives in Nigeria, a majority of the transactions are still bilateral. However, as the market evolves and we have more market participants, we should see increased liquidity and price discovery which will help develop the exchange traded market.”

The Nigerian Structured Products summit was organised by CMSA with the support of the International Swaps and Derivative Association (ISDA) and the American Bar Association Task Force on Financial Engineering for Economic Development (FEED).

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