CBN Flags Off Naira Foreign Exchange Futures Market

Just a week after the lifting of the peg on the naira to create a flexible foreign exchange market, the Central Bank of Nigeria, CBN, on Monday, June 27 launched the Naira Settlement Foreign Exchange Market.

The governor of the apex bank,Godwin Emefiele, who spoke at the ceremony in Lagos, expressed delight that the foreign exchange market in Nigeria has attained the position where participants in Nigeria can settle foreign exchange futures transactions in Naira.

Emefiele, who was represented by the Special Adviser, Financial Market, Mr Emmanuel Ukeje, said: “This product is novel in Nigeria and it gives comfort regardless of the price at which you have quoted to buy foreign exchange in Nigeria.”

He reaffirmed the commitment of the apex bank to ensure the success of the news foreign exchange market structure and also promised to honor all obligations arising from future deals.

A futures foreign exchange transaction is a contract that allows the exchange of one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date.

The Naira-settled OTC Future are non-deliverable forwards where by parties to a contract agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying United States Dollars on maturity or settlement date but only required to settle exchange rate differentials in Naira.