Economy
FMDQ Begins Clearing Services to Deepen Nigerian Financial Market
By Modupe Gbadeyanka
As part of its continued pursuit to strengthen the Nigerian financial markets, and in a bid to promote settlement finality on products traded, the FMDQ OTC Securities Exchange has activated its Clearing House to deliver highly efficient post-trade services across the nation’s fixed income and derivatives markets.
This is expected to address some of the key drivers for the development of the markets; risk mitigation, capital efficiency and price transparency, while ensuring safety, stability, confidence and ultimately, inclusiveness in the marketplace.
The Nigerian fixed income and derivatives markets had up till now experienced slow growth due to sustained counterparty, credit and settlement risks.
Being Africa’s largest economy, the development of the Nigerian financial markets is crucial, with improved market architecture, increased risk management structures, growing need for bespoke hedging products i.e. derivatives and regulation as key drivers for this development.
Called the FMDQ Clear, the system hopes to ensure that its risk management activities underpin its effectiveness, reliability and long-term sustainability, as it strives to resolve key clearing and settlement issues that led to the birth of the franchise, with the development of a robust risk management framework that provides the structure for risk policies, processes and internal control mechanisms to manage, assess and contain the risks posed to the clearing house, in compliance with the global standards set out in the International Organisation of Securities Commissions (IOSCO) Principles for Financial Market Infrastructures (PFMIs).
The governance structure of FMDQ Clear is said to conform to the IOSCO PFMIs, with the Board of Directors chaired by Ms Daisy Ekineh, an independent Non-Executive Director of FMDQ, and a capital market doyen with over 30 years of experience, garnered from various roles, including but not limited to being a former acting Director-General of the SEC, who has played a critical role in driving several policy initiatives in the Nigerian capital market. She was also a Chair of the African & Middle East Regional Committee of IOSCO.
She is ably supported by Alhaji Ahmad Abdullahi, the Director of Banking Supervision of the Central Bank of Nigeria (CBN), whose experience in financial system stability will be brought to bear in providing guidance to the Company; Mrs Vivien Shobo, the Chief Executive Officer of Agusto & Co Limited, a risk management expert and the Chairperson of the SEC-registered Credit Rating Agencies Association in Nigeria; and Mr Bola Onadele. Koko, Managing Director/CEO of FMDQ, an experienced financial market architect, amongst other shareholder representatives who are also on the board.
The Board will also consist of representatives of Clearing Members i.e. banks, to ensure that key market participants are duly represented.
According to FMDQ, this new clearing infrastructure will greatly contribute to making the Nigerian inter-bank market globally competitive, operationally excellent, liquid and diverse, in line with FMDQ’s GOLD Agenda for the transformation of the Nigerian financial markets, as participating Clearing/Dealing Members will have expanded access and in turn, be better able to serve the needs of their client base and the real economy.
The support of and input from key Nigerian financial services regulators, including the SEC, CBN, the National Pension Commission (PenCom), as well as the local banking industry and other key market stakeholders cannot be over-looked in the achievement of this milestone in the Nigerian financial markets and such collaborative efforts have helped to place Nigeria on a global pedestal.
The recent circular, released by the CBN, directing all deposit money banks who wish to participate in OTC market to pledge a collateral of N1 billion worth of Government/CBN Securities, in an effort to enhance efficiency in trading and post-trade activities, and build confidence in the financial markets, is a strong indication of its continuous support for the development of the Nigerian financial market.
Recall that the Securities and Exchange Commission (SEC) had registered FMDQ Clear Limited (FMDQ Clear), as the first central clearing house in Nigeria, a wholly-owned clearing and settlement subsidiary of Nigeria’s foremost debt capital, currencies and derivatives OTC Exchange, FMDQ OTC Securities Exchange.
To ensure a full understanding of the needs of the market, and its readiness for growth and development, FMDQ, in 2015, engaged Salonica, an international-based consortium, to conduct a feasibility study on the introduction of OTC derivatives to the Nigerian financial market, and one of the strong recommendations of this study was the activation of a clearing house to ensure certainty of settlement finality and enforceability; promote market confidence among participants, and facilitate orderly markets in periods of stress.
Furthermore, in 2017, FMDQ, supported by Frontclear Management B.V. (Frontclear), a Netherlands-based development finance company, engaged Catalyst Development (UK) Limited, a specialised consulting company focused on clearing, risk and regulation, to conduct a feasibility study on the activation of a central clearing house infrastructure in Nigeria, culminating in the birth of FMDQ Clear.
By Dipo Olowookere
The last trading session of the week on the floor of the Nigerian Exchange (NGX) Limited ended on a positive note with a 0.26 per cent growth on Friday.
It was the first trading day after the two-day break observed on Wednesday and Thursday for Sallah celebrations by Muslims.
Market participants returned to Customs Street yesterday in high spirits, though keeping an eye on happenings in the macroeconomic environment.
This resulted in the market breadth index closing bearish after recording 32 price gainers and 33 price losers, implying weak investor sentiment.
Sovereign Trust Insurance and Zichis gained 10.00 per cent each to sell for N2.75 and N33.00 apiece, International Energy Insurance rose by 9.98 per cent to N4.52, McNichols grew by 9.85 per cent to N8.70, and Aradel Holdings increased by 9.59 per cent to N1,933.80.
Conversely, the trio of CAP, Austin Lax, and Premier Paints lost 10.00 per cent each to settle at N179.10, N3.96, and N33.75 apiece, LivingTrust Mortgage Bank decreased by 9.89 per cent to N4.01, and John Holt fell by 9.84 per cent to N16.95.
As for the performance of the key market sectors yesterday, the banking space shed 2.51 per cent, the consumer goods index depleted by 1.26 per cent, and the industrial goods sector tumbled by 0.05 per cent.
However, bargain-hunting raised the energy segment by 4.38 per cent and lifted the insurance counter by 0.86 per cent.
Consequently, the All-Share Index (ASI) closed higher by 646.63 points to 250,385.47 points from 249,738.84 points, and the market capitalisation improved by N415 billion to N160.509 trillion from N160.094 trillion.
A total of 1.2 billion stocks worth N43.4 billion exchanged hands in 93,626 deals during the session compared with the 564.1 million stocks valued at N27.2 billion traded in 65,666 deals in the preceding session. This showed that the trading volume, value, and number of deals went up by 112.73 per cent, 59.56 per cent, and 42.58 per cent, respectively.
Fidelity Bank ended the day as the busiest equity with a turnover of 483.0 million units valued at N8.7 billion, Access Holdings transacted 133.3 million units worth N3.2 billion, The Initiates sold 81.7 million units for N2.2 billion, Chams exchanged 43.9 million units valued at N173.8 million, and Dangote Sugar traded 28.4 million units worth N2.0 billion.
By Adedapo Adesanya
The Naira returned from a two-day break on Friday, May 29, stronger against the United States Dollar by 16 Kobo or 0.01 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX), trading at N1,375.25/$1 compared with N1,375.41/$1 it was exchanged on Tuesday.
The local currency also appreciated in the same market window against the Pound Sterling during the trading session by N3.62 to sell for N1,848.62/£1 versus N1,852.26/£1, but lost N2.16 against the Euro to close at N1,601.48/€1 compared with the previous rate of N1,599.32/€1.
The official forex market was closed on Wednesday and Thursday for the Sallah break.
A look at the GTBank FX desk showed that the Naira gained N4 against the Dollar yesterday to quote at N1,379/$1, in contrast to Tuesday’s closing value of N1,383/$1, and at the black market, it improved its value by N5 to N1,380/$1 versus the preceding session’s N1,385/$1.
Market analysts noted that the Nigerian Naira outlook remains stable, citing the latest round of FX inflows, which have lifted gross external reserves to $49.259 billion. Some projected that the domestic currency will close the first half of 2026 stronger as the Central Bank of Nigeria (CBN) continues to inject FX inflows into the official market.
Also supporting expected stability is the continued government signal of growth. In his third year in office, in a speech on Friday, President Bola Tinubu inherited severe economic and structural challenges in 2023, including exchange-rate distortions, which he said have since been reformed.
“Multiple exchange rate windows and forex arbitrage created massive distortions, with Nigeria losing more than N8 trillion over three years to rent-seeking and speculative practices.”
According to the president, the situation required urgent and courageous decisions to avert a deeper economic crisis and fiscal collapse.
In the cryptocurrency market, US-Iran ceasefire hopes have failed to pull Bitcoin (BTC) and Ethereum (ETH) higher, with the two largest cryptocurrencies losing almost 3 per cent as cooling spot bitcoin ETF inflows reinforced the pullback. BTC dropped 0.3 per cent to sell for $73,456.95, while ETH dipped 0.1 per cent to trade at $2,013.29.
Further, TRON (TRX) went down by 2.1 per cent to $0.3427, and Cardano (ADA) dipped 0.4 per cent to close at $0.2348.
On the other hand, Binance Coin (BNB) jumped 4.7 per cent to $667.52, Ripple (XRP) grew by 2.00 per cent to $1.34, and Solana (SOL) expanded by 0.1 per cent to $82.27, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
The crude oil market shrank by more than 2 per cent on Friday as traders awaited a possible ceasefire deal among the United States, Israel and Iran.
Brent crude settled at $92.05 a barrel after it lost $1.66 or 1.8 per cent, while the US West Texas Intermediate (WTI) finished at $87.36 a barrel, down $1.54 or 1.7 per cent.
The latest reports as of Friday suggest that the US and Iran are set to extend the ceasefire, which will include the reopening of the Strait of Hormuz. However, such an extension would need to be endorsed by U.S. President Donald Trump.
The US and Iran reportedly reached a tentative agreement on Thursday to extend a ceasefire and lift restrictions on shipping through the Strait of Hormuz.
The three-month war between the US and Iran has been marked by frequent chatter of an impending end to the conflict that would open the crucial Strait of Hormuz, used to transit one-fifth of the world’s oil and gas supply. Even with both sides suggesting an agreement was forthcoming, their characterisations of the deal were still somewhat different.
The closure of the waterway has driven energy prices sharply higher worldwide. Recent sessions have been volatile, with swings by as much as $6 for both benchmarks on conflicting signals over a potential reopening of the strait.
Traffic through the maritime chokepoint remains a small fraction of levels before the conflict, with analysts saying a reopening of the waterway would offer some immediate relief to the oil market, but a recovery is still uncertain.
Japan, which relies heavily on oil from the Middle East, last month registered a 66 per cent drop in crude oil imports compared with April last year.
Prices plunged by 19 per cent in May as traders and speculators bet on an extended ceasefire and an eventual US-Iran deal despite the biggest physical supply disruption in history. The slump in prices in May follows the biggest monthly surge in history in April, when oil rallied amid the worst supply disruption ever.
Traders spent most of the week looking beyond current supply shortages and focusing on the possibility that a ceasefire agreement could eventually bring barrels back to market, leading to selloffs.
US crude, petrol, and distillate stockpiles fell last week, according to the Energy Information Administration (EIA), as demand from refiners and consumers rose, while exports fell by 1.16 million barrels per day to 4.4 million barrels per day.
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