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 Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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