NG Clearing becomes Nigeria’s first central counterparty

NG Clearing has made history in Nigeria by becoming the first central counterparty, marking a significant milestone in the Nigerian capital market. The emergence of NG Clearing is set to revolutionize the market by providing a safe clearing of derivatives through its central counterparty platform. Oscar Onyema, the Chairman of the Board of Directors at NG Clearing, emphasized the importance of this launch, stating that it represents the maturity and transition of the Nigerian financial system. Established in 2016 and recently receiving final approval from the Securities and Exchange Commission, NG Clearing is poised to begin operations on December 9th, ushering in a new era of efficiency and risk management in the Nigerian financial landscape. This development highlights the growing sophistication of the Nigerian market, as it introduces market infrastructures that pave the way for innovative financial products like derivatives. NG Clearing, a joint initiative by the NGX Group and CSDS, in collaboration with major banks and industry stakeholders, aims to enhance market transparency, reduce counterparty risk, and streamline capital management. Through novation, NG Clearing acts as an intermediary in transactions, assuming the role of buyer to every seller and seller to every buyer, thereby centralizing risk management. This strategic positioning allows for better monitoring and control of transactions, ensuring settlement certainty and minimizing counterparty clearing risk. By leveraging a central counterparty model, NG Clearing optimizes capital usage, as traders are only required to post initial margin and variation margin, instead of extensive capital reserves. This approach enhances market efficiency and aligns with global standards that mandate derivatives transactions to be cleared through central counterparties. In addition to its risk management functions, NG Clearing seamlessly integrates with existing market infrastructure, such as exchanges, central securities depositories, and the real-time gross settlement system of the central bank. This interconnected network facilitates trade clearing, settlement guarantees, and overall risk mitigation, ensuring a robust and resilient financial ecosystem. Furthermore, NG Clearing's governance framework adheres to international standards, with a strong board of directors providing oversight and a dedicated risk management committee ensuring operational integrity. The company's management team comprises industry experts with extensive experience in clearing operations, enhancing NG Clearing's capabilities and credibility. As NG Clearing prepares to commence operations, market participants can look forward to enhanced capital efficiency, improved risk management, and a more resilient market structure. The launch of NG Clearing signals a new chapter in the Nigerian capital market, underpinned by innovation, regulatory compliance, and a commitment to driving market growth and stability.