What will shape Nigeria’s derivatives market?

The Nigerian capital market is at an inflection point, poised for significant growth and development in the derivatives market. Farooq Oreagba, the Chief Executive Officer of NG Clearing, believes that a well-developed derivatives market will play a crucial role in supporting the economy and the overall market growth. In a recent interview with CNBC Africa, Oreagba shared his insights on the current state of the derivatives market in Nigeria and his expectations for the year 2024. The derivatives market in Nigeria has been in existence for some time but is still fragmented. Various exchanges, such as FMDQ, NGX, APEX Exchange, and Lagos Commodity Futures Exchange, offer derivative products, but there are challenges in terms of market awareness and investor education. Oreagba highlighted the importance of creating awareness among institutional and retail investors about the benefits and risks associated with derivatives. One of the key challenges facing the derivatives market in Nigeria is the lack of liquidity in the underlying markets. Oreagba emphasized the need for market participants, including pension funds, fund managers, and other institutional investors, to realize the potential of derivatives in enhancing portfolio performance and managing risks. Collaboration between market players, regulators, and exchanges, such as NG Clearing and NGX, is essential to address these challenges and drive the growth of the derivatives market. Looking ahead to the outlook for 2024, Oreagba outlined several initiatives that are expected to shape the derivatives market in Nigeria. The focus is on repairing and enhancing index futures, introducing single stock futures, and launching commodity futures contracts. The new rules governing gas exchanges will also require closer collaboration between clearinghouses like NG Clearing and market participants. Overall, Oreagba expressed optimism about the future of the derivatives market in Nigeria, highlighting the collaborative efforts of market players and regulators in driving market growth and innovation. With a concerted focus on investor education, market awareness, and liquidity, the derivatives market in Nigeria is poised for significant development in the year 2024. Stakeholders are encouraged to watch this space for exciting developments and opportunities in the Nigerian derivatives market.