The FMDQ group revealed that the total value of over-the-counter foreign exchange (FX) futures contracts traded on its platform reached $ 47.32 billion in four years; a development he highlighted has helped the Central Bank of Nigeria (CBN) meet the challenges of the forex market.
FMDQ revealed that the product, which was launched in 2016 after nearly two years of major challenges in the forex market, was successfully traded on FMDQ Securities Exchange Limited (FMDQ Exchange) and cleared on FMDQ Clear Limited (FMDQ Clear ) – both fully subsidiaries owned by the FMDQ Group.
In a report, the FMDQ revealed that the OTC since its inception last year has seen a significant increase in the participation levels of hedgers, with a total value of OTC FX futures contracts of $ 18.88 billion. out of 1,726 transactions in 2020, compared to $ 15.07 billion out of 1,068 transactions in 2019..
In addition, it reported a total OTC FX futures contract value of $ 7.88 billion out of 671 trades in 2018 and $ 5.49 billion out of 613 trades in 2017.
The group reflecting on the market’s performance last year, said it was undoubtedly a challenge, with the outbreak of the COVID-19 pandemic and the ensuing turbulence in global economic landscapes. and national.
The National Bureau of Statistics (NBS) had revealed that the country’s gross domestic product (GDP) registered a contraction of 1.79% in 2020, a significant drop from the growth of 2.21% recorded in 2019, rate inflation of 13.25% compared to 11.40% in 2019 and a trade deficit of $ 33.46 billion, an increase of 33.77% compared to the deficit of $ 25.01 billion in 2019 , plunging the country’s economy into its second recession in two years.
The report thus indicated that the fortunes of the Nigerian financial markets were not spared in 2020, as activities in the forex market remained limited by reduced liquidity and volatile capital flows, causing the market to contract.
In the report, the FMDQ explained that the capital market allowed investors to access the fixed income market to avoid losses in equity portfolios, but in mid-2020, the securities market to Fixed income took a turn as yields began to fall below 1% per annum, and the stock market rallied in the last quarter of 2020, as investors returned.
He further explained that, as companies and investors faced very difficult choices during the period, many found help in the innovative CBN Naira Settled OTC FX Futures product, a panacea. for the exchange rate risk faced by market players – national and international.
At the same time, an analysis of the financial performance of the FMDQ group shows that its strategy of market diversification has been successful, with the group recording a 44% increase in its turnover, to 31.00 billion naira. , in 2020.
Total market activity in the fixed income, currency and derivatives markets declined slightly by around eight percent to 215.09 trillion naira in 2020 from 232.68 trillion naira in 2019, with the most actively traded product category – Nigerian Treasury Bills and Open Market Operation (OMO) Invoices – contributing a combined total of 35% to total revenue.
The report further revealed that: “The listing activity of the Exchange continued to thrive in 2020, as an impressive number of 82 securities – 13 bonds, 67 commercial papers and 2 funds – were admitted to the platform. -form, with a total value of N2. 0.07 trillion.
“In the Clearing business, due to the impact of the COVID-19 pandemic which inadvertently shaped the course of the year, a 22% drop in the value of cleared sovereign fixed income transactions has been registered by the Group. On the other hand, as companies and investors sought to break free from the volatilities encountered in the market, there was a marked increase in participation levels in OTC FX futures, as the total value of contracts executed by traders. local and foreign companies on FMDQ Exchange and cleared by FMDQ Clear grew 25.25 percent. The Custodian and Private Markets activity also contributed, albeit marginally, to the Group’s sales during the period under review.
Group President, Groupe FMDQ and Deputy Governor, Economic Policy, CBN, Dr. Kingsley Obiora, said in a statement that despite the challenges: “2020 has been a landmark year for FMDQ, as it has seen the reorganization of the Company in a Group structure, with the FMDQ group becoming a non-operating holding company registered by the Securities and Exchange Commission (SEC), with three capital market subsidiaries registered with the SEC – FMDQ Exchange, FMDQ Clear and FMDQ Depository – and a private markets subsidiary, FMDQ Private Markets, all further consolidating our business model, transforming FMDQ into the first vertically integrated IMF group in Africa.
Commenting, the CEO, Groupe FMDQ, Mr. Bola Onadele. Koko said, “I am incredibly proud of the progress we have made in 2020, and we would never have achieved it without the unwavering support of all of our stakeholders. While the pandemic has strained our economy and markets over the year, the level of engagement of our stakeholders has demonstrated their commitment to making our markets thrive. The support of the SEC – the supreme regulator of capital markets, and the CBN – the umbrella bank, has been invaluable and is greatly appreciated.
“In addition, the unparalleled support from the Chairman of the Board and the Directors cannot be overstated and has been essential to the accomplishments and progress made during the year. Your exemplary leadership, confidence and determination to lead the ship with the utmost care, during the hectic year, despite your busy schedules, was nothing short of remarkable, as evidenced by the governance assessment reports of company and the advice of our external consultant, PricewaterhouseCoopers (PwC), upon the conclusion of the 2020 reviews in accordance with the SEC Corporate Governance Guidelines, 2020, and the Nigerian Code of Corporate Governance, 2018. ”