Market News
$1.3bn USD/NDFs open contracts due May 29 - PUNCH
Over $1.30bn is the value of cleared USD/Naira-Settled Non-Deliverable Forwards open contracts due this month on the FMDQ securities.
This was disclosed in the latest FMDQ report published on that market segment on Tuesday, May 7.
The contracts are expected to be settled on May 29.
Cleared Naira-Settled Non-Deliverable Forwards are contracts where parties agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying US dollar on the maturity/settlement date.
Upon maturity, both parties are assumed to have transacted at the Spot FX market rate.
According to the FMDQ, the cleared USD/NGN NDFs contracts are cash-settled in Naira and the differential between the contract rate and the Nigerian Autonomous Foreign Exchange Fixing rate on the maturity day determines the settlement amount, i.e. the gain/loss in the contract.
The product which can be used for hedging was introduced in 2016, with the Central Bank of Nigeria as the pioneer seller of the Cleared USD/NGN NDFs contracts.
The apex bank currently offers amounts for different tenors, ranging from 13 months to 60 months to Authorised Dealers, who offer the same to customers with trade-backed transactions or trade the same with other Authorised Dealers; settling on bespoke maturity dates.
Meanwhile, the naira which started the month of May on a strong note has started to weaken against the dollar.
It closed at the official market, trading at N1,421.06 to the dollar.
The Nigerian Autonomous Foreign Exchange Market data indicated a loss of N4.49, representing a 0.31 per cent decrease compared to the previous trading day’s rate of N1,416.57/dollar.
Despite the depreciation, the total daily turnover increased to $164.74m on Wednesday, up from $160.77m on Tuesday.
