The Divisional head, Capital Market, Nigerian Exchange Limited (NGX), Mr. Jude Chiemeka has said, more investors’ education and stakeholder collaboration are needed for the Exchange Traded Derivatives Markets inac Africa to experience increased growth.
Chiemeka made the remark at the Capacity Building Workshop of the CFA Society, South Africa, held virtually with the theme ‘Building and Scaling Derivatives Markets in Africa’.
Derivatives are essentially contracts that derive their value from an agreed-upon underlying asset, index or commodity. Common underlying instruments include bonds, commodities, currencies, interest rates, market indices and stocks. Derivatives are suited to both professional and private investors who wish to hedge an open position or gain exposure to assets and markets without necessarily holding the underlying assets. Derivatives may also be traded by speculators with the sole purpose of making profits on short-term price movements.
He said that, “enabling the development of the derivatives markets on the African continent requires more investor education and capacity building. Our markets are still in the nascent stages and investors need to be aware of the risks and opportunities that are inherent to derivatives.
“Stakeholder engagement and collaboration is also needed to catalyse growth. At NGX, we have organised various capacity building sessions in partnership with major stakeholders in the capital market to educate investors on the intricacies of Exchange Traded Derivatives market. We also continue to drive conversations and engage regularly through forums and other marketplace development initiatives.”
Chiemeka further explained that the Exchange Traded Derivatives market of NGX which took off in April 2022 as West Africa’s first ETDs market launched with the NGX30 and NGX Pension Index Futures contracts, currently has three accredited trading license holders and two clearing members actively participating.
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