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Nigerian Stock Exchange to offer derivatives by 2016

Oscar Onyema

The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Oscar Onyema, has said the bourse plans to start allowing trading by 2016 of derivatives such as futures and options in interest rates, currencies and equity indexes.

The exchange, one of the main entry points for foreign funds looking to tap Africa’s fast-growing economies, now only offers shares, bonds and exchange-traded funds.

Onyema said the exchange’s surveys showed there was “encouraging” demand for derivatives, which help investors to manage the amount of risk they take on.

“Our target is to really get them by 2016 at the latest,” he told Reuters late on Tuesday, adding they were setting up a clearing house, which required significant investments.

“You need to get all the major banks to buy into the idea and support the development of such an institution,” Onyema said.

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He said the bourse was changing its ownership structure from a mutual company of 240 members in order to add shareholders and prepare for a possible initial public offering (IPO).

The process, known as demutualisation, will help the exchange improve its governance through opening up its ownership and could lead to new fundraising to support expansion.

“Once we have completed demutualisation, a decision will be made as to whether go straight and do an IPO or whether we will do strategic partnerships or whether we will do private equity funding,” Onyema said.

This year, shares in the oil producing-nation have taken a battering, losing about 15 percent. Foreign funds sold shares after the naira lost value in the wake of steep falls in the price of crude oil.

Next year’s presidential election has also been feeding jitters, Onyema said.

“We are just going through a cycle and I believe that given the fundamentals, how strong the listed companies are … we expect to see the market return in a strong way,” he said.

Reuters