Ecobank Nigeria Limited, Guaranty Trust Bank Limited, Rand Merchant Bank, Coronation Merchant Bank, and FMDQ Group have emerged as top sponsors of the 2021 Financial Markets Dealers Association of Nigeria (FMDA) annual virtual conference held last week in Lagos.
The conference was designed to provide an opportunity for financial markets participants, regulators, investors, corporate organisations, and other stakeholders to deliberate on possible ways of using Financial Markets Infrastructure to facilitate economic recovery and development post-Covid-19 pandemic.
In his welcome address, FMDA President, Bayo Adeyemo, said the conference was organised by the FMDA with the theme: “Role of Financial Markets in the Nigerian Economy Post Covid-19.”
He said professionals and regulators in the financial markets will during the event, provide insights on the need to effectively use the financial markets in driving growth in the economy post-Covid-19.
Adeyemo, who is the country treasurer & markets head, Citibank Nigeria Limited, said there was a need for the Nigerian economic structure to work for all despite the economic challenge being experienced in the country.
According to him, the topics at the event- “The Role of Derivatives Markets in FX Liquidity Recovery,” Derivatives Products and Technology: Drivers to Economic Development, presented and Money Market Policies Implementation Sine Qua non to Effective Banking Intermediation: Reviving SMEs for Post Covid-19 proffered solutions to the Nigerian financial markets challenges and economy.
Adeyemo said the association was committed to ensuring the growth of safe, liquid, and financially efficient markets in Nigeria. Such growth would make the financial market a strong and reliable partner to market participants now and in the future.
He said FMDA was dedicated to deepening human capacity and a productive economy.
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“On behalf of the association and its members, I am grateful to the CBN governor, our Board of Trustees (BOT) Chairman, CEO of FMDQ, and all the sponsors, speakers, and attendees at this event for their support in deepening the financial markets,” he said.
In his keynote address, CBN Governor, Godwin Emefiele said the Nigerian financial market is undergoing a litmus test.
Emefiele, who was represented by CBN deputy director, Financial Markets Department, Patrick Ajani, asked banks to “now critically assess their exposures to different sub-sectors while continually leveraging on technology to support their business operations and continuity”.
He said banks should critically assess third-party provider risks, including businesses within the value-chain of sectors funded by the banks.
He said that the resilience of the structure needed to support the financial market is very paramount in ensuring that the processes of keeping the banks stable are realised.
He said the industry players witnessed other pre-existing issues that were worsened by the Covid-19.
Emefiele explained that Nigerian financial markets underwent a sort of litmus test of their business in terms of continuities, continuity plans at short notices with the number of corporates activating remote work conditions and virtual activities rising.
These, Emefiele said, led to rising in costs, while for others, it was a case of leveraging on existing technology.
“These incidences highlighted the importance of periodic review of operational risks and environment of all market players, and crisis management preparedness of the entities, in case there are any disruptions in their processes,” he told the financial market dealers.
It further reinforces the need for cyber-resilience in the face of rapid technology adoption.
The CBN boss disclosed that the pandemic triggered precautionary demand for cash and liquidity, flight to safety amidst a decline in government securities yields, especially bonds, adding that technological and pharmaceutical sectors regained their losses, while services tourism-oriented businesses and hospitality, among others, suffered a major setback.
He said the pandemic equally led to massive disruptions in the economy and business operations, creating an urgent need for businesses to adopt technology.
“Market participants must collaborate closely to build back better. This will promote economies of scale and enhance synergy. Resilience in funding markets was also greatly tested during the pandemic which led to large-scale interventions by the CBN as seen in the targeted credit facility, moratorium, interest rebate, household and mortgage loans, and regulatory forbearances by both the fiscal and monetary authorities to preserve the markets and ensure stability,” he said.
In his opening remarks, the chairman of, Financial Market Dealers Association of Nigeria (FMDA) Board of Trustees, Aigboje Aig-Imoukhuede said the significance of the conference cannot be underestimated.
He said Covid-19 at a time, brought the world economy to a standstill.
According to him, nations should take steps to protect vulnerable populations adding that Nigerian should strengthen the health sector.
He said there is a need to address the fiscal underinvestment in the health system.
Aig-Imoukhuede said Nigeria needs to attract foreign direct investment, aside from the diaspora remittances.
In his presentation titled: ‘The Role of Derivatives Markets in FX Liquidity Recovery’, chief executive officer, FMDQ Group, Bola Onadele Koko, said the derivatives market remains a catalyst for boosting forex market recovery.
It must be obvious that the forex market is the nerve centre of the economy connecting agriculture, construction, commerce, and so on and making a success of their operations.
Koko explained that without a vibrant forex market, Nigeria cannot take its place in international trade.
He disclosed that at inception, the OTC FX Futures rates were offered at deep discounts to spot rates in order to arrest attention and attract foreign capital to the economy.
“Despite the reversal of this trend, adoption of the product continued to increase peaking at an annual turnover of US$18.88 billion in 2020. Also, due to concerns around the illiquidity of the spot FX market and low yields in the fixed income, average monthly turnover of (US$0.55 billion) in 2021 is at its lowest since 2017,” he added.
Koko said that in line with the general principle that derivatives become more valuable with increasing volatility, the uptake of the contracts were highest in the first quarter of 2020 when the uncertainty regarding the impact of the pandemic was highest in Nigeria.
“The year 2020 was the highest crisis we had since the introduction of the contracts as usage went up drastically as uncertainty heightened. The non-alignment of NAFEX with market sentiments has kept activities muted in 2021,” he stated.
Also speaking at the event, Operational Risk Management/Business Continuity, Unity Bank Plc, Lasisi-Yahya Enitan, said there was a need to rescue SMEs through effective policies implementation as the SMEs remain the live-wire of the economy.
Speaking on the topic: “Money Market Policies Implementation Sine Qua non to Effective Banking Intermediation: Reviving SMEs for Post Covid-19”, he said the Covid-19 pandemic did not only come with “economic dreaded monsters”-risks such as unemployment and inflation but provided opportunities for businesses to research and come up with a best and suitable business model that can operate at optimal level irrespective of the prevalence of Covid-19.
He said the emergence of Covid-19 had changed the dynamism of the business environment. Therefore, digitalisation of business has come to stay.
“Money Market policies implementation is necessary for reviving SMEs. However, the process of its formulation needs to be in an integrated form where SMEs’s association leadership, CBN, and financial institutions representatives participate in the policies formulation,” he said.
Enitan said that funding alone cannot be adequate for needed intermediation or intervention as a bottom-up policy development strategy should be adopted.
Proposition Sales Specialist – Trading, at Refinitiv, Julius Kirinya spoke on Derivatives Products and Technology: Drivers to Economic Development. He said that FX derivatives in OTC markets significantly growing since 2010 in Emerging countries
He said interest rate derivatives in OTC markets traded globally averaged $6.5 trillion daily in 2019 according to the Bank for International settlements survey of the global derivatives market.
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