… Launches NG Clearing
By Peter Egwuatu
The Federal Government, Central Bank of Nigeria, CBN, Securities and Exchange Commission, SEC and other key stakeholders in the Nigerian capital market have stated that the establishment of NG Clearing’s Central Counterparty, CPP services, the first in West Africa, would boost the clearing, settlement system of intra African trade area, reduce risk , enhance transparency in the derivative market among others.
The Secretary to the Government of the Federation, Mr Boss Mustaph, who unveiled the take off of NG Clearing, Thursday in Lagos said: “The Federal Government under the leadership of President Muhammadu Buhari has created the enabling environment for the private sector to strive and has given his support to the Board and Management of NG Clearing, the first Central Counterparty organisation in West Africa. This would help in enhancing settlement and payment system among trades in Africa, under the African Continental Free Trade Area, AfCFTA.”
In the same manner, the Deputy Governor, Financial System Stability, Central Bank of Nigeria, CBN, Mrs Aisha Ahmad commended the NG Clearing for achieving this height, stressing that it will help strengthen the country’s investment environment through solutions that systematically reduce risks, enhance operating efficiency, and minimize costs for all market participants, thereby, contributing to national development. The NG Clearing will also boost clearing and settlement of payment on trades among Africa countries.
In his opening remark, Chairman of NG Clearing, Oscar Onyema said: “NG Clearing will position the Nigerian capital market as a stable and resilient market that offers local and foreign investors sound opportunities without compromising global standards. It will be playing a key role in the Financial Markets ecosystem in Nigeria, upholding stability and safety of the marketplace, through the efficient and timely settlement of derivative trades.
Continuing he said: “With the establishment of NG Clearing as a CCP, the long-awaited dream of having exchange-traded derivatives in our capital market has now become a reality. The NG Clearing dream was borne out of a firm commitment to position the Nigerian capital market as a stable and resilient market that offers local and foreign investors sound opportunities without compromising global standards. On this premise, we took steps to identify the gaps that inhibit our market from attaining this positioning. One of the gaps we identified was the absence of the financial market infrastructure known as a CCP. On this journey, we overcame some interesting challenges. The biggest of which were gaps in legislation. As I have reiterated in earlier engagements, having a CCP is key to the realization of the Nigerian capital market master plan. It opens new doors for all stakeholders, and it will reinforce the existing infrastructure in our markets.”
Commenting as well, the Managing Director/CEO, NG Cleaaring, Mr. Taps Das, said : “The global financial meltdown of 2008 left a devastating crisis in its wake. Erstwhile resilient markets crashed with unprecedented losses. In post-crisis examination aimed at mitigating future occurrence of the crisis, the G20 leaders agreed at the 2009 Pittsburgh summit that all standardized derivatives contracts should be traded on exchanges or electronic trading platforms and cleared through central counterparties (CCPs). A CCP is a financial institution that takes on counterparty credit risk between parties to a transaction and guarantees the settlement of trades between the parties. The emergence of NG Clearing is not only an indication of our collective growth as a market, but also a marker of the forward-looking intent of the Nigerian capital market.”
In his remark, Babangida Ibrahim, Chairman, House Committee on Capital Markets at the launch ceremony commended the efforts of the various stakeholders who have made this a reality especially, the board, promoters, shareholders, and management of NG clearing limited.
He said : “ For several years now, the talk of having Exchange Traded Derivatives in the Nigerian capital market has lingered. While the prospect of having exchange-traded derivatives in our capital market is exciting, we have maintained that without the ideal infrastructure such as a qualified CCP, offering derivatives exposes our market to significant structural risk that could undermine market safety and stability. Also, before now, the legislative and regulatory frameworks for CCPs were not robust enough. Today, however, there is a better legislative and regulatory appreciation and the regulatory frameworks have been expanded to take care of the unique subtleties of derivative trading, clearing, and counterparty risk.”
In his remark as well, Otunba Abimbola Ogunbanjo, Chairman NGX Group Plc said: “Today is a special day for the Nigerian capital market. Not just because it marks the beginning of a new era, but also because it signals the readiness of our market to take a deserved position among globally renowned financial markets.
Continuing, he said: “The availability of derivatives as an asset class contributes towards the development of a country by providing links between cash markets, hedgers and speculators. The primary purpose of a derivatives exchange is to provide liquidity and price discovery mechanisms to transfer the underlying risks among players with varying roles in an economy. The experience of emerging markets such as Thailand, Turkey, South Africa, as well as markets like Korea, Malaysia, Brazil and India reveals that innovation and growth in derivatives activity over the past 20 years has yielded substantial benefits in terms of market expansion and overall economic growth.”