Market analysts opined that the surge in demand pressure during trading forced authorities to allow trades to cross higher than N410/$1 and settling at this price by closing last week Thursday.

Figures from the FMDQ OTC Securities Exchange, a platform that oversees foreign-exchange trading in Nigeria, show that it opened on Monday at N403.93, recorded a high of N412.05 and low at N385.

The I&E window is the market trading segment for investors, exporters and end-users that allows for FX trades to be made at exchange rates determined based on prevailing market circumstances.

In the parallel market, the exchange rate between the naira and the US dollar remained flat at N470/$.

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A circular issued by the CBN on Friday disclosed that the purpose of the window was to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

The circular signed by the Bank’s Director in charge of Financial Markets, Dr. Alvan Ikoku, listed eligible transactions under the new window to include invisible transactions such as loan repayments, loan interest payments, Dividends/Income Remittances, Capital Repatriation, Management Service Fees and Consultancy fees.

Also on the eligible list are Software subscription fees, Technology Transfer Agreements, Personal Home Remittances and any such other eligible transactions including ‘miscellaneous Payments’ as detailed under Memorandum 15 of the CBN Foreign Exchange Manual.

While explaining that the invisible transactions under this window excludes international airlines ticket sales’ remittances, the circular added that the window covered Bills for Collection and any other trade-related payment obligations, which are at the instance of the customer.

The circular further clarified that the permitted invisible transactions and Bills for Collection were eligible to purchase foreign currency sourced from the CBN Forex window limited to Secondary Market Intervention Sales (SMIS) Wholesale (Spot and Forwards) only.

According to the statement, international airlines ticket sales’ remittances shall only be eligible to access the CBN FX window (SMIS-Retail and Wholesale; spot and forwards.

On participants in the new window, the circular disclosed that supply of foreign currency to the window shall be through portfolio investors, exporters, authorized dealers and other parties with foreign currency to exchange to Naira. The CBN, it added, shall also be a market participant at the window to promote liquidity and professional market conduct.

Taking cognizance of the slow progress made by corporates in on-boarding the FMDQ OTC Securities Exchange (FMDQ) Thomson Reuters FX Trading & Auction Systems, the CBN said participants at the new window would trade via telephone until appreciable progress is made with the FX trading systems on-boarding process.

The circular therefore advised authorized dealers to promote market transparency by encouraging their corporate clients to on-board to ensure the activities of the window are operated on the forex trading systems.

To provide price discovery to the market, it said the FMDQ will be charged with polling buying and selling rates and other relevant information from the major participants in the market to provide participants with the requisite price discovery, and the CBN with the indicative market depth until the market migrates to the FX Trading systems.

As part of the operational requirements of the window, the CBN circular said the exchange rates of the transactions in the window shall be as agreed between authorized dealers and their counterparties.

It also said that the CBN reserved the right to intervene as a buyer or seller, as it deems fit, in the window, adding that information on transactions between authorized dealers shall be reported to the CBN on a daily basis.

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Market Turnover Report from the company obtained by the News Agency of Nigeria (NAN) in Lagos on Monday indicated that the value was against N13.92 trillion recorded in the corresponding period in 2016.

A breakdown of the new report showed that transactions in Treasury Bills (TBs) contributed the highest of N11.60 trillion to the turnover.

It was trailed by repurchase agreements/buy-backs which accounted for N5.22 trillion worth of transactions, while foreign exchange derivatives had N2.43 trillion worth.

The Federal Government bonds had N2.35 trillion worth, while foreign exchange recorded N1.19 trillion worth.

NAN also reports that 10 leading member banks dominated activities in the FMDQ market during the period with Ecobank Nigeria leading the pack.

Access Bank came second on the activity chart and was followed by UBA, Stanbic IBTC, First Bank, FBN Merchant Bank and Standard Chartered Bank.

Others are Union Bank, Diamond Bank and Guaranty Trust Bank, respectively.

The report said that the top 10 dealing member banks accounted for 70.97 per cent of the transactions amounting to 16.31 trillion of the overall turnover.

Ecobank Nigeria, Access Bank and UBA maintained their positions for the second month running as leaders in OTC market, ranking first, second and third, respectively.

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Dr Abraham Nwankwo, the DMO Director -General, made this known during the bond listing at the NSE in Lagos.

Nwankwo said that the Eurobond was raised under reasonable terms for funding of capital expenditure stated in the budget.

He said that the projects included rails, bridges and power, adding that the bond was the first ever foreign currency bond to be listed on the exchange.

According to him, the listing of the bond is the DMO commitment to democratise what it does for Nigerians to have access, choice and inclusiveness to the bond trading.

He said that the listing of domestic Sovereign Eurobond reinforces Federal Government’s commitment to deepen and grow the Nigerian capital market.

Nwankwo explained that developing the domestic market would bridge the infrastructure deficit constraining economic growth.

He noted that the Eurobond which was over-subscribed by 780 per cent was part of government funding strategy for its 2016 capital expenditure and it would be spent on key infrastructure projects in line with its economic plan.

“This huge over subscription rate underscores a buoyant investor’s appetite for building exposure to Nigeria and demonstrates international confidence in the economy’s long term prospects,”he said.

Also, Monday Usiade of DMO said that minimum denominations for the international Eurobond issuance was 200,000 dollars at multiples of $1,000.

Usiade said the coupon rate for the bond was 7.875 per cent per annum payable on semi-annual basis.

He explained that the primary listing was London Stock Exchange (LSE), while NSE and FMDQ OTC Securities Exchange were the secondary listing.

Usiade said that investors distribution of the bond indicated that asset managers stood at 73 per cent, hedge fund 13 per cent, insurance/pension 10 per cent, banks/private banks three per cent and others one per cent.

Accordingly, Ade Bajomo NSE, the Executive Director, Market Operations and Technology, commended DMO for listing the Eurobond in the nation’s bourse.

He noted that the domestic listing would diversify its investors’ base by giving Nigerian institutional investors access to the bond.

“The listing of the dollar denominated bond on the Exchange will boost price discovery and liquidity in the local market as well as help attract reliable long term foreign currency denominated funds into the financial market.

He said that it would set the foundation for raising and listing more foreign denominated securities in Nigeria which would open up additional capital raising options for issuers and portfolio diversification opportunities to investors”.

“The Exchange, working with Central Securities Clearing System (CSCS) developed and presented to issuers and transaction parties, a framework depicting onshore and cross border trade and settlement process in line with robust market practices.

“This is to ensure seamless trading and settlement of the Eurobond, Bajomo said.

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The over-subscription was with orders in excess of $7.8 billion compared to a pre-issuance target of $1 billion.

The bond, issued under Nigeria’s newly established Global Medium Term Note programme, is the third in the series after the ones in 2011 and 2013.

The note has February 16, 2032 as maturity date for repayment on the principal, and is expected to yield interest at a rate of 7.88 percent.

The Federal Ministry of Finance said proceeds from the bond would be used to fund capital expenditures in the 2017 budget.

The government said the offering attracted significant interest from leading global institutional investors.

The notes would be admitted to the official list of the UK Listing Authority and available to trade on the London Stock Exchange’s regulated market.

“Nigeria will apply for the Notes to be eligible for trading and listed on the Nigerian FMDQ OTC Securities Exchange and the Nigerian Stock Exchange,” finance ministry said in statement.

The pricing for the bond was determined during a roadshow to promote the issuence of the bond.

The roadshow was led by the minister of Finance, Kemi Adeosun; accompanied by her counterpart in the Ministry of Budget and National Planning, Udo Udoma; Central Bank of Nigeria governor, Godwin Emefiele; and Director-General of the Debt Management Office (DMO), Abraham Nwankwo, as well as the Director General of the Budget Office, Ben Akabueze.

“Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure,” Adeosun said of the bond.

“At the heart of the agenda is a commitment to invest in developing Nigeria’s infrastructure through a target 30 per cent annual budget commitment to capital expenditure.

“We are establishing the building blocks for long-term growth and making the hard decisions that must be made to reset our economy appropriately.”

Commenting on the Notes’ pricing, the DMO Director General, Abraham Nwankwo, said: “Nigeria is delighted to have successfully priced its third Eurobond issue.

“We have successfully extended the tenor of our borrowing programme in the international capital markets to 15 years, at a price that reflects belief in the quality of Nigeria’s cash flows and government.”

He said the Eurobond is the latest step in a broader debt strategy designed to significantly re-balance our debt profile towards longer term financing and reduce the burden of interest on our annual budget.

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The S&P Nigeria Sovereign Bond Index tracks the performance of local currency denominated sovereign debt, publicly issued by the Federal Government in its domestic market.

The index is a sub-index of the S&P Africa Sovereign Bond Index, a broad, transparent and independent benchmark that comprises a universe of sovereign bonds, denominated in local currency from 13 African countries.

The index also has 13-country level sub-indices.

At the ceremony in Lagos, Bola Onadele, FMDQ Managing Director, said that the index adoption would help in the development of the nation’s financial market.

Onadele said that the partnership between FMDQ and S&P Don Jones Indices marked the announcement of the adoption of the S&P Nigeria Sovereign Bond Index.

He said that it was part of the company’s mandate to promote price discovery and transparency in the Nigerian financial market.

Onadele said that it would revolutionise the face of the financial markets by providing investors with a consistent, credible and objective measure for the performance of their investments.

“This will likewise serve as an acceptable benchmark for the fixed income market, and provide transparent and credible information to the investing public and other persons with interest in the Nigerian financial market,” he said.

Onadele said that the index would promote global visibility, and as well enhance investors’ confidence in fixed income products.

He said that the company was committed to the growth of the financial market, assuring of more robust development in the future.

FMDQ OTC chief said the company was positioned to drive global competitiveness, by deepening its market through product innovation and institutionalising robust market architecture.

Onadele said it would also ensure market efficiency and liquidity by driving product innovation and institutionalising robust market architecture such as trade execution, trade data repository, among others.

Also, Kurt Zyla, the Managing Director & Global Head Exchange Relationship, S&P Dow Jones Indices, said that the organisation was the largest global resource for essential index-based concepts, data and research.

Zyla said that it was a home to iconic financial market indicators such as S & P 500 and the Dow Jones Industrial Average.

He said that more assets were invested in products based on its indices than on any other provider in the world.

“With over one million indices and more than 120 years of experience, constructing innovative and transparent solutions, S&P Dow Jones Indices defines the way investors measure and trade the markets,” he said.

Zyla said that the company was very excited with the partnership, and would continue to ensure best practices.

He said that S&P was a leader in the global Exchange Traded Funds (ETFs) with 29 per cent market share in Assets Under Management (AUM).

“We look forward to work with FMDQ to create indexes that will help the development of the capital market,” he said.

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The aim of the naira-settled OTC FX Futures Market is to minimise the disequilibrium in the Spot FX market and cause the naira rate to moderate.

It will also attract significant capital inflows to the Nigerian fixed income and equity markets apart from achieving naira exchange rate stability.

During the launch, the CBN Governor, Godwin Emefiele, said that the bank remained steadfast to position the Nigerian foreign exchange market to be competitive, transparent, liquid and diversified.

Emefiele, who was represented by Emmanuel Ukeje, Special Adviser to the Governor on Financial Markets, said the product would offer Nigerians and investors the opportunity to hedge against foreign exchange rise.

“The CBN remains steadfast in its purpose to position the Nigerian FX market to be competitive, transparent, liquid and diversified, thereby ensuring requisite fundamentals that make for a thriving economy,” Emefiele said.

He said that the launching of the first naira-settled OTC FX Futures contracts was an important innovation in Nigeria’s financial market.

Emefiele explained that the product would offer Nigerians and investors the opportunity to rebuild the volatility witnessed in the FX market in the past.

He added that the product would offer foreign investors the opportunity to channel their foreign exchange inflow to the country and thereby enhance liquidity.

Emefiele urged manufacturers to take advantage of the product to expand their businesses to minimise cost instead of rushing to the spot FX market.

He said that CBN would continue to support the growth of the money and capital markets by introducing more friendly products for economic growth and development.

Dr Sarah Alade, Deputy Governor, Economic Policy, CBN and Chairman, FMDQ, described the launch as a significant milestone in the financial market industry.

Alade, who was represented by Mr Yinka Sanni, Non-Executive Director, FMDQ, said that the innovation would make the market competitive globally.

She said “FMDQ, the market organiser, and the OTC FX Futures Exchange, in collaboration with the CBN and other stakeholders are adequately equipped to deliver the needed transformation in the Nigerian financial market.”

Bola Onadele, the Managing Director, FMDQ, said that the OTC FX Futures would no longer allow front-load FX requirements, which had put immense pressure on the naira rate.

“The demand for the dollar by end-users can be staggered appropriately as there will be no need for panic-buying.

“This is because end-users are guaranteed a fixed rate for their FX needs when required,” he said.

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