APRIL 24, 2017

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1. INTRODUCTION

This document provides a summary of the methodology that FMDQ OTC Securities Exchange (“FMDQ”) applies to establish NAFEX - the Nigerian Autonomous Foreign Exchange Rate Fixing.

2. BACKGROUND FMDQ

This is an over-the-counter (“OTC”) securities exchange with a mission to empower the financial markets to be innovative and credible, in support of the Nigerian economy. This mission is achieved by providing the secondary market with a world-class market governance and development service to the benefit of market participants and in support of the objectives of the financial services regulators.

Consequently, FMDQ is committed to developing and publishing independent and transparent benchmarks which are reasonably designed to be reflective of the market at the time of the fix and promote transparency in the OTC markets. FMDQ Fixings meet the requirements of domestic regulations as well as the International Organisation of Securities Commissions (“IOSCO”) Principles for Financial Benchmarks on governance, quality of the methodology and accountability mechanisms.

NAFEX is the FMDQ benchmark rate for Foreign Exchange (“FX”) spot operations in the Investors’ & Exporters’ FX Window (hereinafter referred to as the “Window”). NAFEX is designed and generated independently and objectively and also published every business day at a specific time.

2.1. Uses of NAFEX

An FX fixing is an essential component of the Nigerian financial system. Its importance to the financial industry and other non-financial sectors arises from the impact of a country’s exchange rate on almost all sectors of the economy.

NAFEX will benefit the Nigerian economy in general and the financial industry in particular in a number of ways, including:

▪ Serving as a fixing for the settlement of FX derivatives

▪ Promoting transparency and awareness of USD/NGN rates

▪ Enabling foreign and local investors benefit from a market-driven independent reference rate

▪ Increasing forward contracts usage towards a reduction of investments in currency principals and foreign currency line utilisation

▪ Developing hedge products and derivatives, thus improving the standard of the Nigerian FX market

▪ Providing growth and income potentials for market players through the trading of hedging products ▪ Serving as a benchmark for portfolio valuations, conversions, performance measurement and audits.

2.2. Key Considerations

2.2.1. Benchmark Administrator FMDQ is the benchmark administrator for NAFEX and thus has primary responsibility for all aspects of the benchmark determination process. This process includes the development, determination, dissemination, operation and governance of NAFEX.

2.2.2. Active Market

FMDQ recognises that to enable the publication of a meaningful benchmark, a market in the currency pair represented by the benchmark must genuinely exist and that market must be active. However, the economic realities will dictate the relative meaning of what ‘active’ means, as market liquidity can vary significantly at particular times of the day. FMDQ applies the IOSCO Principles for Financial Benchmarks 7 & 8 – “Data Sufficiency” & “Hierarchy of Data Inputs” in determining thresholds for an “active market.”

2.2.3. Data Sourcing

FMDQ may use transactional data entered into on an arm’s length basis between buyers and sellers in the market, where that data is available and reflects sufficient liquidity. In a market where liquidity levels are low, the benchmark may be based predominantly or exclusively on contributed quotes.

2.2.4. Governance and Transparency

FMDQ is subject to a corporate risk framework which is based on three (3) lines of risk management:

i. Business procedures and controls are designed to promote consistency throughout the process

ii. The application of independent governance, reporting and risk management. The Board of Directors and relevant Board Committees are responsible for oversight of FMDQ Fixings, including reviewing and advising on the policies and methodologies by which FMDQ calculates, administers and publishes the Fixing.

iii. FMDQ Fixings are discussed and adopted by an Oversight Committee i.e. the Market Review Committee, consisting of members of the FMDQ Management Team who perform the required due diligence on the proprietary Fixings. Furthermore, in line with the IOSCO Principles for Financial Benchmarks, FMDQ shall publish submitted quotes received from contributing banks with the eliminated quotes identified.

2.2.5. Exercise of Expert Judgment

FMDQ may exercise discretion on the use of data in determining a Fixing. The calculation of a Fixing includes a validation process whereby, among other steps, FMDQ reviews data and fixes rates under certain pre-determined tolerance checks. When applying tolerance checks, FMDQ has the discretion (subject to internal policies and procedures) to include or reject certain data from the calculation of the Fixing.

Based on FMDQ’s experience in interpreting market data, FMDQ shall apply expert judgment when necessary with the intent of ensuring the quality and integrity of the benchmark rate. Consequently, FMDQ has put in place internal guidelines and quality control procedures that govern the application of “Expert Judgment” and are intended to provide consistency and oversight to the process.

3. FIXING DYNAMICS

3.1. Fixing Methodology - NAFEX Spot Rate NAFEX Spot rates shall be determined as detailed below and contributing banks shall be expected to submit only ‘professional spot quotes’. Where a contributing bank submits an unprofessional quote, such a quote will automatically be disqualified from the NAFEX computation. Contributing banks shall quote single rates for transaction sizes of $5,000,000.00 and above or as advised by FMDQ, at the time of the poll.

3.1.1. NAFEX is a polled rate based on the submissions of ten (10) contributing banks and calculated using a trimmed arithmetic mean. Upon receipt of quotes, the individual contributing banks’ submission is ranked in descending order. The lowest and highest two (2) quotes are eliminated from the ranked rates leaving only the middle six (6) rates. The arithmetic mean of the remaining rates are then calculated to two (2) decimal places and disseminated as the NAFEX Spot Rate.

3.1.2. NAFEX shall be published daily by 12:00noon. 3.1.3. Where FMDQ receives fewer than the required number of submissions by the time NAFEX is due for publication, the reduced submissions methodology detailed below shall apply: i. NAFEX will be published provided that two (2) or more quotes are obtained on a daily basis ii. The calculation methodology shall remain the same irrespective of the number of submissions received. 

3.13 If data remains insufficient by 12:00 noon, FMDQ shall activate the NAFEX Contingency plan as detailed below.

3.2. Contingency Plan

3.2.1. In instances where there are quotes below the documented threshold, the previous day’s NAFEX shall be maintained and published as the current NAFEX.

3.2.2. In circumstances of a force majeure event, leading to the unavailability of quotes in the market, the previous day’s NAFEX will be maintained and published as the current NAFEX.

3.2.3. Any republished rates from the previous business day shall be identified as such on the FMDQ1 eMarkets Portal.

3.2.4. After five (5) consecutive business days of republishing the previous day’s NAFEX (in this case, the NAFEX of 5 business days prior), an FMDQ Market Review Committee meeting shall be convened in a special session to devise a strategy for the appropriate determination of future NAFEX during the extreme market condition, towards preserving the continuity of the NAFEX publication.

4. PUBLICATION NAFEX

Spot Rate is available in three (3) packages – Real-time, 24-hour Delayed and Historical:

▪ Live Fix: Available at 12:00 noon daily via the FMDQ e-Markets Portal

▪ Delayed (24 hours): Published via the FMDQ website2

▪ Historical: Available via the FMDQ e-Markets Portal

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APRIL 09, 2017

• Written by Will Peters

Historically, the British Pound tends to rally in April.

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For the last 12 years without fail, GBP has rallied against the USD with an average monthly gain of 2.2%.

The currency has also done well against the Euro.

The observation has many in the analytical industry understandablyconfident that this April will be no different and that we should therefore expect the UK currency to rise.

But the reasons for this outperformance in April is yet to find any plausible theories and analyst David Bloom at HSBC says he is reluctant to rely upon it and modelling the Pound’s potential direction over coming weeks.

Indeed, Bloom rightly points out that the UK is a very different place in April 2017 than it was in previous Aprils. “The vote for Brexit was a game-changer,” says Bloom.

Bloom does not know why Sterling is favoured by April, but history alone is no reason to suggest this is a set-in-stone rule.

Oliver Harvey at Deutsche Bank says a potential reason for Sterling’s historical outperformance in April relates to dividends.

“After annual reporting in the first quarter, April is often the month when dividends fall due. With over two thirds of FTSE 100 earnings made abroad, cash must be repatriated to pay them,” says Harvey.

Harvey does warn that the divergence between high dividends payments and the declining profitability of UK-listed firms might mean this April’s payouts are limited when compared to previous instances.

The analyst notes that for years now UK corporates have been handing out cash to shareholders at the expense of reinvestment which must at some point be rectified.

As such Deutsche Bank reckon there are many years of underinvestment to catch up with and firms are tipped to hold onto cash which in turn could see less demand for Sterling on global foreign exchange markets.

Added to this, Harvey also notes an increasingly smaller proportion of dividends are being paid back in GBP.

“The share of Sterling dividends is likely to fall further as companies seek to reduce the currency exposure of payouts,” says Harvey. “In short, while the weather is unlikely to improve, sterling's strong April performance may be less of a factor than in the past.”

 

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Sell the Pound on Rallies

HSBC have made a tactical recommendation to clients that they consider selling the British Pound on any rallies in anticipation of an intensification of political risk, the structural headwind of the current account deficit and possible signs of softness in the economic cycle.

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HSBC have previously recommended that GBP-USD is to be sold at 1.2540 - very close to the 1.2450 seen at the time of writing.

“Those not already engaged in GBP may be tempted to wait for better levels to sell, somewhere in the 1.2700-1.2850 region where it last topped out,” says Bloom.

The tactical call to sell the Pound on strength contrasts to the view held at Barclays that the Pound is a buy against the Euro.

We do note the duration of the Barclays call is however shorter in duration.

Economics to Weigh Against Sterling

Looking at the fundamental reasons to engage against Sterling, HSBC eye the mid-March boost given to the currency by the Bank of England which surprised markets by hinting that the next move on interest rates would be to raise them.

One member of the Bank’s decision-making committee - Kristin Forbes - actually voted for a rise at the March meeting.

But, HSBC believe the boost given to GBP from the hawkish shift in rate expectations is vulnerable to a reversal.

“The dissenting vote of Forbes at the last MPC meeting came against a run of upside activity data surprises in January and February,” says Bloom.

Those have now petered out in March with the activity surprise index tracking sideways with leading indicator data turning softer and suggesting a slowdown in economic activity over coming months.

While the upside surprise in inflation data gave an extra boost Sterling  bulls HSBC argue this sentiment is misplaced.

“The rise in inflation is a dovish signal under current circumstances because of the squeeze it poses on real spending power. Wages growth is stuck; inflation is not,” says Bloom.

HSBC think the extra 18bp of tightening the market has added to its expectations for December 2018 are likely to reverse as the data and Bank of England rhetoric delivers a push back.

“This will be significant for GBP/USD as the currency has traded as a cyclical currency so far in 2017, tracking the daily vagaries of the interest rate differential between the UK and US. Once the political risk of an early Brexit negotiation standoff and the structural headwind from the current account deficit are added, we could have all three drivers pointing to GBP weakness,” says Bloom.

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Some Bearish Forecasts for the Pound

HSBC forecast the Pound to Dollar exchange rate to be at 1.15 by mid-2017 ahead of a fall to 1.12 by the end of September and 1.10 by year-end.

The EUR/GBP exchange rate is forecast at 0.91 by mid-2017, 0.96 by September and 1.00 by the end of 2017.

From a Pound to Euro exchange rate perspective this equates to 1.0981, 1.0416 and, well, 1.0.

These are certainly amongst the more bearish forecasts in the analyst community out there and aligns closely to the views held at bears Deutsche Bank.

It might be no wonder then that two major Sterling bears are not buying the idea that the Pound will follow historical precedent and rise this April.

At the time of writing the Pound to Euro exchange rate is quoted at 1.1705.

The Pound to Dollar exchange rate is quoted at 1.2480.

Sterling caught its first tailwind of the week against the dollar thanks to data showing the fastest growth in three months for a sector of the U.K. economy that matters most.

Services growth unexpectedly accelerated in March which for now helped to allay worries of Brexit putting a brake on the economy.

Upside for the Pound could prove limited ahead of more big ticket U.K. numbers in the days ahead on trade, due Friday, and next week when inflation and unemployment print on Tuesday and Wednesday, respectively.

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FEBRUARY 25, 2017

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The Central Bank has found new muscle with the introduction of its new FX policy. The policy will see all banks receive a total of $20m weekly, to sell to the public at N375 /$1 thereby reducing the pressure on the parallel market.

CBN suffered the humiliation of not being able to respond to the dire demand for dollars in the country since late 2016 forcing the naira to spiral out of control.

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CBN introduced IMTOs and empowered them to distribute $15,000 per week which was later slashed to $8,000 per week per BDC. AbokiFX field agents confirmed that the $8,000 dollars a week they receive barely last 60 minutes.

abokiFX observed that the Central Bank, who had been pushed to the wall since the start of 2017  decided to fight back aggressively on all fronts by using a combination of spots, forwards, price discounts and media announcements by selling $41m spot rates, $600m forwards contracts at rates below the parallel market and announcing a new FX policy.

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abokiFX believes with a restored reserve approaching the $30bn threshold with further prospects of future growth, there is enough muscle to fight off any speculative demand in the market and ensure moderate liquidity is sustained on a weekly basis through multiple channels.

CBN has also called for back up from the banks to join the fight to strengthen the naira by instructing the banks to be located in BDC territories such as inside the airports, to provide liquidity penetration to customers. AbokiFX sees some conflict of interest occurring here initially but might be mitigated in the long run.

abokiFX research team will monitor closely what the impact of the new FX policy will have on the rates and liquidity volume in the peak seasons, as that would be the real test of the return of the Naira.

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FEBRUARY 24, 2017

TODAY'S MARKET OBSERVATION

abokiFX Research   24/02/2017

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• Market in chaos as rate fluctuation confuses traders.
• A lot of customers trying to sell but traders not buying at high rates anymore.
• Traders and customers weeping from loss in exchange rate.
• Traders are not able to sell existing stock at low rates as the loss would be catastophic.
• Traders willing to buy are buying limited volumes at discounted rates.
• Volume traded per individual is low compared to standard trading days.
• Customers trooping in to sell their stock are not impressed witht the rates. While some deal, others do not. The observed deals are light.
• The weekend could not have come at a better time for some traders as they try to grasp the reality of the CBN's New FX Policy.

Market observations compiled by abokiFX Research Team.

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FEBRUARY 24, 2017

Parallel market traders are turning customers away as they refuse to buy any foreign currency.

Those willing to buy off customers are offering low rates for the dollar and refusing to take on any large volume.

Traders are also reluctant to sell at low prices but those that have panicked are willing to offload low volumes as well at $460.

abokiFX  field agents believe that customers who usually source forex from the parallel market are now heading to the banks to take advantage of the reduced rates from the CBN.

abokiFX field agents have confirmed that RATES ARE UNSTABLE AT THE MOMENT AND ADVICE THAT TRADES SHOULD BE DONE OUT OF NECESSITY RATHER THAN PANIC.

FEBRUARY 18, 2017

BY ABOKIFX RESEARCH

• FOREIGN RESERVE RECOVERY NOT YET IMPACTING THE EXCHANGE RATE OF THE NAIRA AS NAIRA SPIRALS OUT OF CONTROL. 

• ABOKIFX RESEARCH TEAM BELIEVES THERE IS A POSSIBLITY THE CENTRAL BANK COULD DEFEND THE NAIRA ONCE A FOREIGN RESERVE THRESHOLD IS REACHED.

• CRUDE OIL PRODUCTION VOLUME IS AT 2 MILLION BARRELS A DAY WITH OIL PRICE STEADILY ABOVE $50 A BARREL. THIS EXPLAINS THE FAST RECOVERY OF THE RESERVE.

• abokiFX RESEARCH TEAM WILL WATCH FOR EARLY SIGNS OF CBN INTERVENTION IN THE FX MARKET AS THE CHART SHOWS WE COULD BE HEADING BACK IN THAT DIRECTION. HOW SOON THOUGH, WOULD DEPEND ON A RESERVE THRESHOLD GOOD ENOUGH TO TRIGGER AN INTERVENTION.. 

 

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FEBRUARY 01, 2017

Dr Samuel Nzekwe, finance expert, has urged the Central Bank of Nigeria to reduce the Monetary Policy Rate currently at 13 per cent in order to boost the economy.

Nzekwe, former President, Association of National Accountants of Nigeria (ANAN), told the News Agency of Nigeria (NAN) on Sunday in Ota, Ogun, that the higher MPR had eroded the purchasing power of most Nigerians.

NAN reports that the Monetary Policy Committee of CBN had at its two-day meeting in Abuja on Tuesday retained the MPR at 13 per cent.

According to him, the interest rate charged by the commercial banks was too high, making businesses difficult to do in the country.

“The Federal Government needs to create enabling environment by providing lower interest rate and address critical infrastructure deficiency for industries to thrive’’, the ex-ANAN boss said.

According to him, Nigeria is experiencing cost push inflation, the result of higher cost of production of goods and services.

Nzekwe said devaluation of the nation’s currency was a major factor that affected the high cost of production.

“Goods and services are available but people have no money to buy them because the recession made people to be worse off’’, he said.

He, therefore, advised the CBN to reduce interest rate so that investors could access cheap loans, reduced cost of production and create more employment.

This, he said, would boost the Gross Domestic Product and eradicate poverty level in the country.

JANUARY 30, 2017

By Jemima Kelly and Marc Jones | LONDON

Britain’s pound weakened on Monday, marking its first three-day fall against the dollar this year and putting it on the back foot ahead of Thursday’s first Bank of England meeting of 2017.

“Super Thursday” will see the central bank, which cut interest rates to a record low of 0.25 percent after the June referendum on EU membership, present its quarterly inflation report along with its decision on monetary policy.

Inflation has accelerated as sterling has shed 12 percent since the Brexit vote on a trade-weighted basis. This has led to market talk that the BoE may take a more hawkish tilt and even signal that it is moving closer to raising rates from their current record low of 0.25 percent.

A Reuters poll last week, however, found most economists expect the BoE to leave its rates and other stimulus measures unchanged at least until 2019. Even though it is likely to raise its growth forecasts, uncertainty over soon-to-start Brexit negotiations mean it will likely remain cautious.]

“(Bank of England Governor Mark) Carney will probably reiterate his line that there are limits to tolerance of above-target inflation,” said BNP Paribas currency strategist Sam Lynton-Brown.

“If that rhetoric occurs at the same time of potential upward revisions to growth forecasts and maybe even inflation forecasts, that will prompt the market to increase its pricing for the probability of a Bank of England rate hike by the end of this year.”

Sterling slipped off a five-week high of $1.2674 at the end of last week, and by 1545 GMT on Monday had fallen another 0.2 percent on the day to $1.2525, as worries over a travel plan implemented by U.S. President Donald Trump drove a risk-off mode across markets.

Against a broadly weaker euro, the pound inched up 0.1 percent to 85.13 pence, close to a four-week high.

Crédit Agricole FX Strategist Manuel Oliveri forecast sterling would struggle following a recent mini-rally, with Brexit uncertainty to remain the main driver and data also likely to weaken.

“We don’t think the (BoE) inflation report will be a big shock,” he said. “It may sound a bit more hawkish but it still remains cautious.”

“A lot more is needed to push the needle” for the bank to start considering a move in interest rates, he added.

The pound has fallen roughly 19 percent against the dollar since June’s Brexit vote, but for the last few months it has been in a relatively restrained range of between $1.20 and $1.28 and 84 pence and 88 pence per euro.

(Editing by Richard Lough)

JANUARY 28, 2017

* Yen moves higher after row over U.S. immigration order

* Moves put focus back on risks of Trump’s protectionism

* Weaker-than-expected U.S. GDP halted dollar gains on Friday

* Monetary policy in focus as BOJ, Fed and BoE meet this week (Adds German inflation data, updates prices)

By Patrick Graham

LONDON, Jan 30 The dollar dipped on Monday as investors sought the traditional security of the Japanese yen after new U.S. immigration curbs put the spotlight back on President Donald Trump’s protectionist bent and the risks it poses for the economy.

The dollar had begun to climb at the end of last week after its worst month in five, as expectations of higher inflation and tax cuts to spur growth under the new president pushed U.S. government bond yields higher.

That was halted by a combination of weaker-than-expected U.S. economic growth data on Friday and the uproar that followed Trump’s order restricting entry to the United States for travelers from seven Muslim-majority nations.

“Concerns on protectionism appear to be rising after President Trump’s executive order to restrict immigration,” said Adam Cole, head of G10 FX strategy with RBC in London.

After an Asian session becalmed by Chinese New Year holidays, the yen rose 0.4 percent to 114.58 yen per dollar in morning trade in Europe. The greenback was flat at $1.0695 per euro and marginally higher at $1.2537 against sterling.

The euro drew some support from a rise in European government bond yields to their highest in a year after regional data showed solid rises in annual German inflation. That came at the start of a week dominated by central bank meetings in the United States, Japan and Britain.

The bond market, however, also suggested euro investors were pricing in more risk from France’s presidential election in April after the selection of a more radical leftist candidate by the French Socialists at the weekend.

A stronger dollar was one of 2017’s big calls for many investment banks and asset managers at the end of last year but that faith has been undermined by worries about how U.S. trade and diplomacy will pan out under Trump’s presidency.

At the top of the list are concerns that the new administration may actively pursue a weaker dollar as part of efforts to change its trading relationship with China and others.

“The weak U.S. GDP is doing the dollar no favours. But it also takes courage to keep buying the dollar, considering what Trump has said about the kind of a currency policy he could pursue,” said Daisuke Karakama, market economist at Mizuho Bank in Tokyo.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Gareth Jones)

FEBRUARY 01, 2016

By Babajide Komolafe

THE naira appreciated in the forwards segment of the foreign exchange market indicating rising confidence buoyed by recent increases in the nation’s foreign reserves. ADVERTISING Meanwhile, prices of Nigeria’s Eurobond maintained downward trend for the third consecutive week due to persistent selling pressure. Naira appreciates in forwards market Data from the Financial Dealers Market Quote (FMDQ) show that the naira exchange rate for one month forward contracts dropped to N315.34 on Friday from N320.18 per dollar the previous week, indicating N4.84 or 1.5 percent appreciation for the naira. Highest appreciation Similarly, exchange rate for two months forward contracts dropped to N323.27 from N330.54 per dollar, indicating N7.27 or 2.20 per cent appreciation for the naira.

The naira also appreciated by N14.57 or 4.20 percent for three months forward contracts, as the exchange rate dropped to N331.53 from N346.1 per dollar. Naira The naira recorded its highest appreciation for six months forward contracts, appreciating by N29 or 7.67 per cent, as the exchange rate dropped to N323.27 from N378 per dollar. The naira also recorded marginal appreciation of 0.08 percent for spot transactions where the exchange rate edged down to N305.25 per dollar from N305.5 per dollar in the previous week.

According to analysts at Cowry Assets Management Limited, the naira appreciation in the forwards market suggests future stability in the foreign exchange market amidst rising foreign reserves. The nation’s foreign reserves have been an  upward trajectory since October 18th 2016 courtesy of increase in crude oil prices inspired by the production cut deal agreed by OPEC members. According to data by the Central Bank of Nigeria (CBN), the foreign reserves rose by $5 billion from $23.96 billion on October 18th 2016 to $28.9 billion on Tuesday January 24th 2017.

CBN defends forex policy CBN Governor, Mr. Godwin Emefiele however insisted that the apex bank would maintain its policy of selling 60 percent of available foreign exchange to manufacturers, and continued to intervene in the interbank foreign exchange market to moderate the exchange rate of the naira. Addressing the press on the outcome of the Monetary Policy Committee (MPC) meeting on Tuesday, Emefiele said: “I am happy to say that het reserve today is $28.9 billion. It is exciting to see this happen.   But is there a need to float the Naira?   It is important to note that we have to manage the reserve.    

That means from time to time we will intervene in the market to make sure the exchange rate does not go beyond our expectations   and those interventions will be to moderate the rates as necessary. “The fact that we have begun to see some accretions to the reserves does not mean we have to be reckless.   We will continue the policy of ensuring that foreign exchange is made available to those who are importing raw materials, plants and equipment, those supporting the agricultural sector and not those who want to engage in what I can regard as less important sectors.” Eurobond maintains downward trajectory On the other hand, prices of Nigeria’s Eurobond dropped for the third consecutive week, indicating investors may be dumping the bonds.

According to the closing prices and yields of Nigeria’s Eurobond posted by the Debt Management Office (DMO): The 10-year, 6.75 percent Jan 28, 2021 bond lost $.68 while the yield rose to 5.932 percent; the 5-year, 5.13 percent July 12, 2018 bonds lost $.32 while the yield rose to 3.67 per cent; the 10-year, 6.38 per cent July 12, 2023 also lost $0.77 while the yield rose to 6.59 per cent. CBN to sell N242bn treasury bills Meanwhile the CBN will this week sell treasury bills worth N242.4 billion in continuation of liquidity mop up operations.

The treasury bills comprise N45.18 billion worth of 91 day bills, N80 billion worth of 182 days bills, and N117.2 billion worth of 364 days bills. This of course is to moderate the liquidity effect of the inflow of N218.36 billion through payment for matured treasury bills this week. The matured treasury bills comprise N21.15 billion worth of 91 days bills, N80 billion worth of 182 days bills, N117.2 billion worth of 364 bills and N72.9 billion worth of 185 days bills. The combined effect of these developments is expected to moderate down cost of funds in the interbank money market. Last week cost of funds rose marginally despite inflow of N400 billion from statutory allocation funds.

The impact of the inflow was subdued by outflows through treasury bills and FGN bonds auction during the week. Although interest rate on Overnight borrowing dropped  to 5.5 per cent last week from 11.63 percent the previous week, the interest rate for I month, 3 month and 6 month borrowing rose respectively to 17.86 per cent  (from 17.73), 19.50 percent (from 19.12) and 23.14 percent (from 22.21). Seventh OTC FX Futures Contract matures, settles on FMDQ The 7th Naira-settled OTC FX Futures contract, NG/US JAN 25 2017, with amount $274.39 million, matured and settled on Wednesday, January 25, 2017 on FMDQ OTC Securities Exchange, bringing the total value of contracts so far matured on the OTC Exchange to circa $1.80 billion, and about $5.46 billion  worth of OTC FX Futures contracts traded so far.

Designated clearing agent The contract, which stopped trading on Tuesday, January 17, 2017, was valued against the Nigerian Inter-Bank Foreign Exchange Fixing (NIFEX) Spot rate as published by FMDQ on January 25, 2017, with the associated clearing/settlement effected by the FMDQ-designated clearing agent, the Nigeria Inter-Bank Settlement System PLC (NIBSS), in line with the FMDQ OTC FX Futures Market Operational Standards. Whilst businesses, corporates, and other market participants desirous of hedging their FX exposures continue to key into this product, it is expected that the potential of the OTC FX Futures market will be further maximised during the course of the year. The Central Bank of Nigeria (CBN) on the other hand, introduced a new contract, NGUS JAN 31 2018, for $1.00bn at $/N281.50 to replace the matured contract and also repriced its quotes on the existing one to 11-month contracts.