RIMA engages FMDQ on risks, development of derivative market

Risk Management Association of Nigeria (RIMAN) has collaborated with the FMDQ OTC Securities Exchange in sensitising members on the development of a robust derivative market and the inherent risks.

Derivative according to Allan Ralph Thomson, managing director/CEO, Dreadnought Capital, is a financial instrument that derives its value from underlying asset.

He further explained that derivatives, which also is Futures, Forward, or Swaps, is a bilateral agreement between the buyer and the seller whose respective values are derived from the value of an underlying asset.

The Naira-settled OTC FX Futures product was introduced in 2016, with the Central Bank of Nigeria as the pioneer seller of the OTC FX Futures contracts.

Magnus Nnoka president of RIMAN said the Association is advancing in the effort to extend risk management education to all sectors of the economy and African Countries, with the recent establishment of RIMAN Risk Management Institute.

Speaking at RIMAN’s quarterly risk round table programme themed ‘Derivative Risks: The Role of FMDQ in the Development of the Derivatives Market in Nigeria’, Jumoke Olaniyan, Vice President, market architecture, FMDQ, said the total asset of the top 10 banks stood at N36.5 trillion last year and that the percentage in product – instrument that are impacted by market rate include 70 percent in treasury bills, 24 percent in bonds and 4.75 percent in equity.

She noted that part of what the FMDQ has done in derivatives market was to carry out a feasibility study where it discovered that there is no netting law, no law that protected market transactions.

Olaniyan noted that the FMDQ among others established the Central Counter Party (CCP) system to be able to clear all types of derivatives.

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Olaniyan was pleased at the progress of the review of the Companies and Allied Matters Act (CAMA), noting a well-crafted legal and regulatory framework for any market globally. “What was critical for us in Nigeria was we didn’t have what we call a netting law and so our financial transactions were subject to the bankruptcy laws of Nigeria”

“We didn’t have a law that protected financial market transactions and so what we have done in FMDQ is, along with the president and other stakeholders in the market we conducted a review of the CAMA which didn’t have bankruptcy remoteness law in it.

“We were able to infuse the netting law into the CAMA amendment bill which we were so excited to hear, it has passed through the house and the senate. The senate passed it mid-last year and the house passed it January this year, so, we are literally 80 per cent there, and we are just waiting for the president to sign the law and that literally puts us on the international market”.

In her welcome address, Kaodi Ugoji, associate executive director, corporate development, FMDQ, commended the association of risk managers for its role in creating risk management advocacy and awareness in Nigeria.

She noted that over the years, RIMAN has achieved greatness in promoting best practice risk management in Nigeria.

HOPE MOSES-ASHIKE

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.