The value of cleared USD/Naira-Settled Non-Deliverable Forwards open contracts due this month on the FMDQ securities is over $1.30 billion.
In the latest FMDQ report published on that market segment on Tuesday, May 7, it was revealed.
The contracts are set to be settled on May 29.
Cleared Naira-Settled Non-Deliverable Forwards are contracts where parties agree to an exchange rate for a set date in the future, without the obligation to deliver the underlying US dollar on the maturity/settlement date.
At maturity, it is assumed that both parties have transacted at the Spot FX market rate.
According to the FMDQ, the cleared USD/NGN NDFs contracts are cash-settled in Naira, and the difference between the contract rate and the Nigerian Autonomous Foreign Exchange Fixing rate on the maturity day determines the settlement amount, i.e. the gain/loss in the contract.
The product, which can be used for hedging, was introduced in 2016, with the Central Bank of Nigeria as the pioneer seller of the Cleared USD/NGN NDFs contracts.
The apex bank currently offers amounts for different tenors, ranging from 13 months to 60 months to Authorised Dealers, who offer the same to customers with trade-backed transactions or trade the same with other Authorised Dealers; settling on bespoke maturity dates.
Meanwhile, the naira, which began the month of May on a strong note, has started to weaken against the dollar.
It closed at the official market, trading at N1,421.06 to the dollar.
The Nigerian Autonomous Foreign Exchange Market data indicated a loss of N4.49, representing a 0.31% decrease compared to the previous trading day’s rate of N1,416.57/dollar.
Despite the depreciation, the total daily turnover increased to $164.74 million on Wednesday, up from $160.77 million on Tuesday.
