How derivatives market can attract capital inflows to NGX

The Nigerian Exchange Limited is preparing for the launch of Exchange Traded Derivatives in Nigeria, a move expected to have a significant impact on the country's capital market. Jude Chiemeka, the Divisional Head, Trading Business at NGX Limited, recently discussed the importance of a well-developed derivatives market and how it can support economic growth. In an interview with CNBC Africa, Chiemeka highlighted the role of data in market dynamics, emphasizing its critical role in price formation and decision-making for investors. Market data provides essential insights for investors, helping them analyze trends and historical performance to make informed decisions. Moreover, as the derivatives market gains traction, it is expected to deepen market participation, enhance price discovery, and improve market completeness. Chiemeka explained that while the current market mainly relies on cash transactions, derivatives will allow investors to express their market views without committing all capital, leading to increased market efficiency and adherence to international standards. He emphasized that the timing of the launch is strategic, following years of regulatory and technological preparation to ensure a seamless introduction of the product. With approval in place and necessary infrastructure ready, NGX is gearing up to roll out the index futures as the first phase, with plans to introduce other derivative products in response to market demand and investor feedback. In terms of investor awareness and education, NGX has been actively promoting capacity building and knowledge sharing to help market participants understand and leverage the new product effectively. By providing educational resources and specialized training, NGX aims to empower investors to optimize their portfolios and capitalize on market opportunities. The future of the Nigerian capital market looks promising with the introduction of Exchange Traded Derivatives, poised to revolutionize market dynamics and attract capital inflows. As investors embrace these new opportunities, the market is expected to witness increased depth, liquidity, and efficiency, aligning with global best practices and driving economic growth.