FMDQ Group Managing Director and Chief Executive Officer Zeal Akaraiwe has called on financial regulators to expand hedging products in Nigerian market structures while foreign exchange conditions remain stable.
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Speaking during an international investor dialogue hosted in Singapore by the Central Bank of Nigeria (CBN), J.P. Morgan, NGX Group, and FMDQ Group, Akaraiwe emphasized that stability must not lead to inertia. Consequently, he urged financial institutions to construct deeper risk-management tools—such as currency forwards, cross-currency swaps, and options—before unexpected volatility impacts the domestic economy.
Backstory: Building Financial Risk Resilience Before the Next Shock
To understand why this call for derivative market depth matters today, we must examine how Nigerian financial markets historically responded to economic shocks. In past macroeconomic cycles, sudden foreign exchange illiquidity and sharp currency devaluations caught domestic enterprises without adequate protection.
Although spot trading and government bond issuances historically dominated exchange volumes, lacking complex risk-mitigation tools exposed businesses to unhedged losses. Under CBN Governor Olayemi Cardoso, foreign exchange reserves expanded toward 18-year highs, stabilizing exchange rates near N1,330 per dollar. Nevertheless, market leaders insist that period stability offers the best window to deploy robust derivative instruments.
- 2023–2025: Volatility in foreign exchange availability exposed corporate balance sheets to currency translation risks.
- October 2026: Derivatives trading volume jumped 65.09% in a single week despite temporary contractions in total spot turnover.
- Singapore Dialogue: Nigerian market leaders meet global investors across Asia to present long-term capital market reforms.
Expanding Risk Management Tools to Strengthen Investor Confidence
Beyond introducing derivatives, Akaraiwe highlighted technology-driven exchange control monitoring, predictable capital exit pathways, and enhanced professional competency as key requirements for the next decade.
“A lot of times we make the mistake of confusing stability with being static. Stability does not mean static,” stated FMDQ Group CEO Zeal Akaraiwe during the executive session. “Nigeria is large, but what we need to aspire to at the next phase is depth. We do a very huge but limited amount of bonds and FX, but what next? How are we going to start introducing forwards, cross-currency swaps, and then at some point even options?”
In summary, advancing hedging products in Nigerian market operations transforms temporary exchange rate calm into long-term financial resilience. Building sophisticated derivative tools ensures businesses and global investors remain shielded during future economic cycles.
