Manufacturers key into FX futures as market records $294.6m turnover

*Exchange rate.

*Exchange rate.

08 August 2016, Lagos — In order to optimally manage and plan their foreign exchange (FX) requirements and transactions more easily, manufacturers in the country have started taking advantage of the over-the-counter (OTC) FX Futures market.

This is just as the Managing Director/CEO of FMDQ, Mr. Bola “Koko” Onadele, said yesterday that the turnover on the futures market last week (Aug. 1-5) stood at $294.63 million, with a high of $139.55 million for the June 21, 2017, contract.

Also providing details on liquidity on the spot market since trading started under the new rules last June, he said the market recorded a turnover of $761 million for the week ending July 29 and an average daily turnover of $152.38 million; $1.184 billion for the week ending July 22 and posted an average daily turnover of $236.98 million; $505 million for the week ending July 15, with an average daily turnover of $100.98; $157 million for the week ending July 8 and an average daily turnover of $78.32 million; $1.027 billion for the week ending July 1and an average daily turnover of $205.45 million; and $2.226 billion for the week ending June 24 and an average daily turnover of $445.17.

Onadele explained that the previous numbers reported were not representative of market activities, as they were only the confirmed trades on the system.

“Dealing members have not started trading with their clients on the FMDQ system. The only way to obtain the total market turnover figure now is to rely on the numbers they report to FMDQ. We have now obtained these figures as shown above,” he explained.

Onadele noted that the figures provided to THISDAY were more comprehensive, as they were reflective of what the dealing members executed in total with their clients.

“From next week, we shall also have what the dealing members are trading amongst themselves. This is also an indicator of market liquidity,” he added.
Meanwhile, returns on FX utilisation from FirstBank Nigeria Limited as of July 20, showed that two firms operating in the manufacturing sector opted for futures contracts with the bank to the tune of $28,238,273.32 for the importation of raw materials.

Also, FirstBank and Standard Bank traded in another futures contract for $5 million.

A breakdown of this showed that while De United Foods Industries Limited bid for $21,374,273.32 with FirstBank Nigeria, the bank also had a $6,864,000 transaction for the same firm.

A futures contract allows parties to hedge against price fluctuations and always includes a future expiration date and a specific quality and quantity of the underlying security.

FirstBank’s returns also showed that it sold dollars to 196 customers. For Stanbic IBTC, its returns for the week under review showed that it sold dollars to 264 customers. Of this, 35 of the customers were foreign portfolio investors.
Stanbic IBTC’s major customers during the week were Eleme Petrochemicals Limited – $1,067,222; Shorelink Oil and Gas Limited -$1,416,032; Diamond Bank – $1.5 million; FirstBank – $2 million; and Gruppo Investment Limited – $5,649,303.

Similarly, First City Monument Bank Limited sold the greenback to 446 customers, both corporate and individual. Most of the bank’s customers purchased dollars for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA).

On its part, Fidelity Bank Plc, which sold the dollars it bought from autonomous market sources to 177 customers, sold $2 million to Ecobank Nigeria and United Bank for Africa Plc (UBA) as its biggest customers during the week under review.

Its other customers also bought the greenback mostly for the importation of industrial raw materials, payment of school fees and PTA.

For Diamond Bank Plc, it sold $11,125,008.07 to 499 customers. Its biggest customers were Ikorodu Steel Mills – $2,083,897, and Parco Enterprises – $2,098,583. It also had customers that bought the greenback for PTA, industrial raw materials and for school fees.

Skye Bank Plc also sold $5,144,946.40 to its customers for the payment of school fees, funding of its Skye MasterCard obligations, industrial raw materials and importation of spare parts.

One of the merchant banks, Coronation Merchant Bank also sold $4,981,989.67 to 26 customers.
*Obinna Chima – Thisday

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