More firms tap futures contracts as naira dips further against dollar

The value of FX futures contracts traded this week between banks and their clients jumped more than eightfold as the naira extended its decline against the dollar, data from FMDQ Group, a securities exchange, show.

FX futures contracts worth $367.25 million were traded in 31 deals, representing an increase of 738.47 percent when compared to the $43.80 million futures contracts traded in 13 deals, according to the data.

“For the week-ended May 12, 2023, the average Nigerian Autonomous Foreign Exchange Fixing rate was $/₦463.34, compared to $/₦462.70 recorded in the week-ended May 5, 2023, representing a depreciation of the naira against the United States dollar by 0.14 percent,” FMDQ said in a report on Saturday.

It said the total turnover in the FX spot and derivatives markets rose by 182.20 percent to $1.07 billion from $378.89 million last week.

The upturn was attributed to the 111.78 percent ($367.24 million) and 641.58 percent ($323.10 million) increases in FX spot turnover and FX derivatives turnover, respectively.

FMDQ said the increase in FX derivatives turnover was driven by increase in FX futures turnover, which offset the 5.34 percent, $0.35 million, decrease in FX forwards turnover.

“In the FX spot market, the total value of transactions for the week-ended May 12, 2023, was $695.77 million, representing an increase of 111.78 percent ($367.24 million) from the value of transactions executed in the week-ended May 5, 2023 ($328.53 million),” it added.

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