Nigeria Content Online

Nigeria’s
quest to make the naira an international currency may become a reality
after all, albeit the move is coming from another country.

Mauritius-based
Global Board of Trade Limited (GBOT) has said in the next six months,
it would start trading the naira alongside other African currencies on
its currency futures exchange. GBOT will offer commodity as well as
currency derivatives products.

A
currency future is a futures contract to exchange one currency for
another at a specified date in the future at a price (exchange rate)
that is fixed on the purchase date. Typically, one of the currencies is
the US dollar.

The
GBOT, which started operations on Monday, October 18, will offer a
platform for Africa’s commodity and currency derivatives landscape,
thereby helping to tie up future sale contracts for exporters and
importers, guaranteeing prices several months before production or
actual delivery.

The
GBOT’s managing director and chief executive officer, Joseph Bosco,
told Reuters recently that the exchange would start with 12 brokers,
and would also be looking at opportunities in Nigeria, Uganda,
Tanzania, and Egypt.

Currency offerings

“GBOT
is already offering futures contracts on the African currency pairs
USD/MUR (US dollar/Mauritian rupee) and ZAR/USD (South African
rand/US dollar). In the next phase, we plan to trade futures on
other African currencies on our Exchange,” Mr. Bosco said.

This
is the first time worldwide that two African currency futures will be
traded. He noted a marked interest from banks and from industry in
several countries on the continent for hedging on their currency’s
fluctuations.

The
naira has been fluctuating in recent weeks, dropping from about N147 to
the dollar at the beginning of the year to around N149/N150. At the
interbank market, the naira is trading at around N152 to the dollar.
This movement is due to the anticipation of either a possible
devaluation or uncertainties on political transition, thereby
increasing the activities of currency speculators.

“For
launching new African currencies on GBOT, we would first discuss the
matter with the Central Bank of the relevant countries and then take it
forward,” Mr. Bosco said through an email sent by Michel Gilbert
Deville, GBOT’s head of corporate communications.

‘We are not aware’

The
Central Bank of Nigeria (CBN) feigned ignorance of the development. “We
are not aware of anything like that,” said Mohammed Abdullahi, CBN
spokesperson.

Asked
about how disposed the Central Bank would be to such a venture by
another African country that would boost the reputation of the naira,
Mr. Abdullahi retorted, “I am not aware of anything like that. That is
the only thing I will tell you.”

However,
Lamido Sanusi, the CBN governor, said recently that the Central Bank
would consider introducing products that would discourage currency
speculation.

“Part
of what we are trying to do in the Central Bank is introduce a forward
market so that people can hedge that risk and then don’t feel any urge
to pre-liquidate outstanding dollar exposure,” Mr. Sanusi told Reuters
recently.

He
said there were indications that some people might be frontloading some
of their dollar obligations, resulting in the huge demand for foreign
exchange, a situation that would be ameliorated by a currency futures
market.