NIGERIA Law and Practice Contributed by: Fred Onuobia, Michelle Chikezie, Chima Uzochukwu-Obi and Anita Ebbi, G Elias
G Elias 6 Broad Street Lagos Nigeria Tel: +234 146 078 90 Email: gelias@gelias.com Web: www.gelias.com
1. General 1.1 Overview of Derivatives Markets
tion in Nigeria. Section 355 of the ISA 2025 empow - ers the SEC to make rules and regulations specifically directed at derivatives, including matters relating to derivatives markets and business, derivatives exchanges, market infrastructure, business operators, and trade associations. It also authorises the SEC to take measures aimed at preventing unfair derivatives trading practices. This legislative development affirms Nigeria’s commitment to deepening its derivatives framework in line with international best practices and is expected to guide the evolution of more compre - hensive regulatory interventions by the SEC across both exchange-traded and over-the-counter deriva - tives products. The ISA 2025 (s. 356 (3)) preserves all prior regulations and orders issued by the SEC prior to its enactment. The Central Bank of Nigeria (CBN) also plays a major role in the regulation of the Nigerian derivatives mar - ket, especially in relation to FX trades. In March 2011, the CBN introduced the Guidelines for FX Derivatives in the Nigerian Financial Markets (the “FX Derivatives Guidelines”), which set out the approved FX deriva - tives products that can be offered by authorised dealers (ie, banks authorised by the CBN to trade in FX) in the Nigerian financial markets. The CBN also released the Revised Guidelines for the Nigeria For - eign Exchange Market, 2024 (“Revised FX Guide - lines”), and Revised Guidelines for the Operation of the Nigerian Interbank Foreign Exchange Market 2016 (the “Interbank FX Market Guidelines”), which provide that – in addition to the approved hedging products provided under the CBN Guidelines for FX Derivatives and Modalities for CBN FX Forwards 2011 (the “FX Derivatives and Modalities for CBN FX Forwards Guidelines”) – authorised dealers are per - mitted to offer naira-settled non-deliverable OTC FX
The Nigerian derivatives market is nascent and not as developed as the derivatives markets of Europe and North America. However, in recent times, the Nige - rian market has received attention from leading global banks and mid-sized financial institutions from Europe and Asia. This has led to the structural growth and development of the market, products, regulations, and regulatory infrastructure. The Nigerian Securities and Exchange Commis - sion (SEC) performs a major role in the regulation of exchange-traded derivatives transactions in the Nige - rian financial market. The SEC Rules and Regulations 2013 (as amended) (the “SEC Rules”) contain provi - sions on derivatives transactions, including commodi - ties and futures trading. In 2019, the SEC published the Rules on Regulation of Derivatives Trading (the “Derivatives Trading Rules”). The Derivatives Trading Rules provide for rules to regulate derivatives trading on an exchange, including registration requirements for derivatives contracts and market participants. The Derivative Trading Rules will apply to OTC derivatives trade when specifically mentioned in the relevant derivative contract. The SEC also introduced the Rules on Regulation of Derivatives and Central Counterparties 2019 (the “CCP Rules”) in 2019, which – among other things – outlines the requirements for registration as a central counterparty (CCP). Most recently, the enactment of the Investments and Securities Act, 2025 (“ISA 2025”) has further strength - ened the statutory foundation for derivatives regula -
56 CHAMBERS.COM
Powered by FlippingBook