NIGERIA Law and Practice Contributed by: Fred Onuobia, Michelle Chikezie, Chima Uzochukwu-Obi and Anita Ebbi, G Elias
As mentioned in 2.2 Swaps and Security-Based Swaps , the Derivatives Trading Rules (paragraph 15) also require all participants (dealing members or enti - ties performing clearing services) and other registered capital market operators to report all OTC derivatives transactions to a trade repository or an exchange (as the case may be) in accordance with guidelines to be issued by the SEC from time to time. Additional requirements may apply where an exchange such as FMDQ is engaged as a CCP for the OTC derivatives contract or where the OTC contract is standardised and traded on the exchange. 2.5 Asset Classes The most common assets that underlie derivatives products in Nigeria are securities (primarily stocks, government bonds, treasury bills and open mar - ket operation (OMO) bills), currency exchange rate, interest rates, and commodities (such as paddy rice, crude oil, wheat, cotton and maize). Notably, the FX Derivatives Guidelines recognise FX options, forwards (outright and non-deliverable), FX swaps and cross- currency interest rate swaps as approved hedging products for authorised dealers. There are no outright restrictions on asset classes on which derivatives products can be based. In principle, parties to an OTC derivatives contract can base the derivatives product on any asset class and the con - tract will be valid. This is because Nigerian law and courts will enforce an agreement voluntarily entered into by parties, subject to unlawfulness, public policy considerations or other vitiating concerns. As regards exchange-traded derivatives, however, even though there is no outright prohibition or restriction on any asset class, the SEC reserves the right to approve every exchange-traded derivatives contract before that contract is introduced on an exchange. As a result, the SEC can exercise this discretion in favour of or against the approval of a derivatives product based on a particular asset class. The ISA 2025 now mandates the SEC to register derivative products and regulate the derivatives market. As mentioned in 1.1 Overview of Derivatives Mar- kets , the Nigerian derivatives market is still nascent. Unconventional or innovative futures products such
as cryptocurrency futures have not yet been intro - duced into the market even though the existing legal framework contemplates such innovative products. The asset classes underlying derivatives products in the Nigerian market are fairly conventional. In terms of liquidity, the limited offerings in the Nige - rian derivatives markets make it difficult to properly estimate liquidity across all asset classes. However, most liquidity can be seen in the currency asset class, with the recent rise in the use of currency swaps and FX forwards by Nigerian companies to hedge against the falling value of the naira. As referenced earlier, the FMDQ reported a total turnover in its FX derivatives segment of about NGN2.85 trillion (approximately USD1.8 billion) in May 2025. 2.6 Exemptions, Non-Derivative Products and Spot Transactions There are no derivatives products that are exempt from regulation in Nigeria. The ISA 2025 gives the SEC power to regulate the Nigerian derivatives market. As mentioned in 2.2 Swaps and Security-Based Swaps , while the regulatory framework for OTC derivatives products is not as robust as that for exchange-traded derivatives, the Derivatives Trading Rules still require that standardised OTC derivatives contracts be trad - ed on an exchange and require market participants to report all OTC derivatives transactions to a trade repository or an exchange (as the case may be) in accordance with guidelines to be issued by the SEC from time to time. There are more extensive regula - tions applicable to exchange-traded derivatives con - tracts, including a requirement that every such con - tract must be approved by the SEC. Spot commodities transactions are regulated in accordance with the regulations put in place by the relevant exchange or self-regulatory organisation that acts as a CCP in such transactions – for example, the Nigeria Commodity Exchange, AFEX, or LCFE. Such regulations are made in accordance with applicable laws regulating commodities trading, which are gener - ally non-discriminatory with regard to spot commodi - ties trading. FX trading in Nigeria is regulated by the FEMMPA, the Forex Manual and the Revised FX Guidelines. The
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