NAN-H-94
Infrastructure
By Aisha Cole
Lagos, Feb. 22, 2017 (NAN) Some commercial lawyers have attributed inadequate infrastructure and lack of appropriate regulation as factors hindering the establishment of derivatives trading.
The lawyers spoke with the News Agency of Nigeria (NAN) on the sidelines of a two-day Nigerian Structured Products Summit titled: “Derivative and Other Financial Instruments“ organised by Capital Market Solicitors Association
(CMAS).
One of the lawyers, Kehinde Dauda, said once adequate infrastructure and appropriate regulation were provided, the capital market would open up for transactions.
Cue in audio 1 (Daudu)
“The major challenges we have regards infrastructure in place particularly regulations and deregulators to put things in place to be able to drive the process, these are the major challenges in it.
“The benefit is that it opens up the market, capital market is such a huge one.
“This is just an aspect of the capital market, you have futures, you have derivatives, and you have options and all that.
“Mostly what we see in Nigeria these days just mainly what we have with shares and morning market, this one we open up the markets.
“It will encourage inflow of foreign capital into the system which may ease what you have now as the challenges we have with the foreign exchange.’’
Cue out audio 1
He said that laws available could be interpreted to accommodate the challenges hindering the implementation of the derivative transaction.
Mr Francisco Khoza, the Head, Banking and Finance Department at Bowmans in Johannesburg, South Africa, said the establishment of derivatives transactions would assist the Nigerian Capital Market operators to evade risks.
Cue in audio 2 (Francisco)
“It will help Nigerian companies to hedge their risks entering into transaction now a day on foreign currency.
“Just making example, if a Nigerian company borrows money from London bank for just to pay in future, it can hedge his risk and make sure he is able to pay, that is what he will do.
“The challenges right now is about what we called netting, what happens if the Nigerian company goes insolvent.
“Can not be able to own up is obligation just a challenge the law is not structure in other to provide for and lenders are not comfortable to lend if that is not resolved.
“In a Nigerian company goes insolvent it will not be able to own its obligations and that is a problem.’’
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Another lawyer, Mr Vincent Anya, called for more enlightenment of the rules governing the derivatives transactions to attract more operators and bring huge benefit in the processing.
He said: “It will help the delays that are normally encountered in such transaction if it is implemented it will make it to be faster.
“Among the benefit is also it will make more people, there are some people that are not aware of such benefits that accrued from such transaction.
“So when there is more enlightenment on the part of the people it will create awareness and it will in turn bring about development and the investment.
“When people tend to invest more, it invariably uplift the economy, create jobs and add to the Gross Domestic Products,’’ Vincent said.
He, however, advised that CMAS should ensure firm implementation of the laws through the executive arm of government. (NAN)
AIC/ENN/YEE
Edited by Edwin Nwachukwu/Emmanuel Yashim
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