Regulatory Alerts2011-03-22 | FMD\FED\CIR\GEN\01\084\11Guidelines for Foreign Exchange Derivatives in the Nigerian Financial Markets
The Central Bank of Nigeria (CBN) has introduced new guidelines for foreign exchange (FX) derivatives trading and risk management to improve the efficiency, transparency, and liquidity of the FX market. These guidelines allow outright FX transactions, non-deliverable forwards (NDFs), and trade-backed hedging requirements while extending the maximum tenor allowed for FX forwards and swaps to five years. The CBN will also support Authorized Dealers with trading liquidity in Cross-Currency Interest Rate Swaps (CCIRS) provided that these are project-backed. The guidelines stipulate trade-backed requirements, accounting and market valuation methodologies, financial statements, and returns submission, among other provisions. These measures aim to promote risk management support for end-users, enhance competition in the pricing of hedging products, and boost trading liquidity in the FX derivatives market.