Salonica was part of a consortium mandated by the client to produce a feasibility study on the introduction of Derivatives to Nigeria, with an associated Implementation Plan if we felt the project was feasible.
This involved extensive stakeholder engagement and a deep understanding of both local practise and international best practise. was part of a consortium that was engaged by the regulatory authorities and stock exchange to develop a roadmap for the implementation of derivatives to the Nigerian Capital Markets.
We were required to produce a variety of deliverables including:
- An initial Feasibility study
- Technical study
- Financial model and feasibility of the project
- Advising on optimal pre and post trading mechanisms including clearing
- Advising on Target Operating Model (ongoing)
- Development of Product Suite (initially FX and then Interest Rate derivatives)
- Implementation proposal
We engaged all stakeholders, including the apex regulators, the Central Bank, local banks, international banks, asset managers, pension funds and corporates. This was to understand the current state of preparedness of the market, as well as the market requirements.
We found that the current level of infrastructure was irregular, in that the international banks had better readiness to onboard derivatives, while the local institutions were far less ready. This meant that we had work with the Exchange to develop capacity of market participants.
After developing a technical and legal framework , we worked with the Exchange to implement the proposal over a specific time period, which eventually led to the introduction of an Exchange traded FX Future product, which was able to assuage market demands to hedge FX risks.