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‘Derivatives are useful tool for hedging financial risks’

By Helen Oji
24 June 2022   |   3:56 am
The Chartered Institute of Stockbrokers (CIS) has stated that derivatives traded on the Exchange are essential in the market as they allow for market sophistication...

NGX Group building

The Chartered Institute of Stockbrokers (CIS) has stated that derivatives traded on the Exchange are essential in the market as they allow for market sophistication, transparent financial contracts as well as offer a useful risk management tool for implementing risk mitigation, or hedging strategies against financial risks.

President of the Institute, Oluwole Adeosun, said this while speaking at a virtual capacity-building workshop for Exchange Traded Derivatives stakeholders organised by the Nigerian Exchange Limited (NGX) and the CIS with the theme, ‘Exchange-Traded Derivatives: Enhancing the Capital Market for Robust Value Creation’.

Adeosun noted that the instruments also present an alternative investment acceptance useful for pursuing diversification and investment strategies.

Additionally, he mentioned that stockbrokers and securities traders have been undergoing a series of training on derivatives instruments and an adaption has been synchronized with the examination syllabus for securities traders and brokers.

In his opening remarks, the Chief Executive Officer, NGX, Temi Popoola, noted that the derivatives workshop is consistent with the shared aspiration of NGX and CIS to promote and protect the interests of the securities and investment profession by upholding the highest standards of service and integrity.

“Since 2017, the Exchange has been building the capacity of market stakeholders on derivatives, leveraging X-Academy, our learning and capacity development platform.

“We are pleased to collaborate with CIS in hosting this workshop aimed at facilitating a better understanding of how derivatives work, including how the contract is traded and settled on a day-to-day basis, the margining process, and risk management issues”, he said.

Meanwhile, trading on the equities sector of the NGX Limited closed on a positive note, as MTN Nigeria Communications (MTNN) and 17 stocks lifted index further by N130 billion.

In summary, the All-Share Index (ASI) grew by 241.52 absolute points, representing 0.47 per cent increase, to close at 51,618.73 points. Similarly, the overall market capitalisation value gained N130 billion to close at N27.828 trillion.

The market positive performance was driven by price appreciation in large and medium capitalised stocks which are; MTNN, FBN Holdings (FBNH), Union Bank of Nigeria (UBN), Ardova and Oando.

Analysts at GTI Securities Limited said: “Equities market closed positive yesterday, as investors’ continued bargain hunting on oversold stocks continues. We expect positive sentiment to continue in the domestic market.”
However, the market breadth closed negative as 22 stocks declined while 18 others appreciated in price. Conoil recorded the highest price gain of 9.97 per cent to close at N32.00 kobo.

FBNH followed with a gain 9.78 per cent to close at N10.10 kobo. FTN Cocoa processors gained 9.38 per cent to close at 35 kobo while Consolidated Hallmark Insurance increased by 8.06 per cent to close at 67 kobo.
Livestock Feeds also appreciated by 6.94 per cent to close at N1.54 kobo. Union Bank gained 6.19 per cent to close at N6.

On the other hand, Ellah Lakes Plc and Academy Press led the losers’ chart by 10 per cent each to close at N3.96 kobo and N1.17 kobo while E-Tranzact International and Presco followed with a decline of 9.84 per cent to close at N2.20 and N165.00 respectively. Meyer Plc shed 9.68 per cent to close at N2.52 kobo.
Meanwhile the total volume of trades declined slightly by 2.67 per cent to 223.245 million units, valued at N2.859 billion, and exchanged in 4,028 deals.

Transactions in the shares of Mutual Benefits Assurance topped the activity chart with 40.131 million shares valued at N10.032 million. Oando followed with 28.524 million shares worth N168.937 million, while FCMB Group traded 24.452 million shares valued at N85.567 million.

Access Holdings traded 24.099 million shares valued at N229.018 million, while FBNH transacted 12.359 million shares worth N121.766 million.