(Reuters) On April 21, 2017, the Central Bank of Nigeria (CBN), announced what some refer to as a necessary dawn for the West African economic giant. The CBN announced a unique foreign exchange (FX) window for Investors and Exporters Trading (known as the I & E window), which after one year has had a successful turnover of $45 billion. This move is seen as part of the CBN’s continuing effort to deepen the country’s FX market and reduce the demand for hard currency. Importantly, it is also seen as part of the country’s efforts to prompt foreign investors to return to the country.
Thomson Reuters has been invested in Nigeria for over 100 years, and has experienced the development, highs and lows of the markets over the years. In 2012, foreign investors’ appetite for Nigerian bonds was thriving, execution was timely and the country’s FX market held liquidity and eligible transactions. Since 2014, a combination of factors from Nigeria being removed from the JPMorgan Government Bond index, trading restrictions and economic slowdown, have resulted in a challenging environment for investors and traders, and lower liquidity and transparency in the market.
The establishment, and resultant success of the I & E window over this period has fuelled hopes of a readmission into the J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM). Key to making a mechanism like the I&E window successful, and reigniting global investor demand for Nigeria, are partnerships across multiple market participants, from the regulator to market associations, exchanges and commercial banks to data and technology platform providers that can showcase the Nigerian opportunity to the world.
Thomson Reuters, as a key partner in this effort, believes in the power of connecting global markets, and in the importance of local relevance. As a leading global distributor of financial market data from both proprietary and third party sources, Thomson Reuters has worked closely with CBN, FMDQ, several banks and others, to develop many applications to support the development of the market over the years.
Most recently, Thomson Reuters has launched the FMDQ OTC app as part of its award winning Eikon financial data platform, an app that could serve as a central hub for all strategic FMDQ OTC reference data in the Nigerian financial market. Specific pages have also been created within the Thomson Reuters Eikon platform, including a composite page (NGNIE=), for the Nigerian Market to accommodate real-time market data and pricing on the NGN I & E window from local market participants.
Thomson Reuters and other providers continue to partner with the Central Bank of Nigeria (CBN) to support the APEX banks mandate to promote transparency and best practice in Nigeria’s FX financial markets. As a result of this collaboration and contribution, the Nigerian FX market has seen increased efficiency and activity. In addition to partnerships, inclusivity of the market as a whole should also be encouraged as a catalyst to increasing the country’s global recognition, reputation and position. New entrants bring dynamism and diversity to the market that will increase its attractiveness and competitiveness globally.
Nigeria currently ranks in 6th place on Africa Financial Market’s Index with a potential to move up the ranks and even overtake South Africa’s 1st place ranking if the current focus on increasing market depth, improving access to foreign exchange, market transparency and regulations continues. The capacity of local investors, macroeconomic opportunity and enforceability of international financial agreements are equally paramount.
As Nigeria seeks to drive economic growth, and strives to play a much larger role in the global economy, a sustainable, automated platform catering for all market players is no longer a luxury but a necessity, and it is exciting to see that regulators, market participants and investors and technology platform providers are working together to make this happen.