Nigeria’s quest for more robust financial market operations as well as faster economic growth and development received a boost today with the official launch of the Financial Markets Dealers Quotations (FMDQ) OTC PLC at the Shell Nigeria Hall, Muson Center, Onikan, Lagos.

The event was graced by a galaxy of banking industry chiefs, among them Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi, who delivered the keynote address.

The CBN Governor described the formal birth of FMDQ OTC as important and “meant to chart a course for the further deepening of Nigeria’s financial markets and supporting the Nigerian economy for growth and development.”

He described the FMDQ OTC, formed with the active support of CBN but a baby of the Financial Markets Dealers Association (FMDA), a professional body for banks, discount houses and other relevant financial institutions, as a development that that would foster financial markets development in the country and complement the efforts of government and regulatory authorities. The launch of the FMDQ platform, according to him, “is therefore consistent with other reform initiatives that CBN has initiated to develop Nigeria’s financial markets.”

Highlighting the relevance of the new platform, the CBN Governor said: “The importance of the launch of the FMDQ OTC is anchored on the complementary role of bringing the activities of financial securities transactions outside of the official window under the regulatory purview. The activities of the FMDQ is expected to complement existing securities exchanges and provide the governments, issuers and investors, both globally and domestically with world class market governance for capital transfers. FMDQ will provide a centralised governing and information disseminating platform where the interest of operators and investors can integrate.

“This is expected to bring about increased liquidity in the instruments of unlisted securities, increased attraction and flow of resources to small and medium-sized enterprises, price discovery and enhanced financial inclusion potentials, amongst others. All these would ultimately lead to a vibrant private sector development and increased contribution to economic activities.”

The primary focus of the FMDQ over-the-counter transactions is on inter-bank markets for funds intermediation, foreign exchange dealings, repurchase transactions and government securities (treasury bills and bonds). “I expect that, in the very near future, other instruments would be riding on the back of the achievements that would have been recorded from this undertaking today,” Sanusi said. He explained that the formation of FMDQ became imperative due to developments in the global financial markets.

Sanusi used to opportunity to highlight the vision of the CBN and what it is doing to actualise it. “Our vision,” he said, “is to become the model central bank, and as the lead agency driving the implementation of FSS 2020, the CBN is keen to see that the strategic objectives are achieved. Of immediate relevance is the objective that relates to the strengthening and deepening of the domestic financial markets – money, bond, currency and derivatives.”

He disclosed that “in order to improve on the governance of money market operations, the CBN executed the Nigerian Master Repo Agreement (NMRA) – an adaptation of Global Master Repo Agreement (GMRA) with banks and discount houses accessing funds at its repo window,” adding: “This has motivated the banks and discount houses to adopt the same standards in their inter-bank operations. The inter-bank interest rate benchmark (NIBOR) definitely remains an area for development. FMDQ is expected to look at this in light of IOSCO’s standards on benchmarks.”

The CBN Governor also set the agenda for the FMDQ, saying that it “should also look at the revival of the Commercial Paper market and its regulation.” According to him, “With FMDQ, a fixed income securities exchange, the registration process is expected to be established to kick-start this segment of the money market which is useful in promoting the culture of companies in the issuance of instruments and securities.”

Sanusi made it clear that “the FGN bond market must remain liquid and effective to establish a credible risk-free yield curve. Corporate debts should be priced on the back of this curve and such credible price information is key for institutional investors’ efforts in striking the right balance between risk and return.”

He disclosed that CBN has huge expectations of the FMDQ to further restructure and give depth to the country’s financial markets.

Sanusi noted that “the listings and trading of money market instruments and bonds on the same platform presents opportunities for the much desired integration of money and capital markets.” He said that “to achieve this, it is imperative that domestic markets should become more transparent, liquid and efficient. It is also expected that the activities of FMDQ’s will enable the determination of fair values for other off-the-run securities, as well as those securities which hitherto were infrequently traded.”

The CBN Governor assured that the apex bank “will continue to collaborate with FMDQ on strategic initiatives that will support global competitiveness, Operational excellence, Liquidity and Diversity (GOLD) of the market. We are also keen to see that FMDQ upholds the highest standards of market governance.”

He further assured that the CBN would always be prepared to support developmental initiatives that are beneficial to monetary policy objectives and the good of the national economy and its operating agents – the households, intermediaries and firms.

“I would like to use this opportunity to implore the FMDQ to uphold its commitment to ensure that its operations are continuous and transparent to ensure the flow of liquidity; as well as ensure that appropriate risk management measures and systems are put in place,” Sanusi said. “It should also provide acceptable conditions for the admission of other securities such as commercial papers, banker’s acceptances, negotiable certificates of deposits, etc., and, foster adherence to rules and regulations by participants at all times in order to maintain and sustain market integrity and confidence,” he added.

•Photo (L-R) showsAigboje Aig-Imoukhuede, MD/CEO of Access Bank and Chairman of Financial Markets Dealers Quotations (FMDQ) OTC Plc; Arunma Oteh, DG, Securities and Exchange Commission; Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria; Bola Onadele Koko, MD/CEO, FMDQ OTC; and Oscar Onyema, DG, Nigerian Stock Exchange at the launch of the FMDQ OTC Plc . . . today in Lagos.

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