The two leading West African economies Nigeria and Ghana are preparing to launch their derivatives markets, eight months after Kenya opened its derivatives exchange.
The countries aim to increase liquidity in their markets through derivatives trading. Additionally, the derivatives will also allow investors to hedge against volatility risk.
At the moment there are only two derivatives markets in SubSahara Africa; the Johannesburg Derivatives Market and the Nairobi Derivatives Market.
At the Nairobi Exchange, five stocks futures and two index futures are traded. The derivatives exchange intends to introduce more products such as options and swaps as the market develops.
A proper regulatory framework and extensive investor education is necessary for derivatives markets to succeed in the continent.
According to Jude Chiemeka, the Head of Trading Business at the Nigeria Stock Exchange, they have conducted sufficient training on market participants and they are ready to start the derivatives trading.