Foreign Exchange Derivatives in Emerging Economies: Evidence from Nigerian Financial Services Industry
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Developments in recent years have evidenced remarkable use of financial derivatives. However, this trend has not been attained by most developing economies. Consequently, the emanating questions are to what extent is the development of financial derivatives market in these countries? and; what factors influence the use of the instruments as risk management tools? To provide answers to these questions, this study has chosen companies quoted on the Nigerian Stock Exchange (NSE) as a reference point. To ensure objectivity, a structured approach directed towards key finance executives of the underlying companies. Input were sought in order to provide clarity to the most significant variables determining the development of derivatives market in Nigeria. Results showed using multivariate analysis and logistics regression that the use of derivative instruments in Nigerian financial services is significantly low and relevant factors affecting its development are notion of risk and financial benefits. The conclusion of the study advocated that regulatory authorities should provide appropriate framework to promote use of derivatives. Market agents should also engage in appropriate pattern of behaviour to support use of derivatives. It also provides suggestions for future research on derivatives as most adequate mechanisms for market development purposes.
Financial Derivatives , Risk Management , Developing Economies , Regulatory Authorities
Tijani, O.M and Ajape, K.M (2013) Foreign Exchange Derivatives in Emerging Economies: Evidence from Nigerian Financial Services Industry. Journal of African Macroeconomic Review, Vol. 3(1).