The Central Bank of Nigeria (CBN) reduced its spending on transactions involving naira-settled over-the-counter (OTC) foreign exchange futures by 91.5 percent in 2025, saving about N11.61 billion as activity in the market continued to decline. According to the CBN’s 2025 Annual Report, the bank’s OTC FX futures transaction fee expense fell sharply to N1.08 billion in 2025, from N12.69 billion recorded in 2024.

The N11.61 billion reduction reflects the CBN’s decision to scale back its direct participation in the naira-settled non-deliverable forwards (NDF) market, which had been an important tool for managing foreign exchange risks. The CBN began offering naira-settled OTC FX futures in 2016 through the FMDQ platform.

The contracts enabled importers, investors and companies to hedge against movements in the naira exchange rate. However, the CBN stopped quoting offer rates for all cleared naira-settled NDF contracts in September 2023 as part of reforms aimed at allowing the exchange rate to be increasingly determined by market forces. Since then, activity on the market has fallen significantly. Data from FMDQ showed that no new long-dated 60-month contracts were introduced after August 2024, while there were no trades in cleared USD/NGN NDF contracts throughout 2024 and into the first four months of 2025.

The value of open cleared NDF contracts also dropped by 98.81 percent year-on-year to just $2 million as of July 2025. By December 29, 2025, the total value of open contracts across the NDF curve had fallen further to about $1.55 million. The decline in transactions means the CBN now has significantly fewer trading and clearing fees to pay, resulting in substantial savings for the apex bank.

The development, however, has implications for FMDQ, which had benefited significantly from the CBN’s participation in the OTC FX futures market. FMDQ operates the infrastructure through which the contracts are traded and cleared, with transaction and other related fees paid by market participants, including the CBN.

The CBN was previously a major source of revenue for FMDQ from the FX futures market. Earlier analysis of FMDQ’s financial statements showed that the exchange earned N20.82 billion in futures and margin management fees from the CBN in 2020, compared with N11.17 billion in 2019. At the time, the CBN accounted for about 67 percent of FMDQ Group’s N31 billion revenue in 2020, highlighting the importance of the apex bank’s activities to the exchange.

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The sharp fall in CBN’s OTC FX futures expenses therefore suggests a major reduction in recurring revenue from that particular business for FMDQ. However, FMDQ appears to have offset much of the impact through increased activity in the spot foreign exchange market. FMDQ Group’s 2024 results showed that revenue rose 49.9 percent to N51.41 billion, while profit before tax increased 65.5 percent to N23.23 billion.

The FX segment accounted for 45 percent of total market turnover, driven largely by a 283 percent year-on-year increase in spot FX activity. Thus, while the CBN’s retreat from the OTC FX futures market has significantly reduced its transaction costs, it has also changed the revenue structure of FMDQ, shifting growth away from CBN-backed derivatives towards the broader spot FX market.