Advances, False Starts, and Outstanding Reform Imperatives in Nigerian Derivatives Law and Regulation

Abstract

Many developing countries are eager to leverage derivatives to enhance their financial markets and—by extension—their broader economic compacts. A clear legal and regulatory framework is integral to the establishment and vibrancy of any derivatives market. These being so, this study deconstructs the law and regulation of derivatives in Nigeria with the objective of generating a clear understanding of the extant regulatory framework, given recent attempts at reform. Chiefly, the objective is to determine the extent to which extant Nigerian law and regulation (a) engenders legal certainty and (b) accentuates transactional efficacy in the derivatives market. Mainly, this dissertation argues that the intended effects of recent derivatives reform will not be achieved under current terms, as contextual and substantive attention was not paid to the ontology of the domestic legal and financial system before the enactment of recently transplanted reform. Relatedly, it is contended that the transnational flow of reform into Nigerian law was/is defective. Consequently, much, it will be seen, has been lost in the reform process. Finally, it is argued that the appurtenant infrastructure surrounding the derivatives regulatory framework which is supposed to underpin associated functions in the derivatives market remains sub-optimally ordered.

This work produces three contributions to knowledge. Firstly, situating what is Nigerian derivatives law within the broader field of international financial law, it offers the first documented exploration of the derivatives regulatory scheme in this important developing country, where clarity has been hitherto limited at best (as is evidenced by the continued existence and persistence of fractures documented in this study). Secondly, it develops an analytical framework designed to enhance understanding as to how financial regulatory reform might be pursued in these kinds of jurisdictions (i.e., developing countries). This framework can be applied to other financial market segments (e.g., equities, commodities, or structured products) where reform might be in contemplation. Thirdly, building on comparative perspectives, this work offers points of reform, which, if implemented, will contribute to reordering the regulatory framework, invigorating the Nigerian derivatives market, and de-risking the broader financial system.