Financial Derivatives: Taking The Road Less Travelled
Once, at the MM international airport, Lagos – Nigeria, I encountered an official of National Drug Law Enforcement Agency (NDLEA) who wanted to know the source of my income. I respectfully told him that I trade derivatives.
The man became confused and exclaimed derive… what? I said derivatives. “What the hell do you mean by that” he asked?
Derivative is a financial instrument that its value is based on an underlying asset, such as shares, bonds, currencies, commodities, interest rates, etc. They are used to speculate the market and to hedge against risk.
At this point the ‘officer’ called one of his subordinates; “detain this man until he is ready to say what he does for a living. Let him know that we are here to fight money laundry, which is an aspect of president Buhari’s war on corruption.
Now, the table has turned and suddenly I am the one who has become confused. I wondered why an airport in Lagos, which is a financial centre, cannot boast of ‘officers’ with average knowledge of world’s main financial instruments.
I know to some people this will sound like a tall order, but indeed it is a reality check. The financial world is moving so fast that any country that fails to follow swiftly is left behind and hence, bears the consequences.
Though these ‘officers’ lack knowledge of these financial ‘jargons’, there are some people in Nigeria who know what they are.
They do not include bank workers who are sent by their bosses to ‘capture’ deposits. They also do not include majority of banks’ depositors, who surrender their money while expecting the funds to be returned to them on demand.
The people who know about derivatives are mostly risk managers of the investment arms of most banks.
And for the ‘officers’ at the airport, they finally let me go after explaining to them the workings of derivatives. And how they differ from conventional share trading.
Why don’t you deal straight in shares one of the ‘officers’ asked me? Because I like taking the road less travelled.