The total value of Commercial Papers (CPs) quoted on FMDQ Exchange in May was N166.48billion, representing a month-on-month (MoM) increase of 37.64percent (N45.53billion) from the value of CPs quoted in April 2022 (N120.95billion).
Commercial Papers (CPs) are short-term debt obligations of corporations. They can be issued for tenors of up to 270 days in the Nigerian financial markets. Like Treasury Bills, they are typically issued at a discount and redeemed at par (face value amount) upon maturity.
CPs are also typically issued by large corporations with good credit ratings and history and are quoted and traded/reported on relevant platforms of FMDQ Exchange.
FMDQ Exchange in its financial markets monthly for May noted that issuers of CPs quoted in May 2022 were in Financial services (4), Telecommunications (2) Real Estate (2), Retail (1) and Manufacturing (1), sectors.
While total outstanding value for corporate bonds decreased by 1.96percent (N20.096billion) in May, CPs increased MoM by 55.79percent (N173.54bn) to N1.004trillion and N484.61billion respectively.
The fixed income (FI) market turnover was N7.17trillion in May 2022, representing a MoM increase of 3.17percent (N220billion) from the turnover recorded in April 2022 (N6.95trillion). In May 2022, CBN Special Bills were the most traded FI securities, with a 135.25percent (N1.65trillion) MoM increase in turnover to N2.87trillion.
Similarly, T.bills turnover increased MoM by 1.81percent (N20billion). However, trading intensity for T.bills declined by 3 basis points (bps) to 0.25 from 0.28 in the previous month.
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T.bills within the >6M – 12M tenor range were the most traded sovereign debt securities, accounting for 40.76percent (N860billion) of turnover for sovereign debt securities, while FGN Bonds with term-to-maturity of >15Y – 20Y were the most traded long-term sovereign debt securities, accounting for 12.95percent (N270billion) of total turnover for sovereign debt securities.
In May 2022, the yield spread between the 3M and 30Y sovereign debt securities increased by 1.38ppts to 11.71 percentage points (ppts), indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in May 2022.
Total turnover in the Money Market segment decreased MoM by 30.39percent (N1.55trillion) to N3.55trillion in May 2022. The MoM decrease was driven by the 28.19percent (N1.37trillion) and 75percent (N180billion) decrease in Repos/Buy-backs and Unsecured Placement/Takings turnover, respectively.
The DMO sold T.bills valued at N311.35billion across its auctions in May 2022. It exceeded the amount offered (N280.50billion) indicating the sustained demand for T.bills, and also represents a 7.70percent (N22.26billion) MoM increase in T.bills sold relative to April 2022 (N289.09billion). Similarly, the DMO reopened two (2) 10Y and one (1) 20Y FGN Bonds, with the total value of FGN Bonds sold equalling N378.41billion indicating a sustained demand, representing an 8.56percent (N29.83billion) MoM increase from April 2022 figures for the reopened issues.
In May 2022, the CBN sold OMO Bills worth N180.01billion compared to no sales in April 2022. Total value of corporate bonds listed on FMDQ Exchange in May 2022 was N10billion compared to April 2022 where no corporate bonds were listed on the Exchange. Corporate bond listing was from the Telecommunications sector (1).
Turnover in FMDQ markets for the month ended May 31, 2022 was N15.39trillion, representing a MoM decrease of 20.42percent (3.95trillion) and YoY increase of 50.29percent (N5.15trillion), respectively.
OMO, CBN Special Bills and Foreign Exchange (FX), transactions were the highest contributors to the FMDQ markets turnover in May 2022, jointly accounting for 63.03percent of the total FMDQ markets turnover.
Total market turnover for all products traded in the spot market was N13.48trillion in May 2022, representing a MoM decrease of 15.01percent (N2.38trillion) from the turnover recorded in April 2022.
The MoM decrease in total spot market turnover was driven by the 27.66percent (N1.05trillion) and 30.39percent (N1.55trillion) decrease in FX market and money market (MM) turnover, respectively, which offset the 3.17percent (N220billion) increase in fixed income (FI) market turnover in May 2022.
The MoM increase in FI market turnover was driven by the MoM increase in CBN Special Bills and T.bills turnover by 134.97percent (N1.65trillion) and 1.70percent (N20billion), respectively.
Although, the turnover for OMO bills, FGN Bonds and Other Bonds decreased MoM by 37.34percent (N1.29trillion), 12.74percent (N150billion) and 36.75percent (N10billion), respectively.
FX market turnover was N2.76trillion ($6.58billion) in May 2022, representing a MoM decrease of 27.56percent (N1.05trillion) from the turnover recorded in April 2022 (N3.81trillion).
In the FX Market, the Naira depreciated against the US Dollar, losing 0.38percent ($/N1.60) to close at an average of $/N419.15 in May 2022 from $/N417.55 recorded in April 2022.
Further, exchange rate volatility increased in May 2022 compared to April 2022 as the Naira traded within an exchange rate range of $/N417.00 -$/N421.50 in May 2022 compared to $/N416.50 -$/N419.50 recorded in April 2022.
The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) increased by 0.96ppts and 1.10ppts respectively, to close at an average of 9.73percent and 9.35percent in May 2022. Total turnover in the FX market segment was N1.91trillion ($4.55billion), representing a MoM decrease of 45.12percent (N1.57trillion) from April 2022.
The MoM decrease was driven by the 70.78percent (N1.55trillion) and 21.37percent (N250billion) decrease in FX Swaps and FX Forwards to N640billion and N920billion, respectively which offset the 186.06percent (N230billion) increase in FX Futures to N350billion in May 2022.
In the OTC FX Futures market, the near month contract (NGUS MAY 25, 2022) expired and open positions with a total notional value (NV) of $640million were settled. A far month (60M) contract, NGUS APR 28, 2027 was introduced at a Futures rate of $/N626.97; which has been the Futures price for the far month contract for five (5) consecutive months.
The total NV of open OTC FX Futures contracts as at May 29, 2022, stood at circa $3.76billion representing a MoM increase of 1.08% ($0.04bn) and a YoY decrease of 5.05percent ($200millio) from its value as at April 29, 2022 and May 31, 2021, respectively.
The total NV of OTC FX Futures Contracts traded increased by 957.29% ($620million) to $680billion in May 2022 from $60million recorded in April 2022. In May 2022, the hedge concentration in the OTC FX Futures Market was within the 13 – 18M maturity bucket, accounting for 70.51percent ($480million) of the total traded values across thirteen (13) of the twenty-eight (28) deals conducted in the period under review.
The NV of OTC FX Futures Contracts traded across short-dated contracts (0 – 12M) increased by 215.43percent ($100million) to $150million while the NV of OTC FX Futures Contracts traded across long-dated contracts (13 – 60M) increased by 3090.86percent ($510million).
Average OTC FX Futures Contract rates in May 2022 remained constant across all tenor buckets when compared to the previous month of April. In contrast, the rates of Deliverable Forwards in May 2022 varied across all tenor buckets when compared to the rates in April 2022. In the Deliverable Forwards market, the highest depreciation in rate was recorded on the 12M contract.
