The total outstanding value of admitted Commercial Papers (CPs) on FMDQ Exchange increased month-on-month (MoM) by 8.50percent (N80.72billion) to N1.029trillion in August, according to the recently released financial markets monthly report.
The total outstanding value of admitted Commercial Papers on the Exchange was N949.26billion in July 2023, N831.94billion in June, and N788.43billion in May. In April it stood at N715.28billion, N669.36billion in March, N366.25billion in February and N221.56billion in January.
The total value of Commercial Papers (CPs) quoted on FMDQ Exchange in August 2023 was N239.04billion, representing a month-on-month (MoM) increase of 103.75percent (N121.72billion) from the value of CPs quoted in July 2023.
The monthly report also shows that quoted CPs were issued by institutions from various sectors including Financial Services (5), Manufacturing (5), Agriculture (5), Commodities Trading (3), Real Estate (3), Retail (3), Oil & Gas (2), and Transportation (2).
Also in August 2023, corporate bonds worth N46billion were listed on FMDQ Exchange, compared to July 2023 where there were no corporate bond listings. As a result, the total outstanding value for corporate bonds increased MoM by 0.07percent (N1.20billion) to N1.795trillion in the review month.
Secondary market turnover on FMDQ Exchange in August 2023 was N17.68trillion, representing a MoM decrease of 11.24percent (N2.24trillion) and year-on-year (YoY) increase of 13.84percent (N2.15trillion) from July 2023 and August 2022 figures, respectively.
Foreign Exchange (FX), Money Market (MM) and CBN Bills transactions dominated secondary market activity, accounting for 80.99percent of the total secondary market turnover in August 2023.
Total spot market turnover for all products traded in the secondary market was N16.54trillion in August 2023, representing a MoM decrease of 10.45percent (N1.93trillion) from July 2023 figures.
The MoM decrease in total spot market turnover was jointly driven by a decline in turnover across all spot market products, with contributions by FX, MM and FI transactions decreasing MoM by 7.64percent (N0.28trillion), 5.36percent (N0.34trillion) and 15.56percent (N1.31trillion), respectively.
According to the FMDQ report, the decline in MM turnover was majorly driven by a decrease in Repos/Buy-backs, offsetting the MoM improvement in Unsecured Placement/Takings transactions. Likewise, the downtrend in FI turnover was driven by a MoM decrease across all FI products, excluding CBN Special Bills which increased in the review period. Spot FX market turnover was $4.37billion (N3.34trillion) in August 2023, representing a MoM decrease of 6.13percent ($0.29billion) from the turnover recorded in July 2023 ($4.66billion).
In the FX Market, the US Dollar depreciated against the Naira, with the spot exchange rate ($/N) decreasing by 0.84percent ($/N6.46) to close at an average of $/N763.04 in August 2023 from $/N769.51 recorded in July 2023. Exchange rate volatility decreased in August 2023 as the Naira traded within an exchange rate range of $/N738.18 – $/N789.08 compared to $/N740.08 – $/N803.90 recorded in July 2023.
Fixed Income (FI) market turnover was N7.12trillion in August 2023, representing a MoM decrease of 15.54percent (N1.31trillion) from the turnover recorded in July 2023 (N8.43trillion).
The MoM decrease in the FI market turnover was driven by the 33.69percent (N0.92trillion), 4.99percent (N0.12trillion), 36.79percent (N0.89trillion) and 36.09percent (N0.01trillion) decline in turnover across T.Bills, OMO Bills, FGN Bonds and Other Bonds, offsetting the 85.08percent (N0.63trillion) MoM uptick in CBN Special Bills transactions, respectively. As a result, the trading intensity (TI) for T.Bills and FGN Bonds decreased MoM by 0.20 and 0.05 to 0.39 and 0.08, respectively.
T.bills and FGN Bonds within the >6M – 12M and >20Y tenors respectively were the most traded sovereign FI securities, accounting for 37.82percent (N1.26trillion) and 30.83percent (N1.03trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
Read also: Total outstanding value of quoted CPs on FMDQ Exchange up to N826.7bn
In August 2023, the yield spread between the 3M and 30Y sovereign FI securities increased by 1.42ppts to 10.63ppts, indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in August 2023, declining further on the back of rising inflation which remains higher than policy interest rates and outpace increase in nominal yields.
The monthly financial markets report also shows that total turnover in the MM segment decreased MoM by 5.36percent (N0.34trillion) to N6.08triliion in August 2023. The MoM decline was driven by the 6.26percent (N0.40trillion) decrease in Repos/Buy-backs, offsetting the 46.08percent (N0.05trillion) uptick in Unsecured Placement/Takings transactions, respectively.
The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 5.55 percentage points (ppts) and 5.38ppts respectively, to close at an average of 11.46percent and 10.77percent in August 2023.
Total turnover in the FX derivatives market segment was $1.49billion (N1.14trillion) in August 2023, representing a MoM decrease of 57.76percent ($0.79billion) from July 2023 figures. The MoM decrease in the FX derivatives turnover was jointly driven by the 13.38percent ($0.21billion) and 62.05percent ($0.17billion) decline in transactions across FX Swaps and FX Forwards, and the sustained lack of activities in the FX Futures market, respectively.
The report shows that in the OTC FX Futures market, the near month contract (NGUS AUG 30, 2023) expired and open positions with a total notional value (NV) of $0.71billion were settled. A far month (60M) contract, NGUS AUG 30, 2028 was introduced at a Futures price of $/N1,567.49, representing the same Futures price when the previous far month contract (NGUS JUL 28, 2028) was introduced in July 2023.
The cumulative NV of open OTC FX Futures contracts decreased for the second consecutive month to circa $5.56billion as at August 31, 2023. This represents a MoM decrease of 11.18percent ($0.70billion) and YoY increase of 45.17percent ($1.73billion) from its value as at July 31, 2023 and August 31, 2022, respectively.
