Earlier this week, the FMDQ Exchange released its financial markets monthly report for January 2023. The Exchange noted that its secondary market turnover in January 2023 dropped to a 17 month low of N13.04trillion. This represents a month-on-month (MoM) decrease of 38.04percent (N8trillion) and a year-on-year (YoY) decrease of 7.75percent (N1.10trillion) from December 2022 and January 2022 figures respectively. Foreign Exchange (FX), CBN Bills and Money Market (MM) transactions dominated secondary market activity in January 2023, accounting for 75.58percent of the total secondary market turnover.
Spot Market: Total spot market turnover for all products traded in the secondarymarket was N11.06trillion in January 2023, representing a month-on-month (MoM) decrease of 37.07percent (N6.51trillion) from December 2022 figures.
FMDQ Exchange said the MoM decrease in total spot market turnover was jointly driven by a decline in turnover across all products with contributions by fixed income (FI), foreign exchange (FX) and money market (MM) decreasing MoM by 26.75percent (N2.20trillion), 41.72percent (N1.93trillion) and 50.49percent (N2.38trillion), respectively in the review month.
The Exchange said the downtrend in MM turnover was driven by a decrease in Repos/Buy-backs transactions. Likewise, the decline in FI turnover was jointly driven by the MoM decrease in T.Bills and CBN Bills, respectively which offset the MoM increase in FGN and Other Bonds turnover in January 2023.
Spot FX Market: Spot FX market turnover was N2.69trillion ($5.38billion) in January 2023, representing a MoM decrease of 41.72percent (N1.93trillion) from the turnover recorded in December 2022 (N4.62trillion).
In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate ($/N) increasing by 2.29percent ($/N10.34) to close at an average of $/N461.55 in January 2023 from $/N451.21 recorded in December 2022.
Further, exchange rate volatility decreased in January 2023 as the Naira traded within an exchange rate range of $/N461 – $/N462 compared to $/N445.33 – $/N461.67 recorded in December 2022
Total turnover in the money market (MM) segment decreased MoM by 50.49percent (N2.38trillion) to N2.34trillion in January 2023.
The MoM decrease was solely driven by the 52.48percent (N2.42trillion) decrease in Repos/Buy-backs turnover which offsets the 31.89percent (N0.04trillion) increase in UnsecuredPlacement/Takings transactions respectively.
The average Over Night (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 1.37 percentage points (ppts) and 1.23 ppts respectively, to close at an average of 10.55percent and 10.10percent in January 2023.
Fixed Income market turnover was N6.02trillion in January 2023, representing a MoM decrease of 26.75percent (N2.20trillion) from the turnover recorded in December 2022 (N8.23trillion).
The MoM decrease in the FI market turnover was jointly driven by the 8.23percent (N0.12trillion), 34.77percent (N0.01trillion) and 43.52percent (N2.19trillion) decline in T.Bills, Other Bonds and CBN Bills1transactions respectively, which offset the MoM increase of 6.88percent (N0.12trillion) in FGN Bonds turnover.
As a result, the trading intensity (TI) for T.Bills and OMO Bills decreased by 0.01 and 2.42 points to 0.31 and 4.77 respectively, whilst TI for FGN Bonds increased MoM by 0.01 points to 0.12.T.bills and FGN Bonds within the >6M – 12M and >10Y – 15Y tenors respectively were the most traded sovereign FI securities, accounting for 33.83percent (N1.07trillion) and 16.41percent (N0.52trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
In January 2023, the yield spread between the 3M and 30Y sovereign FI securities increased by 4.03ppts to12.60ppts, indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in January 2023, FMDQ Exchange noted.
Total turnover in the Money Market segment decreased MoM by 50.49percent (N2.38trillion) to N2.34trillion in January 2023. The MoM decrease was solely driven by the 52.48percent (N2.42trillion) decrease in Repos/Buy-backs turnover which offsets the 31.89 percent (N0.04trillion) increase in Unsecured Placement/Takings transactions respectively.
Derivatives Market – (FX Market): Total turnover in the FX derivatives market segment was N1.98trillion($4.28billion) in January 2023, representing a MoM decrease of 43.10percent (N1.50trillion) from December 2022 figures.
The MoM decrease in the FX derivatives turnover was jointly driven by the decline in turnover across all FX derivatives products with contributions by FX Swaps, FX Futures and FX Forwards decreasing MoM by 58.85percent (N1.15trillion), 53.18percent (N0.32trillion) and 2.11percent (N0.02trillion) to N0.81trillion, N0.29trillion and N0.88trillion respectively.
The average price of OTC FX Futures contracts and Deliverable Forwards increased MoM across all tenor buckets in January 2023 relative to December 2022.The average price of OTC FX Futures Contracts withinthe 55-60M tenor range recorded the highest MoM increase in price (that is expected depreciation of Naira against the US Dollar) relative to December 2022. Similarly, the 1M deliverable FX Forward contracts recorded the highest MoM price depreciation in January 2023.
Primary Market
Sovereign Securities: The Debt Management Office (DMO) sold T.bills valued at N277.47billion across its auctions in January 2023, representing a 49.68percent (N92.09billion) MoM increase on the value of T-bills sold across its auctions in December 2022 (N185.38billion).Similarly, the DMO re-opened two (2) 10Y, one (1) 20Y and one (1) 30Y FGN Bonds worth N662.62billion (representing a 184.06percent oversubscription of the amount offered) in January 2023.
Likewise, this represents a 150.50percent (N398.10billion) MoM increase from the amount sold across the two 10Y and one 20Y FGN Bond maturities re-opened in December 2022 (N264.52billion). In the review month, the CBN did not auction OMO Bills in the primary market compared to N30billion worth of bills sold in the previous month ended December.
Non-Sovereign Securities:
No corporate bonds were listed on FMDQ Exchange for the second consecutive month in January 2023 compared to N199.31billion worth of listings across three issuers in November 2022. In addition, the total outstanding value for corporate bonds decreased MoM by 0.17percent (N2.38billion) to N1.401trillion in January 2023.
The total value of Commercial Papers (CPs) quoted on FMDQ Exchange in January 2023 was N83.20billion, representing a MoM increase of 759.85percent (N73.52billion) from the value of CPs quoted in December 2022.
Quoted CPs were issued by institutions from various sectors including Real Estate (4), Financial Services (3), Manufacturing (3), Agriculture (2) and Health & Pharmaceuticals (1). In January 2023, CPs with a total value of N113.10billion matured and were redeemed resulting in a MoM decrease of CPs outstanding by 11.89percent (N29.90billion) to N221.56billion.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
