FMDQ Securities Exchange Limited (FMDQ Exchange) has released its financial markets monthly report for April, noting that its secondary market turnover on FMDQ Exchange in April 2023 was N12.55trillion.
FMDQ Exchange noted that the record secondary market turnover in April represents a month-on-month (MoM) and Year-on-Year (YoY) decrease of 48.45percent (N11.80trillion) and 35.09percent (N6.79trillion) from March 2023 and April 2022 figures respectively.
The report further noted that Foreign Exchange (FX), CBN Bills and Money Market (MM) transactions dominated secondary market activity in April 2023, accounting for 79.65percent of the total secondary market turnover.
Total spot market turnover for all products traded in the secondary market was N10.60trillion in April 2023, representing a MoM decrease of 49.04percent (N10.19trillion) from March 2023 figures.
The MoM decrease in total spot market turnover was jointly driven by a decline in turnover across all products with contributions by MM, FI and FX decreasing MoM by 43.84percent (N2.62trillion), 52.71percent (N5.63trillion) and 47.08percent (N1.94trillion), respectively.
The decrease in Money Market turnover was driven by a decrease in Repos/Buybacks and Unsecured Placement/Takings transactions. Likewise, the decline in FI turnover was driven by a MoM decrease across all FI products in the review period.
Spot FX market turnover was N2.18trillion ($4.72billion) in April 2023, representing a MoM decrease of 47.08percent (N1.94trillion) from the turnover recorded in March 2023 (N4.13trillion).
In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate ($/N) increasing by 0.34percent ($/N1.59) to close at an average of $/N463.09 in April 2023 from $/N461.50 recorded in March 2023. Further, exchange rate volatility increased marginally in April 2023 as the Naira traded within an exchange rate range of $/N462- $/N464 compared to $/N461.00 – $/N462 recorded in March 2023.
Fixed Income (FI) market turnover was N5.05trillion in April 2023, representing a MoM decrease of 52.71percent (N5.63trillion) from the turnover recorded in March 2023 (N10.68trillion). The MoM decrease in the FI market turnover was jointly driven by a decline in turnover across all FI products with contributions by T.Bills, OMO1 Bills, CBN Special Bills, FGN Bonds and Other Bonds declining by 39.87percent (N0.78trillion), 52.99percent (N1.75trillion), 66.42percent (N1.86trillion), 47.24percent (N1.23trillion) and 39.62percent (N0.004trillion) respectively.
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As a result, the trading intensity (TI) for T.Bills, OMO Bills and FGN Bonds decreased MoM by 0.16, 7.83 and 0.07 points to 0.25, 10.69 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 42.85percent (N1.09trillion) and 22.04percent (N0.56trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
In April 2023, the yield spread between the 3M and 30Y sovereign FI securities decreased by 0.74percentage points (ppts) to 9.76ppts, indicating a flattening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in April 2023.
Spot Market – (Money Market)
Total turnover in the MM segment decreased MoM by 43.84percent (N2.62trillion) to N3.36trillion in April 2023. The MoM decrease was jointly driven by the 43.44percent (N2.56trillion) and 68.76percent (N0.06trillion) decline in Repos/Buy-backs and Unsecured Placement/Takings transactions respectively.
The average overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) increased MoM by 3.18ppts and 3.25ppts respectively, to close at an average of 17.35percent and 16.97percent in April 2023.
Derivatives Market – (FX Market)
Total turnover in the FX derivatives market segment was N1.96trillion ($4.23billion) in April 2023, representing a MoM decrease of 45percent (N1.60trillion) from March 2023 figures. The MoM decrease in the FX derivatives turnover was jointly driven by a decline in turnover across all products with contributions by FX Futures, FX Swaps and FX Forwards decreasing MoM by 51.44percent (N0.28trillion), 49.93percent (N1.06trillion) and 29.27percent (N0.26trillion) to N0.26trillion, N1.07trillion and N0.63trillion, respectively.
Naira-settled OTC FX Futures Market
In the OTC FX Futures market, the near month contract (NGUS APR 26, 2023) expired and open positions with a total notional value (NV) of $0.18billion were settled. A far month (60M) contract, NGUS APR 26, 2028 was introduced at a Futures price of $/N703.61, representing a 1.01percent ($/N7.03) rate depreciation from the Futures price ($/₦696.58) of the previous far month contract NGUS MAR 29, 2028.
The cumulative NV of open OTC FX Futures contracts increased for the fifth consecutive month to circa $5.23billion as at previous month ended April 28, 2023. This represents a MoM and YoY increase of 1.75percent ($0.09billion) and 40.59percent ($1.51billion) from its value as at March 31, 2023 and April 29, 2022, respectively.
Market activity in the OTC FX Futures in April 2023, accounted for $0.27bn worth of trades, representing a MoM decrease of 52.95percent ($0.30billion) relative to the value recorded in March 2023 ($0.57billion). The NV of OTC FX Futures contracts traded across the short-dated (1M – 13M) decreased by 45.32percent ($0.22billion) to $0.27billion whilst the long-dated (14M – 60M) contracts did not record any trades in the review period. As a result, traded value was concentrated within the 13 – 18M tenor range which accounted for 58.86percent ($0.16billion) of trading turnover across nine (9) of the twenty-three (23) deals conducted in the review period.
The average Futures price of OTC FX Futures contracts increased across all tenor buckets in April 2023 relative to March 2023. The average price of OTC FX Futures Contracts within the 55-60M tenor range recorded the highest MoM increase in price (that is, expected depreciation of Nigerian Naira against the US Dollar) relative to March 2023.
Conversely, Deliverable FX Forwards prices also increased across the review period except for 12M Deliverable FX Forward contracts which recorded the highest MoM decrease in price (that is, expected appreciation of Nigerian Naira against the US Dollar), whilst the 6M deliverable FX Forward contracts recorded the highest MoM depreciation in price against the US Dollar relative to March 2023.
