Here’re how FMDQ Securities Exchange markets performed in February

Recently, the FMDQ Securities Exchange Limited released its markets monthly report for February, which shows that total value of Commercial Papers (CPs) quoted on FMDQ Exchange in February 2023 was N101.84billion.

This represents a month-on-month (MoM) increase of 22.40percent (N18.64billion) from the value of CPs quoted in January 2023.

Quoted CPs were issued by institutions from various sectors including Financial Services (13), Real Estate (7), Manufacturing (3) and Construction (2). As a result, the total outstanding value of CPs increased MoM by 65.31percent (N144.69billion) to N366.25billion.

The report shows that secondary market turnover on FMDQ Exchange in February 2023 was N14.66trillion, representing MoM and year-on-year (YoY) increase of 12.47percent (N1.63trillion) and 3.03percent (N430billion) from January 2023 and February 2022 figures respectively.

It also noted that Foreign Exchange (FX), CBN Bills and Money Market (MM) transactions dominated secondary market activity in February 2023, accounting for 73.90percent of the total secondary market turnover.

The monthly report also shows that total spot market turnover for all products traded in the secondary market was N12.58trillion in February 2023, representing a MoM increase of 13.81percent (N1.53trillion) from January 2023 figures.
The MoM increase in total spot market turnover in the review month was jointly driven by an uptick in turnover across all products with contributions by Fixed Income (FI), FX and MM increasing MoM by 10.33percent (N620billion), 0.63percent (N0.02trillion) and 37.94percent (N0.89trillion), respectively.

The increase in MM turnover was driven by an increase in Repos/Buybacks transactions. Likewise, the uptrend in FI turnover was driven by a MoM increase in FGN and Other Bonds turnover which offset the MoM decrease in T.bills and CBN Bills transactions, respectively in February 2023.

Spot FX market turnover was N2.71trillion ($5.88billion) in February 2023, representing MoM increase of 0.63percent (N0.02trillion) from the turnover recorded in January 2023 (N2.69trillion).

In the FX Market, the Naira appreciated marginally against the US Dollar, with the spot exchange rate ($/N) decreasing by 0.24bps ($/N0.01) to close at an average of $/N461.54 in February 2023 from $/N461.55 recorded in January 2023.

Further, exchange rate volatility increased marginally in February 2023 as the Naira traded within an exchange rate range of $/N461.00 -$/N462.17 compared to $/N461 – $/N462 recorded in January 2023.

Fixed Income market turnover was N6.65trillion in February 2023, representing MoM increase of 10.33% (N0.62trillion) from the turnover recorded in January 2023 (N6.02trillion).

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The MoM increase in the FI market turnover was jointly driven by the 51.08percent (N0.93trillion) and 13.15percent (N0.11trillion) uptick in FGN Bonds and CBN Special Bills transactions which offset the MoM decline in T.Bills, OMO Bills and Other Bonds turnover respectively.

As a result, the trading intensity (TI) for T.Bills decreased by 0.08 points to 0.23, whilst TI for FGN Bonds increased MoM by 0.05 points to 0.17. The TI for OMO Bills improved by 1.51 points to 6.28 points despite the decline in turnover. This can be attributed to the lower outstanding amount (that is, no issuances coupled with maturing securities) within the review period.

T.bills and FGN Bonds within the >6M – 12M and >5Y – 10Y tenors respectively were the most traded sovereign FI securities, accounting for 23.04percent (N0.88trillion) and 25.13percent (N0.96trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.

In February 2023, the yield spread between the 3M and 30Y sovereign FI securities increased by 0.46ppts to 13.06 percentage points (ppts), indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in February 2023.

Total turnover in the Money Market segment increased MoM by 37.94percent (N0.89trillion) to N3.23trillion in February 2023. The MoM increase was solely driven by the 41.32percent (N0.91trillion) increase in Repos/Buy-backs turnover which offset the 12.60percent (N0.02trillion) decrease in Unsecured Placement/Takings transactions respectively. The average O/N rate and OPR rate (secured lending rate) increased MoM by 1.97ppts and 2.02ppts respectively, to close at an average of 12.52percent and 12.11percent in February 2023.

Total turnover in the FX derivatives market segment was N2.08trillion ($4.51billion) in February 2023, representing a MoM increase of 5.31percent (N0.10trillion) from January 2023 figures.

The MoM increase in the FX derivatives turnover was solely driven by the 71.83percent (N0.20trillion) increase in FX Futures transactions which offset the MoM decline in FX Swaps and FX Forwards turnover by 0.81percent (N0.01trillion) and 11.70percent (N0.10trillion) to N0.80trillion and N0.78trillion respectively.

In the OTC FX Futures market, the near month contract (NGUS FEB 22, 2023) expired and open positions with a total notional value (NV) of $0.14billion were settled. A far month (60M) contract, NGUS FEB 23, 2028 was introduced at a Futures price of $/N696.58, representing the same Futures price ($/N696.58) when the previous far month contract NGUS JAN 26, 2028 was introduced in January 2023.

The cumulative NV of open OTC FX Futures contracts as at February 28, 2023, stood at circa $4.84billion representing a MoM and YoY increase of 7.56percent ($0.34billion) and 9.26percent ($0.41billion) from its value as at January 31, 2023 and February 28, 2022, respectively.

In February 2023, market activity in the OTC FX Futures accounted for $0.44billion worth of trades, representing a MoM increase of 32.76percent ($0.11billion) relative to the value recorded in January 2023 ($0.33billion) The NV of OTC FX Futures contracts traded across the short-dated (1M – 13M) contracts increased by 43.13percent ($0.13billion) to $0.42billion whilst long-dated (14M – 60M) contracts decreased by 49.51percent to $0.02billion, respectively.

Specifically, traded value was concentrated within the 7 – 12M tenor range, which accounted for 71.46percent ($0.31billion) of trading turnover across twenty (20) of the thirty-one (31) deals conducted in the review period.

The average Futures price of OTC FX Futures contracts remained flat across all tenor buckets in February 2023 relative to January 2023.

However, Deliverable Forwards rates traded mixed in the review period. The very near-term contract (1M) recorded the highest MoM decrease in price (that is, expected appreciation of Nigerian Naira against the US Dollar), whilst the 12M deliverable FX Forward contracts recorded the highest MoM increase in price (that is expected depreciation of Nigerian Naira against the US Dollar) in February 2023.

The DMO sold T.bills valued at N263.50billion across its auctions in February 2023, representing a 5.03percent (N13.97billion) MoM decrease on the value of T-bills sold across its auctions in January 2023 (N277.47billion).

Similarly, the DMO sold FGN Bonds worth N770.82billion in February 2023 via re-openings of two (2) 10Y, one (1) 20Y and one (1) 30Y FGN Bonds. The total sale represented a 214.12percent oversubscription of the amount offered, and a 16.33percent (N108.20billion) MoM increase on the amount sold in January 2023 (N662.62billion) for the same FGN Bond maturities.

The CBN did not auction OMO Bills in the primary market for the second consecutive month in February 2023. Non-Sovereign Securities The total value of corporate bonds listed on FMDQ Exchange in February 2023 was N115billion, bucking the trend in the last two (2) months where there was no listing on the Exchange.

The two (2) listings were by a single issuer in the telecommunications sector. As a result, the total outstanding value for corporate bonds increased MoM by 6.94percent (N97.30billion) to N1.498trillion in the review month.