FMDQ Exchange recently released its financial markets monthly report for October. The report shows that secondary market turnover was N21.70trillion, representing a month-on-month (MoM) decrease of 6.75percent (N1.57trillion) and year-on-year (YoY) increase of 60.27percent (N8.16trillion) from September 2023 and October 2022 figures, respectively.
The report noted that CBN Bills, Money Market (MM) and Foreign Exchange (FX) transactions dominated secondary market activity, accounting for 80.69percent of the total secondary market turnover in October 2023.
The DMO sold T.bills valued at N406.90billion across its auctions in October 2023, representing a 25.21percent (N137.15billion) MoM decrease on the value of T-bills sold across its auctions in September 2023 (N544.05billion). Similarly, the DMO sold FGN Bonds worth N374.76billion via the reopening of two (2) 10Y, one (1) 15Y, and one (1) 30Y FGN Bond in October 2023.
The total sale represents 104.10percent oversubscription of the amount offered and a 18.41percent (N58.27billion) MoM increase on the amount sold in September 2023 (N316.49billion) for the same FGN Bond maturities. In October 2023, the CBN sold OMO Bills worth N400billion in its second public OMO Bills auction in 2023.
Non-sovereign bonds worth N23billion were listed on FMDQ Exchange in October 2023, representing an 80percent (N92billion) MoM decrease from September 2023 listings. The non-sovereign bond listings emanated solely from a corporate issuer in the financial services sector. As a result, the total outstanding value for non-sovereign bonds increased marginally1 MoM by 0.35percent (N7.72billion) from N2.180trillion in September 2023 to N2.187trillion in the review month.
The total value of Commercial Papers (CPs) quoted on FMDQ Exchange in October 2023 was N36.51billion, representing a MoM decrease of 75.03percent (N109.71billion) from the value of CPs quoted in September 2023. Quoted CPs were issued by institutions from various sectors including financial services (5), manufacturing (5), agriculture (2), health & pharmaceuticals (1), and real estate (1). As a result, the total outstanding value for CPs increased MoM by 2.39percent (N22.15billion) to N948.56billion in October 2023.
Total spot market turnover for all products traded in the secondary market was N20.48trillion in October 2023, representing a MoM decrease of 4.02percent (N860billion) from September 2023 figures. The MoM decrease in total spot market turnover was jointly driven by the 38.24percent (N3.04trillion) and 11.89percent (N490billion) decrease in MM and FX turnover, offsetting the 29.04percent (N2.68trillion) increase in FI turnover, respectively.
The decline in MM turnover was jointly driven by a decrease in Repos/Buy-backs and Unsecured Placement/Takings transactions, respectively. Conversely, the uptick in FI turnover was driven by a MoM increase across all FI products, excluding T.Bills and FGN Bonds which decreased in the review period. Spot FX market turnover was $4.66billion (N3.66trillion) in October 2023, representing a MoM decrease of 14.96percent ($0.82billion) from the turnover recorded in September 2023 ($5.48billion).
In the FX Market, the US Dollar appreciated against the Naira, with the spot exchange rate ($/N) increasing by 5.34percent ($/N40.41) to close at an average of $/N797.43 in October 2023 from $/N757.02 recorded in September 2023. Further, exchange rate volatility increased in October 2023 as the Naira traded within an exchange rate range of $/N741.85 – $/N993.82 compared to $/N722.39 – $/N780 recorded in September 2023.
Fixed income (FI) market turnover was N11.91trillion in October 2023, representing a MoM increase of 29.04percent (N2.68trillion) from the turnover recorded in September 2023 (N9.23trillion). The MoM increase in the FI market turnover was driven by the 5.10percent (N150billion), 170.76percent (N2.92trillion), and 24.06percent (N10billion) increase in turnover across OMO Bills, CBN Special Bills and Other Bonds, offsetting the 12.28percent (N280billion) and 5.68percent (N130billion) MoM decline in T.Bills and FGN Bonds transactions, respectively. As a result, the trading intensity (TI) for T.Bills and FGN Bonds decreased MoM by 0.06 and 0.01 to 0.42 and 0.11, respectively.
T.bills and FGN Bonds within the >6M – 12M and >20Y tenors respectively were the most traded sovereign FI securities, accounting for 33.97% (N1.41trillion) and 19.06percent (N790billion) of the secondary market turnover for sovereign FI securities in the spot market, respectively. In October 2023, the yield spread between the 3M and 30Y sovereign FI securities decreased by 3.13ppts to 8.01ppts, indicating a flattening of the sovereign yield curve.
Real (inflation-adjusted) yields remained negative across the yield curve in October 2023, declining further on the back of surging inflation which remains higher than policy interest rates and outpace increase in nominal yields. Total turnover in the MM segment decreased MoM by 38.24percent (N3.04trillion) to N4.91trillion in October 2023. The MoM decrease was driven by the 36.03percent (N2.72trillion) and 80percent (N320billion) decrease in Repos/Buy-backs and Unsecured Placement/Takings transactions, respectively.
The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 6.62 percentage points (ppts) and 6.53ppts respectively, to close at an average of 4.50percent and 3.87percent in October 2023. Total turnover in the FX derivatives market segment was $1.55billion (N1.22trillion) in October 2023, representing a MoM decrease of 39.27percent ($1billion) from September 2023 figures.
The MoM decrease in the FX derivatives turnover was jointly driven by the 40.19percent ($860millio), 28percent ($70million) and 52.94percent ($90million) decrease in transactions across FX Swaps, FX Forwards, and FX Futures, respectively. In the Cleared Naira-Settled Non-Deliverable Forwards market, the near month contract (NGUS OCT 25, 2023) expired and open positions with a total notional value (NV) of $740million were settled.
As a result, the cumulative NV of open Cleared Naira-Settled Non-Deliverable Forwards contracts decreased for the fourth consecutive month to circa $4.16billion as at October 31, 2023. This represents a MoM decrease of 15.27percent ($750million) and YoY increase of 1.22percent ($50million) from its value as at September 29, 2023 and August 31, 2022, respectively.
in October 2023, there were no rates quoted for Cleared Naira-Settled Non-Deliverable Forwards. Conversely, indicative non-deliverable FX Forwards rates increased across all tenor buckets. The farthest-term 12M contracts recorded the highest MoM increase in price (that is expected depreciation in the Nigerian Naira against the US Dollar) in the review period.
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