Forex attracts largest chunk of N93trn OTC market deal

Nigeria’s Over-The-Counter (OTC) market has shown increase in deals with eleven month turnover at N93.01 trillion, data from the FMDQ OTC plc shows.

Only last month, the OTC market turnover spiked to N12.58trillion from the preceding month’s N11.31trillion. It was N7.15trillion as at January 2014.

OTC market dealers attributed the increase to the CBN “guidelines on the operations of CBN intervention in the inter-bank market, through the two-way quote system” released on October 28, 2014 and the apex bank’s “guidelines on accessing the CBN Standing Deposit Facility and exclusion of some transactions from the RDAS window” released on November 6, 2014.

“OTC market turnover rose by N1.26 trillion or 11.16% when compared to the October level, which was also a marked increase of circa N1.80 trillion from the previous month,” FMDQ OTC plc said.

BusinessDay learnt that the CBN’s instruction contributed in pushing high demand for FX in the inter-bank market, driving transaction volumes by the Dealing Members.

The Foreign Exchange (forex) market attracted the largest chunk of the money flow, representing N28.48trillion or 30.6% share in a market with nine broad product categories.

In November Forex market turnover was N4.43trillion, against N3.98trillion in the preceding trading month of October.

“The limit placed on funds that can access the CBN Standing Deposit Facility drove demand for short term securities, leading to more transactions in Treasury Bills. There was also a marked increase (circa 41%) in Repos/Buy-Back transactions, most likely driven by some dealing members with low liquidity positions,” FMDQ OTC plc confirmed this position. 

Foreign Exchange, Treasury Bills (T-Bills), Repurchase Agreements/Buy-Back, FBN Bond, Foreign Exchange derivatives, Unsecured Placements/Takings, Money Market derivatives, and other bonds contributed to the new highs in the value of deals at the OTC market.

In the eleven-months to November 2014, deals in Treasury Bills were valued at N24.03trillion, or 25.8%; Repurchase Agreements/Buy-Back (N21.7trillion or 23.3%); FGN Bonds (N7.14trillion); and Unsecured Placements/Takings (N5.51trillion).

Market analysts said the Repo/Buy-Back markets, with a share of 23.3% in turnover, shows the likelihood that banks and discount houses carry a large amount of securities on their books.

The bond market recorded just 7.68% share in turnover from January to November 2014, revealing the possibility of low appetite for long term securities dealing on the part of OTC dealing members.

Deals in the OTC market also showed interests in Foreign Exchange derivatives with deals worth N5.85trillion; Money Market Derivatives (N50.82billion); while N227.3billion worth of deals were recorded around other bonds.

Iheanyi Nwachukwu