Turnover in the Fixed Income and Currency (FIC) markets for the month ended September 30, 2020 was N14.07trillion, FMDQ Securities Exchange monthly report shows.
The record turnover indicates a month-on-month (MoM) and year-on-year (YoY) decrease of 1.33percent (N0.19trillion) and 26.76percent (N5.14trillion) from N14.26trillion (August 2020) and N19.21trillion (September 2019) respectively.
The year to date (YTD) turnover as at September 30, 2020, was circa N164.32trillion, representing a YoY decrease of 7.69percent (N13.68trillion) on the YTD turnover of N178trillion recorded as at September 30, 2019.OMO bills and Foreign Exchange transactions were the highest contributors to the FIC markets in September 2020, jointly accounting for 54.48percent of the total FIC market turnover.
Total FX market turnover in September 2020 was $8.66billion (N3.34trillion), representing a MoM decrease of 11.27percent ($1.10billion) from the turnover recorded in August 2020 $9.76bn (N3.76trillion) as liquidity challenges in the FX market persisted, despite the interventions by the Central Bank of Nigeria (CBN) in form of FX Sales to Dealing Member (Banks) to reduce the backlog of unmet FX demand in September 2020.
Analysis of FX market turnover indicates that FX Derivatives turnover decreased MoM by 28.94percent ($2.04billion) whilst FX Spot turnover increased by 34.69percent ($0.94billion) in September 2020. In the OTC FX Futures market, the near month contract (NGUS SEP 30 2020) with a total outstanding notional value of $1.54billion matured and was settled, whilst a new long-term (60-month) contract, NGUS SEP 24 2025 was introduced at a rate of $/N589.09.
The total notional value (NV) of open OTC FX Futures contracts as at September 30, 2020 stood at circa $11.13billion, representing a 9.81percent ($1.21billion) decrease on the NV of open contracts as at August 31, 2020 (circa $12.34billion), and continuing the downward trend in the NV of open contracts since May 2020. The total NV of OTC FX Futures contracts traded since inception stood at $50.41billion as at September 30, 2020. The CBN Official Spot $/N exchange rate closed at an average of $/N379.04 in September 2020, representing a 0.37% ($/N1.39) appreciation of the exchange rate from $/N380.43 recorded in August 2020.
At the Investors’ and Exporters’ (I&E) FX Window, the Naira appreciated against the US Dollar, gaining 0.06% ($/N0.25) to close at an average of $/N386.01 in September 2020 from $/N386.26 recorded in August 2020. Similarly, in the parallel market, the Naira appreciated against the US Dollar gaining 3.90percent ($/N18.55) to close at an average of $/N456.74 in September 2020 from $/N475.29 recorded in August 2020. This can be attributed to the resumption of FX intervention sales by the CBN to Bureau de Change operators in September 2020. Consequently, the average spread between the exchange rate in the I&E FX Window and the parallel market reduced by 20.55% ($/N18.30) to $/N70.73 in September 2020 from $/N89.03 in August 2020.
Fixed Income (FI) Market (T.bills, OMO bills and FGN Bonds)
In the primary market, average discount rates for the 91-day and 182-day T.bills both decreased MoM by 8 basis points (bps) to 1.09percent and 1.51percent respectively in September 2020, whilst the average discount rates for the 364-day T.bill decreased MoM by 30bps to 2.97percent in September 2020. Similarly, the discount rates for OMO bills decreased MoM by an average of 3bps to close at a range of 4.86percent – 8.92percent in September 2020.
In the primary market for sovereign bonds, the marginal rates for FGN Bonds decreased by an average of 84bps to close at a range of 6percent – 8.94percent respectively in September 2020.
The total value of T.bills and OMO bills outstanding as at September 30, 2020 decreased MoM by 1.45percent (N0.04trillion) and 12.13percent (N1.03trillion) to N2.72trillion and N7.46trillion respectively, whilst the total value of FGN Bonds outstanding as at September 30, 2020 increased MoM by 1.05percent (N0.11trillion) to N10.54trillion, leading to a 0.44percent (circa N0.06trillion) MoM increase in local public debt to circa N13.62trillion as at September 30, 2020 and a YoY increase of 16.01percent (circa N1.88trillion) relative to September 2019.
Turnover for T.bills and OMO bills increased by 36.70percent (N0.40trillion) and 11.34percent (N0.44trillion) to N1.49trillion and N4.32trillion respectively, resulting in an increase in trading intensity to 0.54 for both securities in September 2020 from 0.40 and 0.44 respectively in August 2020. Conversely, FGN Bonds turnover decreased MoM by 8.12percent (N0.19trillion) to N2.15trillion in September 2020, resulting in a marginal decrease in its trading intensity to 0.21 (0.23 in August 2020).
In September 2020, OMO bills within the >3M – 6M maturity bucket was the most traded across all tenors in the Fixed Income market, accounting for 24.42percent (N2.23trillion) of the total Fixed Income market turnover. T.bills within the >6M – 12M maturity bucket was the most traded across short-term tenors, accounting for 9.97percent (N0.91trillion) of the total Fixed Income market turnover, whilst FGN Bonds within the >20Y – 30Y maturity bucket was the most traded across medium to long term tenors, accounting for 13.58percent (N1.24trillion) of the total Fixed Income market turnover.
There was a general decrease in yields across the sovereign yield curve between August and September 2020 except on the 3M tenor of the curve. Furthermore, the highest spreads were recorded on the securities with 2Y and 3Y maturities.
Weighted average yields on short-term, medium-term and long-term maturities decreased MoM by 5.18percent, 1.27percent and 0.24percent respectively in September 2020.
Additionally, inflation-adjusted yields remained negative across the short, medium and long-term tenors in September 2020.