FMDQ Exchange records N21.04trn secondary market turnover in December
…says FX, CBN Bills, Money Market transactions account for 84.81%
Secondary market turnover on FMDQ Exchange in December 2022 was N21.04trillion, representing a month-on-month (MoM) increase of 35.07percent (N5.46trillion) and a year-on-year (YoY) increase of 2.46percent (N500billion) from November 2022 and December 2021 figures respectively. FMDQ Exchange in its recently released financial markets monthly report for December said Foreign Exchange (FX), CBN Bills and Money Market (MM) transactions dominated secondary market activity in December 2022, accounting for 84.81percent of the total secondary market turnover.
Total spot market turnover for all products traded in the secondary market was N17.57trillion in December 2022, representing a MoM increase of 40.12percent (N5.03trillion) from November 2022 figures.
The MoM increase in total spot market turnover was jointly driven by an increase in turnover across all products with contributions by FI, FX and MM increasing MoM by 49.97percent (N2.74trillion), 23.59percent (N880billion) and 42.46percent (N1.41trillion), respectively in the review month.
The uptrend in MM turnover was driven by an increase in Repos/Buybacks and Placements/Takings transactions. Likewise, the growth in FI turnover was jointly driven by the MoM upsurge in CBN Bills and FGN and Other Bonds, respectively which offset the MoM decrease in T.Bills turnover in December 2022.
Spot FX market turnover was N4.62trillion ($10.24billion) in December 2022, representing a MoM increase of 23.59percent (N880billion) from the turnover recorded in November 2022 (N3.74trillion). In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate ($/N) increasing by 1.22percent ($/N5.45) to close at an average of $/N451.21 in December 2022 from $/N445.76 recorded in Nov. 2022. Further, exchange rate volatility increased in December 2022 as the Naira traded within an exchange rate range of $/N445.33 – $/N461.67 compared to $/N444.70 – $/N446.67 recorded in November 2022.
Fixed Income (FI) market turnover was N8.23trillion in December 2022, representing a MoM increase of 49.97percent (N2.74trillion) from the turnover recorded in November 2022 (N5.48trillion). The MoM increase in the FI market turnover was jointly driven by the 102.44percent (N1.72trillion), 248.49percent (N1.16trillion) and 109.64percent (N900billion) increase in OMO Bills, CBN Special Bills, FGN and Other Bonds turnover respectively, which offset the MoM decrease of 41.51percent (N1.04trillion) in T.bills turnover respectively.
As a result, the trading intensity (TI) for OMO Bills, and FGN Bonds increased by 4.04 and 0.06 points to 7.19 and 0.11 respectively, whilst TI for T.bills decreased MoM by 0.24 points to 0.32. T.bills and FGN Bonds within the >6M – 12M and >10Y – 15Y tenors respectively were the most traded sovereign FI securities, accounting for 31.69percent (N1trillion) and 30.29percent (N960billion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
In December 2022, the yield spread between the 3M and 30Y sovereign FI securities increased by 4.59percentage points (ppts) to 8.57ppts, indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in December 2022.
Total turnover in the Money Market (MM) segment increased MoM by 42.46percent (N1.41trillion) to N4.72trillion in December 2022. The MoM increase was jointly driven by the 40.98percent (N1.34trillion) and 153.19percent (N70billion) increase in Repos/Buy-backs and Unsecured Placement/Takings turnover respectively. The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 0.82ppts and 1.03ppts respectively, to close at an average of 11.92percent and 11.33percent in December 2022.
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Total turnover in the FX derivatives market segment was N3.47trillion ($7.69billion) in December 2022, representing a MoM increase of 14.22percent (N430billion) from November 2022 figures. The MoM increase in the FX derivatives turnover was jointly driven by the 57.02percent (N220billion) and 35.39percent (N510billion) increase across FX Futures and FX Swaps turnover to N610billion and N1.96trillion respectively, despite the 25.03percentage (N300billion) decrease in FX Forwards turnover.
In the OTC FX Futures market, the near month contract1 (NGUS DEC 28, 2022) expired and open positions with a total notional value (NV) of $0.15billion were settled. A far month (60M) contract, NGUS DEC 29, 2027 was introduced at a Futures price of $/N694.47, representing a 3.13percent ($/N21.10) depreciation in forward exchange rate of the Naira, relative to the Futures price ($/N673.37) of the previous far month contract (NGUS NOV 24, 2027). The cumulative NV of open OTC FX Futures contracts as at December 30, 2022, stood at circa $4.29billion representing a MoM increase of 6.45percent ($260million) and a YoY decrease of 19.51percent ($1.04billion) from its value as at November 30, 2022 and December 31, 2021, respectively.
In December 2022, market activity in the OTC FX Futures accounted for $0.44bn worth of trades, representing a MoM increase of 129.73percent ($250million) relative to the value recorded in November 2022 ($190million) The NV of OTC FX Futures contracts traded across both short-dated (1M – 13M) and long-dated (14M – 60M) contracts increased by 133.10percent ($170million) and 123.32percent ($0.08) to $300million and $150million, respectively. Traded value was specifically concentrated within the 13 – 18M tenor range, which accounted for 66.14percent ($290million) of trading turnover across 13 of the 23 deals conducted in the review period.
The average price of OTC FX Futures contracts and Deliverable Forwards increased MoM across all tenor buckets in December 2022 relative to November 2022. 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 November 2022. Similarly, the 12M deliverable FX Forward contracts recorded the highest MoM price depreciation in November 2022.
Primary Market (Sovereign Securities)
The DMO sold T.bills valued at N185.38billion (representing a 136.65percent oversubscription of the amount offered – N135.38billion) across its auctions in December 2022, and a 64.59percent (N338.17billion) MoM decrease on the value of T-bills sold across its auctions in November 2022 (N523.55billion). Similarly, the DMO sold FGN Bonds worth N264.52billion in December 2022 via re-openings of two (2) 10Y and one (1) 20Y bonds (exceeding the total amount of FGN Bonds offered by N39.25billion), as well as representing a 1.72percent (N4.64billion) MoM decrease from the amount sold in November 2022 (N269.15billion) for the same FGN Bond maturities. In the review month, the CBN sold OMO Bills worth N30billion, representing a 50percent (N10billion) MoM increase on the value of OMO bills sold across its auctions in November 2022 (N20billion).
There were no corporate bonds listed on FMDQ Exchange in December 2022 compared to N199.31billion worth of listings across three issuers in November 2022. As a result, the total outstanding value for corporate bonds decreased MoM by 0.44percent (N6.17billion) to N1.403trillion.
The total value of Commercial Papers (CPs) quoted on FMDQ Exchange in December 2022 was N9.68billion, representing a MoM decrease of 86.66percent (N62.86billion) from the value of CPs quoted in November 2022. Quoted CPs were issued by institutions from various sectors including Financial Services (3), Agriculture (2), Chemical Supply & Oil Field Services (2) and Education (1).
In December 2022, CPs with a total value of N165.93billion matured and were redeemed resulting in a MoM decrease of CPs outstanding by 38.32percent (N156.254billion) to N251.46billion.