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FMDQ Exchange secondary market turnover for October down by 31.84%

FMDQ Exchange has released its Financial Markets Monthly report for October which shows that its secondary market turnover was N13.54 trillion, representing a month-on-month (MoM) decrease of 31.84percent (N6.33trillion) and a year-on-year (YoY) decrease of 21.33percent (N3.67trillion) from September 2022 and October 2021 figures respectively.

It noted that the Foreign Exchange (FX), Money Market (MM) and Central Bank of Nigeria (CBN) Bills transactions dominated secondary market activity in October, accounting for 87.52 percent of the total secondary market turnover.

Total spot market turnover for all products traded in the secondary market was N11.54 trillion in October, representing a MoM decrease of 28.88 percent (N4.68 trillion) from September figures.

The MoM decrease in total spot market turnover was driven by a decrease in turnover across all products, especially Fixed Income (FI) turnover which decreased MoM by 35.34percent (N2.75trillion), likewise MM and FX turnover decreased in October 2022 by 24.97percent (N1.21trillion) and 20.07percent (N720billion), respectively.

The slump in MM turnover was jointly driven by MoM decreases in all Money Market products and largely in Unsecured Placements/Takings while the decline in Fixed Income turnover was mutually driven by MoM decreases in all Fixed Income products excluding Other Bonds which marginally increased in the review month.

Spot FX Market

Spot FX market turnover was N2.85trillion ($6.46billion) in October 2022, representing a MoM decrease of 20.07percent (N720billion) from the turnover recorded in September 2022 (N3.56trillion).

In the Spot FX Market, the Naira depreciated against the US Dollar, with the exchange rate ($/N) increasing by 1.19percent ($/N5.19) to close at an average of $/N441.02 in October 2022 from $/N435.83 recorded in September 2022.

Further, exchange rate volatility increased in October 2022 compared to September 2022 as the Naira traded within an exchange rate range of $/N436.63 – $/N444.75 compared to $/N430 -$/N437.03 recorded in September 2022.

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Spot Fixed Income (FI) Market

FI market turnover was N5.04 trillion in October 2022, representing a MoM decrease of 35.34 percent (N2.75 trillion) from the turnover recorded in September 2022 (N7.79 trillion). The MoM decrease in the FI market turnover was driven by the decrease in T.bills, OMO Bills, CBN Special Bills as well as FGN Bonds turnover which offset the MoM marginal increase of 38.16percent (N20billion) in Other Bonds turnover. As a result, the trading intensity (TI) for T.bills, OMO Bills and FGN Bonds decreased MoM by 0.22, 0.63 and 0.02 points to 0.23, 5.02 and 0.04, respectively.

T.bills and FGN Bonds within the >6M – 12M and >10Y – 15Y tenors respectively were the most traded sovereign FI securities, accounting for 48.77percent (N790billion) and 17.90percent (N290billion) of the sovereign FI turnover in the spot market, respectively.

In October 2022, the yield spread between the 3M and 30Y sovereign FI securities decreased by 3.15ppts to 3.84ppts, indicating a flattening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in October 2022.

Spot Market – (Money Market)

Total turnover in the MM segment decreased MoM by 24.97 percent (N1.21 trillion) to N3.65 trillion in October 2022.

The MoM decrease was jointly driven by the 24.77 percent (N1.19 trillion) and 41.69 percent (N20 billion) decrease in Repos/Buy-backs and unsecured Placement/Takings turnover, respectively.

The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) increased MoM by 4.11 percentage points (ppts) and 4.20ppts respectively, to close at an average of 16.47percent and 16.08percent in October 2022.

Derivatives Market

Derivatives Market – (FX Market) Total turnover in the FX derivatives market segment was N2trillion ($4.54billion) in October 2022, representing a MoM decrease of 45.06percent (N1.64trillion) from September 2022 figures.

The MoM decrease in the FX derivatives turnover in October 2022 was jointly driven by the 28.16percent (N290billion), 46.13percent (N810billion) and 61.97percent (N540billion) decrease across FX Forwards, FX Swaps and FX Futures turnover, respectively.

Naira-settled OTC FX Futures Market

In the OTC FX Futures market, the near month contract1 (NGUS OCT 26, 2022) expired and open positions with a total notional value (NV) of $ 490 million were settled. A far month (60M) contract, NGUS OCT 27, 2027 was introduced at a Futures rate of $/N673.37, representing an increase of 2.13percent ($/N14.06) in the Futures price relative to the Futures price ($/N659.31) of the previous far month contract (NGUS SEP 29, 2027).

The total NV of open OTC FX Futures contracts as at October 31, 2022, stood at circa $4.11bn2 representing a MoM decrease of 1.67percent ($0.07billion) and a YoY decrease of 28.77percent ($1.66billion) from its value as at September 30, 2022, and October 31, 2021, respectively.

Primary market

Sovereign Securities

The Debt Management Office (DMO) sold T.bills valued at N144billion across its auctions in October 2022, representing a 73.99percent (N409.66billion) MoM decrease on the value of T-bills sold across its auctions in September 2022 (N553.66billion).

Similarly, the DMO re-opened two (2) 10Y and one (1) 20Y FGN Bonds worth N107.88billion in October 2022 (lagging the total amount of FGN Bonds offered1 by N117.12billion). Likewise, this represents a 58.75 percent (N153.62 billion) MoM decrease relative to the amount sold in September 2022 (N261.50 billion) for the same FGN Bond maturities.

In the review month, the CBN did not auction OMO Bills in the primary market compared to N25.60 billion worth of bills sold in September 2022.

Non-Sovereign Securities

The total value of corporate bonds listed on the FMDQ Exchange in October 2022 was N50.09 billion compared to the previous month when no corporate bonds were listed on the Exchange. Corporate bond listings emanated solely from two (2) issuers in the Financial Services and the Power & Utility sectors. As a result, the total outstanding value for corporate bonds increased MoM by 3.64 percent (N42.55 billion) to N1.212 trillion.

The total value of Commercial Paper (CPs) quoted on FMDQ Exchange in October 2022 was N66.51billion, representing a month-on-month (MoM) increase of 196.92percent (N44.11billion) from the value of CPs quoted in September 2022.

Quoted CPs were issued by institutions from various sectors including Financial Services (8), Real Estate (2), Agriculture (1), Oil & Gas (1), Logistics (1) and Telecommunications (1). In October 2022, CPs with a total value of N139.69 billion matured and were redeemed resulting in a MoM decrease of CPs outstanding by 15 percent (N73.18 billion) to N414.55 billion.