Turnover in the Fixed Income and Currency (FIC) market for the month ended January 31, 2019 was N15.08trillion, representing a 14.85percent (N2.63trillion) decrease month-on-month against N17.71trillion recorded in December 2018, and a 28.78percent (N3.37trillion) year-on-year (YoY) increase, according to FMDQ OTC Securities Exchange monthly report released last Friday.
The Treasury Bills (T. bills) and Foreign Exchange (FX) market segments remain the major drivers of turnover in the FIC market, jointly accounting for 78.69percent of turnover in January and higher by 2.21 percentage points (ppts) from their contribution to turnover in December (76.48percent).
Total FX market turnover in January 2019 was $14.91billion, representing a 35.36percent ($3.89billion) month-on-month (MoM) increase from the turnover recorded in December 2018 ($11.01billion).
The increase in FX turnover in January was attributed to 150.61percent and 0.61percent rise in Member-Clients and Inter-Member trades “which was only marginally offset by the 27.55percent decrease in Member-CBN trades”.
Contrastingly, turnover at the Investors & Exporters (I&E) FX Window in January 2019 recorded 22.42percent ($1.11billion) and 26.86percent ($1.41billion) MoM and YoY decreases respectively to close at $3.84billion from the $4.95billion and $5.25billion recorded in December and January 2018 respectively.
FMDQ analysis of FX turnover by product type showed that FX Spot was the main driver of the overall increase in FX turnover, with a MoM increase of 462.93percent ($7.84billion). The increase in FX Spot was attributed to FX inflow for investments in the higher yielding FGN fixed income securities.
Conversely, FX Derivatives recorded a MoM decrease of 42.34percent ($3.95billion), driven mainly by a 44.89percent decline in Member-CBN FX Swaps turnover, while turnover in FX Futures also declined by 35.66percent.
In January, the 31st Naira-settled OTC FX Futures Contract (NGUS JAN 30 2019) with total open contract of $515.09million matured and was settled on FMDQ, while a new 12-month Futures contract (NGUS JAN 29 2020) with a notional principal of $1billion and futures price of $/N364.65 was listed on the OTC Exchange.
In January 2019, the Nigerian Naira appreciated against the US Dollar at the I&E FX Window, gaining 97 kobo to close the month at $/N363.03 (from $/N364 recorded in December 2018). However, relative to January 2018, the Naira has depreciated by N3.03 ($/N360 in January 2018).
Similarly, the CBN Official Spot rate appreciated by 25 kobo to close at $/N306.75 (from $/N307 recorded in December in 2018). The $/N rate at the Parallel market appreciated by N2 to close at $/N361 (from $/N363 recorded in December).
Total T. bills (including OMO bills) outstanding recorded a MoM decrease of N160billion to close at N2.58trillion as the CBN continued mopping up liquidity via its OMO auctions to curtail build-up of inflationary pressure. FGN Bonds remained flat at N8.26trillion as at January 31, 2019.
Furthermore, the split in sovereign debt between long and short-term debt as at January was 76:24 (long versus short term), close to the target ratio of 75:25 outlined in the Debt Management Strategy (2016-2019).
Monthly Trading Intensity in the T. bills and FGN Bonds markets decreased marginally from 0.49 and 0.09 in December 2018, to 0.46 and 0.08 in January respectively, as the 12.77percent rise in T. bills and FGN Bonds outstanding did not result in similar or higher growth in turnover.
T. bills within the 6-12 months maturity bracket remained the most actively traded in January 2019, accounting for 44.57percent of the total FI market turnover.
Weighted average yields on short, medium and long-term maturities on the sovereign yield curve decreased by 0.80ppts, 0.07ppts and 2.18ppts respectively in January 2019. Yield spread between the 3-month T. bill and the 10-year FGN Bond decreased by 217 basis points (bps) to close at 3.18ppts in January 2019 (1.01ppts in December 2018)
Turnover recorded in the Repos/Buy-Backs segment of the Money Market was N2.45trillion in January 2019, representing a 27.39percent (N920billion) MoM decrease from N3.37trillion recorded in December 2018, and a 31.78percent (N590billion) YoY increase from the turnover recorded in January 2018.
Furthermore, Unsecured Placements/Takings closed the review month with a turnover of N49.95billion, representing 11.68percent (N6.60billion) MoM decrease from N56.55billion recorded in December 2018, and a YoY decrease of 58.58percent (N70.66billion).
Average Overnight (O/N) NIBOR decreased by 6.20ppts to close at 19.09percent in January 2019 from 25.29percent reported for December 2018, indicating an increase in liquidity in the inter-bank market.
