…FX, money market transactions account for 69.98%
The total secondary market turnover on FMDQ Securities Exchange was N40.43trillion in August 2024, representing a month-on-month (MoM) increase of 31.97 percent (N9.79) and a year-on-year (YoY) increase of 128.57 percent (N22.74trillion) from July 2024 and August 2023 figures, respectively.
FMDQ Securities Exchange said in its recently released financial markets monthly report for August that Foreign Exchange (FX) and Money Market (MM) transactions dominated secondary market activity, jointly accounting for 69.98 percent of the total secondary market turnover in August 2024.
The report shows that total spot market turnover for all products traded in the secondary market in August 2024 was N37.64trillion, representing a MoM increase of 36.07 percent (N9.98trillion) from July 2024 figures.
In the secondary market, the month-on-month increase in total spot market turnover was driven by the increase in turnover across the FX, MM, and FI turnover by 37.12 percent (N4.26trillion), 4.93 percent (N460billion), and 76.43 percent (N5.26trillion), respectively. The increase in Money Market turnover was driven by the MoM increase in Repos/Buy-backs transactions.
Meanwhile, the increase in fixed income (FI) turnover was driven by the increase across all FI product categories, offsetting the decrease in other bonds, while CBN Special Bills remained inactive.
Spot FX market turnover was $9.90billion (N15.74trillion) in August 2024, representing a 33.88 percent ($2.51billion) MoM
increase from the turnover recorded in July 2024 ($7.39billion). In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate ($/N) increasing by 1.68 percent ($/N26.24) to close at an average of $/N1,586.56 in August 2024 from $/N 1,560.32 recorded in July 2024.
Further, exchange rate volatility increased in August 2024 as the Naira traded within an exchange rate range of $/N1,543.84 – $/N1,617.08 compared to $/N1,500.32 – $/N1,621.12 recorded in July 2024. FI market turnover in August 2024 was N12.14trillion, representing a MoM increase of 76.43 percent (N5.26trillion) from the turnover recorded in July 2024 (N6.88trillion).
The MoM increase in turnover was driven by the increase in T.bills, OMO Bills, and FGN Bonds transactions, while transactions in other bonds recorded a MoM decrease of 18.43percent (N10billion).
Read also: Secondary market turnover on FMDQ Exchange hits N30.63trn in July
The trading intensity (TI) for T.bills and FGN Bonds increased MoM by 0.07 basis points (bps) and 0.04bps to 0.28 and to 0.10, respectively. T.bills with term-to-maturity (TTM) between >6M – 12M and FGN Bonds with TTM between >5Y – 10Y, were the most traded sovereign FI securities, accounting for 36.23 percent (N2.17trillion) and 26.88 percent (N1.61trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
The sovereign yield curve experienced a 0.98 percentage points (ppts) MoM increase in yield spread to -1.55ppts in August 2024, indicating a flattening of the yield curve. Real (inflation-adjusted) yields remained negative across the yield curve, despite the decrease in headline inflation in August 2024.
Total turnover in the MM segment increased MoM by 4.93 percent (N0.46trillion) to N9.76trillion in August 2024. The MoM increase was driven by the 5.22 percent (N0.48trillion) increase in Repos/Buy-backs, offsetting the 26.58 percent (N0.02trillion) decrease in Unsecured Placement/Takings transactions.
The average O/N rate and OPR rate (secured lending rate) decreased MoM by 2.02ppts and 2.07ppts respectively, to close at an average of 28.57 percent and 27.92 percent in August 2024. Total turnover in the FX derivatives segment in August 2024 was $1.75billion (N2.78trillion), representing a MoM decrease of 8.39 percent ($0.16billion) from July 2024 figures ($1.91billion).
The MoM decrease in the FX derivatives turnover was driven by the 8.50 percent ($0.16billion) and 5.12 percent ($0.003billion) decrease in FX Swaps and FX Forwards transactions, whilst the FX Futures market remained inactive during the review period. In the Cleared Naira-Settled (USD/NGN) Non-Deliverable Forwards market, the near month contract (NGUS AUG 28, 2024) expired and open positions with a total notional value (NV) of $0.02billion were settled.
However, no new far month (60M) contract2 was introduced in the Cleared Naira-Settled Non-Deliverable Forwards market in the review period, continuing the trend since August 2023. Consequently, the TTM of the farthest open contract is forty-eight (48) months (that is NGUS AUG 30, 2028 contract).
As a result, the cumulative NV of open Cleared Naira-Settled NonDeliverable Forwards contracts, continued its downward trend as it decreased to $0.11billion as at August 31, 2024, representing a MoM and YoY decrease of 15.38 percent ($0.02billion) and 98.02 percent ($5.45billion), respectively.
At the primary market, the Debt Management Office (DMO) sold T.bills valued at N507.13billion across its auctions in August 2024, representing an 82.44 percent (N229.16billion) MoM increase on the value of T-bills sold across its auctions in July 2024 (N277.96billion). Similarly, the DMO sold FGN Bonds worth N374.75billion in August 2024. This represented a 66.03 percent (N149.04billion) MoM increase on the amount sold in July 2024 (N225.71billion).
Sovereign securities offered by the DMO in its FGN Bond auctions were oversubscribed by 142.20 percent. In contrast, only 81 percent of T.bills were sold, despite the 141.83 percent oversubscription during the review period.
In August 2024, the Central Bank of Nigeria (CBN) sold OMO Bills worth N1.627trillion, compared to July 2024 where the CBN did not conduct any public OMO Bills auction in the primary market.
Two (2) Corporate Bonds worth ₦62.40bn were listed on FMDQ Exchange in August 2024, as such the value of Non-Sovereign Bonds outstanding increased to N2.254trillion. The total value of Commercial Papers (CPs) quoted on FMDQ Exchange in August 2024 was N66.93billion, representing a MoM increase of 276.23 percent (N49.14billion) from the value of CPs quoted in July 2024 (N17.79billion).
In August 2024, quoted CPs were issued by institutions from the Manufacturing (3) sector, followed by the Financial Services (2), Agriculture (2), Retail (2), and Health (1) sectors. The outstanding value for CPs decreased MoM by 28.82 percent (N257.43billion) to N635.85billion in August 2024 due to the N324.36billion worth of CPs that matured during the review period.
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