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Nigeria’s Fixed Income, Currencies Markets turnover up 29.9% to N20.54trn

Stock market moves further south by 0.17%

The turnover in the Fixed Income and Currencies (FIC) Markets in December 2021 was N20.54trillion, representing a month-on-month (MoM) increase of 29.89percent (N4.73trillion) and a year-on-year (YoY) increase of 31.86percent (N4.96trillion) from turnover in November 2021 and December 2020, respectively, according to FMDQ Securities Exchange Limited FIC monthly report for December.

The report noted that Foreign Exchange (FX), CBN Special Bills and OMO bills were the highest drivers of market turnover, jointly accounting for 60.63percent of the total FIC markets turnover in December 2021, mainly due to an increase in FX supply and a 452.71percent (N1.72trillion) increase in secondary market activity for CBN Special Bills.

Total FX market turnover in December 2021 was $16.37billion (N6.84trillion), representing a MoM increase of 58.96percent ($6.07billion) from the turnover recorded in November 2021 ($10.30billion), as FX supply increased in the month.

The MoM increase in total FX market turnover was jointly driven by the 55.33percent ($3.10billion) and 63.29percent ($2.98billion) MoM increase in FX Spot and FX Derivatives turnover respectively in December 2021.

The MoM increase in FX Derivatives turnover was driven by MoM increase in turnover for FX Swaps and FX Futures by 188.79percent ($2.91billion) and 16.43percent ($0.10billion) respectively; despite the 1.55percent ($0.04billion) decrease in FX Forwards. Consequently, the contribution of FX Derivatives to total FX market turnover increased by 1.24 percentage points (ppts) to 46.88percent in December 2021.

In the OTC FX Futures market, the near month contract (NGUS DEC 29, 2021) expired and open positions with a total notional value (NV) of $0.55billion were settled. A far month (60M) contract, NGUS DEC 30, 2026 was introduced at a Futures price of $/N614.32

The total NV of open OTC FX Futures contracts as at December 31, 2021, stood at circa $5.33bn representing a MoM decrease of 2.20percent ($0.12billion) from its value as at November 30, 2021.

Read also: Nigeria’s stock market rises further by 1.01%

In the FX Market, the Naira depreciated against the US Dollar, losing 0.45percent ($/N1.89) to close at an average of $/N416.81 in December 2021 from $/N414.92 recorded in November 2021. Further, exchange rate volatility increased in December 2021 compared to November 2021 as the Naira traded within an exchange rate range of $/N414.06 – $/N435 in December 2021 compared to $/N414.30 -$/N415.10 recorded in November 2021.

In the primary markets, average discount rates for the 91-day, 182-day and 364-day T.bills in December 2021 decreased by 0.01 percentage points (ppts), 0.05ppts and 1.25ppts, to 2.49percent, 3.45percent and 4.95percent respectively whilst the average discount rates for CBN OMO bills with comparable tenors remained flat within the range of 7percent – 10.10percent in December 2021.

In December 2021, the coupon rates of reopened issues of 10Y FGN Bond remained flat whilst the coupon rates of reopened issues of 20Y FGN Bond increased by 0.15ppts to 13.10percent, from 12.95percent recorded in November 2021.

In December 2021, OMO bills were the most traded FI securities, with a 10percent (N0.32trillion) MoM increase in turnover. Trading intensity for OMO bills increased by 37basis points (bps) to 1.98 from 1.61 in November 2021. Similarly, turnover across other fixed income products such as FGN Bonds, CBN Special Bills and Other Securities also increased MoM in December 2021, except turnover for T.bills which decreased MoM by 49.08percent (N1.33trillion), to N1.38trillion in December 2021.

In December 2021, T.bills within the >6M –12M tenor range were the most traded sovereign debt securities, accounting for 43.77percent (N1.25trillion) of the total turnover for sovereign debt securities, while FGN Bonds with term-to-maturity of 20Y or higher were the most traded long-term sovereign debt securities, accounting for 17.63percent (N0.50trillion) of the total turnover for sovereign debt securities.

In December 2021, the yield spread between the 3M and 30Y sovereign debt securities decreased by 1.70ppts to 8.50ppts, indicating a flattening of the sovereign yield curve. In line with the trend throughout the year, as well as the marginal uptick in Headline inflation recorded in December 2021, real (inflation-adjusted) yields remained negative across the yield curve in December 2021.

Total turnover in the Money Market segment increased MoM by 23.41percent (N0.96trillion) to N5.06trillion in December 2021. The MoM increase was driven by the 23.82percent (N0.96trillion) increase in Repos/Buy-backs turnover, respectively. The average O/N rate and OPR rate (secured lending rate) increased by 1.86ppts and 1.98ppts respectively, to close at an average of 13.42percent and 12.94percent in December 2021.

The total number of executed trades reported on FMDQ Trading Systems decreased MoM by 14.34percent (557) to 3,326 in December 2021, driven mainly by the MoM decrease in trading activity for T.bills and OMO bills, offsetting the MoM increase in CBN Special Bills and FGN Bonds. Daily average trade size in December 2021 was N0.19trillion compared to N0.18trillion in November 2021, mainly driven by the 257.08percent (N0.02trillion) increase in the daily average trade size of CBN Special Bills.