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Nigeria’s Fixed Income, Currency Market turnover rises by 13.66% to N18.72trillion

Currency Market

Turnover in Nigeria’s Fixed Income and Currency (FIC) markets for the month ended July 2020 was N18.72 trillion. This implies a month-on-month (MoM) increase of 13.66percent (N2.25trillion) from the turnover recorded in June 2020 (N16.47trillion), and a year-on-year (YoY) increase of 14.43percent (N2.36trillion) from the turnover recorded in July 2019 (N16.36trillion), FMDQ Securities Exchange monthly report shows.

As at July 29, 2020, year-to-date (YtD) turnover was c. N136trillion, representing a YoY increase of 0.30percent (N0.41trillion) on the YTD turnover of N135.58trillion recorded in July 2019.
OMO bills and Money Market transactions (Repurchase Agreements [Repos] and Unsecured Placements/Takings) remained the highest contributors to the FIC markets in July 2020, jointly accounting for 60.16percent of the total FIC market turnover.

Foreign Exchange (FX) Market:

Total FX market turnover in July 2020 was $10.82billion (N4.20trillion), representing a MoM increase of 25.38percent ($2.19billion) from the turnover recorded in June 2020 $8.63billion (N3.34trillion). Analysis of FX market turnover indicates that FX Derivatives accounted for 70.32 percent ($1.54billion) of the total MoM increase in FX market turnover in July 2020.

In the OTC FX Futures market, the near month contract (NGUS JUL 29 2020) with a total outstanding notional value of $1.37billion matured and was settled, whilst a new long-term (60-month) contract, NGUS JUL 30 2025 was introduced at a rate of $/N581.52. The total notional value of open OTC FX Futures contracts as at July 29, 2020 stood at c.$12.69billion, representing a 3.64percent ($0.48billion) decrease on the value of open contracts as at June 30, 2020 (c.$13.17billion), and continuing the downward
trend in the value of open contracts since May 2020, while the total notional value of OTC FX Futures contracts traded since inception stood at $48.85billion as at July 29, 2020.

On July 7, 2020, the Central Bank of Nigeria (CBN) Official Spot US$/N exchange rate closed at $/N381, representing a decrease of $/N20 (5.54percent) in the Official Spot FX rate compared to the closing rate of $/N361 as at July 6, 2020. Further, this represents the first (1st) $/N FX rate devaluation by the CBN since March 20, 2020, when the Official Spot FX rate was adjusted to $/N361 from $/N307.

Consequently, the CBN Official Spot FX rate closed at an average of $/N377.19 in July 2020, representing a decrease of 4.48percent ($/N16.19) from $/N361 recorded in June 2020.

At the Investors’ and Exporters’ (I&E) FX Window, the Naira depreciated against the US Dollar, losing 0.28percent ($/N1.09) to close at an average of $/N387.48 in July 2020 from $/N386.39 recorded in June 2020. Similarly, in the parallel market, the Naira depreciated against the US Dollar losing 3.38percent ($/N15.29) to close at an average of $/N467.67 in July 2020 from $/N452.38 recorded in June 2020
Fixed Income (FI) Market (T.bills, OMO bills and FGN Bonds).

In the primary market, average discount rates on the 91-day, 182-day and 364-day T.bills decreased MoM by 47bps, 38bps and 50bps to 1.43percent, 1.74percent and 3.38percent respectively in July 2020.

The discount rates on the 82 – 89 day, 159 – 194 day and 334 – 348 day OMO bills remained unchanged MoM and stood at 4.95percent, 7.79percent and 8.99percent respectively in July 2020. Further, the marginal rates for the 15-year and 30-year FGN Bond re-openings decreased by 150bps and 220bps to 9.50percent and 9.95percent respectively in July 2020, compared to the marginal rates for FGN Bond re-openings in June 2020.

During its monthly FGN Bond Auction in July 2020, the Debt Management Office did not re- open the 5-year FGN Bond, instead it re-opened the 10-year FGN Bond at a marginal rate of 6percent and introduced a new issue with a 25-year tenor at a marginal rate of 9.80percent.

The total value of T.bills outstanding as at July 29, 2020 increased MoM by 2.17percent (N0.06trn) to N2.82trillion, whilst the value of OMO bills outstanding as at July 29, 2020 decreased MoM by 2.40percent (N0.22trillion) to N8.93trillion. Total outstanding value of FGN Bonds as at July 29, 2020 increased MoM by 1.78percent (N0.18trillion) to N10.31trillion.

Turnover for T.bills decreased by 51.22percent (N0.84trillion) to N0.80trillion, resulting in a decrease in its trading intensity to 0.29 in July 2020 from 0.59 in June 2020, whilst OMO bills turnover increased MoM by 22.01percent (N0.92trillion) to N5.10trillion in July 2020, resulting in the increase in its trading intensity to 0.57 in July 2020 from 0.45 in June 2020.

FGN Bonds turnover decreased MoM by 0.82percent (N0.02trillion) to N2.43trillion in July 2020.

In July 2020, OMO bills within the >6M – 12M maturity bucket was the most traded across all tenors in the Fixed Income market, accounting for 53.85percent (N4.49trillion) of the total Fixed Income market turnover. T.bills within the >1M – 3M maturity bucket was the most traded across short-term tenors, accounting for 4.32percent (N0.36trillion) of the total Fixed Income market turnover, whilst FGN Bonds within the >20Y – 30Y maturity bucket was the most traded across all tenors, accounting for 11.75percent (N0.98trillion) of the total Fixed Income market turnover.

Weighted average yields on short and medium-term maturities decreased MoM by 20.17percent and 2.21percent respectively in July 2020, while the weighted average yields on long-term maturities increased by 5.74percent. Additionally, inflation-adjusted yields remained negative across the short, medium and long-term tenors in July 2020.

Money Market (Repos/Buy-Backs and Unsecured Placements/Takings):

Total turnover in the Money Market segment increased MoM and YoY by 28.60 percent (N1.37trillion) and 74.50percent (N2.63trillion) respectively to a total of N6.16trillion in July 2020.

This was driven by the MoM and YoY increases of 29.15percent (N1.37trillion) and 79.59percent
(N2.69trillion) respectively in Repos/Buy-Backs turnover to N6.07trillion in July 2020, whilst turnover in Unsecured Placements/Takings remained unchanged MoM and recorded a YoY decrease of 40percent (N0.06trillion) to N0.09trillion in July 2020. Average over night (O/N) and open buy back (OBB) rates decreased by 82bps and 84bps to close at 10.49percent and 9.53percent respectively in July 2020 from 11.31percent and 10.37percent recorded in June 2020

Market Surveillance:
Total number of executed trades reported on the Bloomberg E-Bond Trading System in July 2020 was 4,497, representing a MoM decrease of 21.15percent (1,206) from the number of executed trades recorded in June 2020 (5,703). This was driven by the MoM decrease recorded across executed trades on T.bills, OMO bills and Jul-20 Jun-20 FGN Bonds in July 2020.