FMDQ: Investors splash N19.34trillion on financial instruments in April

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Investments in the Fixed Income and Currencies market blossomed in April 2022 with investors splashing a handsome N19.34 trillion on the various financial instruments available. Month-on-month, growth stood at 27.57 percent while it was 19.53 percent or N3.16billion year-on-year. BAMIDELE FAMOOFO reports.

Uba Group

Uba Group

Turnover in FMDQ markets for the month ended April 29, 2022 was N19.34trn, representing a MoM and YoY increase of 27.57 percent (N4.18trn) and 19.53 percent (N3.16trn), respectively.

Foreign Exchange and Money Market transactions were the highest contributors to the FMDQ markets turnover in April 2022, jointly accounting for 64.08 percent of the total FMDQ markets turnover.

Spot Market

Total market turnover for all products traded in the spot market was N15.86trn in April 2022, representing a MoM increase of 20.89 percent (N2.74trn) from the turnover recorded in March 2022. The MoM increase in total spot market turnover was driven by the 39.61 percent (N1.08trn) and 55.96 percent (N1.83trn) increase in FX market and money market (MM) turnover, respectively, which offset the 2.39 percent (N0.17trn) decrease in fixed income (FI) market turnover in April 2022.

The MoM decrease in FI market turnover was driven by the MoM decrease in bonds turnover by 33.71 percent (N0.60trn). Although, the turnover for T.bills also decreased MoM by 7.56 percent (N0.09trn), total bills turnover increased MoM by 7.85 percent (N0.42trn) due to the combined MoM increase in OMO and CBN Special Bills turnover by 12.26 percent (N0.51trn).

Spot FX

Market FX market turnover was N3.81trn ($9.13bn) in April 2022, representing a MoM increase of 39.61 percent (N1.08trn) from the turnover recorded in March 2022 (N2.73trn). In the FX Market, the Naira depreciated against the US Dollar, losing 0.24 percent ($/N1.01) to close at an average of $/N417.55 in April 2022 from $/N416.54 recorded in March 2022. Further, exchange rate volatility increased in April 2022 compared to March 2022 as the Naira traded within an exchange rate range of $/N416.50 – $/N419.50 in April 2022 compared to $/N416.00 – $/N417.00 recorded in March 2022.

“In the FX Market, the Naira depreciated against the US Dollar, losing 0.24 percent ($/N1.01) to close at an average of $/N417.55 in April 2022 from $/N416.54 recorded in March 2022”

Spot fixed income market

FI market turnover was N6.95trn in April 2022, representing a MoM decrease of 2.39 percent (N0.17trn) from the turnover recorded in March 2022 (N7.12trn). In April 2022, CBN Special Bills were the most traded FI securities, with a 23.23 percent (N0.23trn) MoM increase in turnover to N1.22trn.

Similarly, OMO Bills turnover increased MoM by 8.83 percent (N0.28trn). Consequently, trading intensity (TI) for OMO bills increased by 14bps to 4.05 from 3.91 in March 2022, while TI for FGN Bonds and T.bills declined by 3bps and 4bps to 0.25 and 0.09, respectively. T.bills within the >6M – 12M tenor range were the most traded sovereign debt securities, accounting for 35.72 percent (N0.80trn) of turnover for sovereign debt securities, while FGN Bonds with term-to-maturity of >10Y – 15Y were the most traded long-term sovereign debt securities, accounting for 13.66 percent (N0.31trn) of total turnover for sovereign debt securities.

In April 2022, the yield spread between the 3M and 30Y sovereign debt securities decreased by 1.08ppts to 10.33ppts, indicating a flattening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in April 2022.
Spot Market – (Money Market) Total turnover in the Money Market segment increased MoM by 55.96 percent (N1.83trn) to N5.10trn in April 2022. The MoM increase was driven by the 55.27 percent (N1.73trn) and 71.43 percent (N0.10trn) increase in Repos/Buy-backs and Unsecured Placement/Takings turnover, respectively. The average O/N rate and OPR rate (secured lending rate) increased by 1.73ppts and 1.72ppts respectively, to close at an average of 8.77 percent and 8.25 percent in April 2022.

Derivatives Market Derivatives Market – (FX Market) Total turnover in the FX market segment was N3.48trn ($8.34bn), representing a MoM increase of 70.49 percent (N1.44trn) in April 2022.

The MoM increase was driven by the 157.65 percent (N1.34trn), 0.39 percent (N8.63bn) and 311.43 percent (N0.09trn) increase in FX Swaps, FX Forwards and FX Futures to N2.19trn, N1.16trn and N0.12trn, respectively.

Naira-settled OTC FX Futures Market In the OTC FX Futures market, the near month contract1 (NGUS APR 27, 2022) expired and open positions with a total notional value (NV) of $0.43bn were settled. A far month (60M) contract, NGUS APR 28, 2027 was introduced at a Futures rate of $/N626.97; which has been the Futures price for the far month contract for four consecutive months. The total NV of open OTC FX Futures contracts as at April 29, 2022, stood at circa $3.72bn2 representing a MoM and YoY decrease of 9.02 percent ($0.37bn) and 19.62% ($0.91bn) from its value as at March 31, 2022 and April 30, 2021, respectively.

The total NV of OTC FX Futures Contracts traded decreased by 59.82 percent ($0.10bn) to $0.06bn in April 2022 from $0.16n recorded in March 2022. In April 2022, the hedge concentration in the OTC FX Futures Market was within the 0 – 6M maturity bucket, accounting for 71.00 percent ($0.05bn) of the total traded values across four deals of the six (6) deals conducted in the period under review. The NV of OTC FX Futures Contracts traded across short-dated contracts (0 – 12M) decreased by 25.00 percent ($0.02bn) to $0.06bn while the NV of OTC FX Futures Contracts traded across long-dated contracts (13 – 60M) decreased by 100.00 percent ($0.02bn) as there were no trades in this category for the period under review.

Average OTC FX Futures Contract rates in April 2022 remained constant across all tenor buckets when compared to the previous month of March. In contrast, the rates of Deliverable Forwards in April 2022 varied across all tenor buckets when compared to the rates in March 2022. In the Deliverable Forwards market, the highest appreciation in rate was recorded on the 6M contract while the highest depreciation in the rate was recorded in the 2M contract.

“CBN"

In the sovereign securities market, the DMO sold T.bills valued at N289.09bn across its auctions in April 2022. Although this exceeded the amount offered (N262.33bn) indicating the sustained demand for T.bills, it represents a 29.61 percent (N121.63bn) MoM decrease in T.bills sold relative to March 2022 (N410.72bn). In April 2022, the DMO reopened the 10Y and 20Y FGN Bonds and issued a new 10Y FGN Bond, with the total value of bonds sold equalling N348.58bn indicating its sustained demand , representing a 17.36 percent (N51.57bn) MoM increase from March 2022 figures for the reopened issues.

However, the CBN did not auction OMO Bills in the primary market in April 2022 compared to N170.00bn worth of OMO Bills sold in March 2022.

In the non-sovereign securities segment, there were no corporate bonds listed on FMDQ Exchange in April 2022 compared to March 2022 during which corporate bonds worth 45.30bn were listed on the Exchange. Conversely, total value of CPs quoted on FMDQ Exchange in April 2022 was N120.95bn, representing a MoM increase of 67.85 percent (N48.89bn) from the value of CPs quoted in March 2022 (N72.06bn). Issuers of CPs quoted in April 2022 were in Financial services (9), Agriculture (2), Health & Pharmaceuticals (1), Manufacturing (3) and Real Estate (2) sectors. In April 2022, total outstanding value for corporate bonds decreased by 0.14 percent (N1.46bn) while CPs increased MoM by 9.63 percent (N27.32bn) to N1, 024.69bn and N311.07bn respectively.

March in retrospect

Turnover in FMDQ markets for the month ended March 31, 2022 was N15.16trn, representing a MoM increase of 6.54 percent (N0.93trn) and YoY decrease of 22.46% (N4.39trn), respectively.

“In March 2022, the CBN sold OMO Bills worth N170.00bn representing 100 percent of the amount offered”

Foreign Exchange and Money Market transactions were the highest contributors to the FMDQ markets turnover in March 2022, jointly accounting for 53.00 percent of the total FMDQ markets turnover.

Total market turnover for all products traded in the spot market was N13.12trn in March 2022, representing a MoM increase of 5.04 percent (N0.63trn) from the turnover recorded in February 2022 (N12.49trn). The MoM increase in total spot market turnover was driven by the 18.18 percent (N0.42trn) and 14.34 percent (N0.41trn) increase in FX market and money market (MM) turnover despite the 2.61 percent (N0.19trn) decrease in fixed income (FI) market turnover in March 2022.

The MoM decrease in FI market turnover was driven by the MoM decrease in T.bills and FGN Bonds by 13.77 percent (N0.19trn) and 13.00 percent (N0.26trn) respectively despite the 1.93 percent (N0.06trn), 25.32 percent (N0.20trn) and 33.33 percent (N0.01trn) increase in OMO Bills, CBN Special Bills and Other Bonds respectively.

FX market turnover was N2.73trn ($6.55bn) in March 2022, representing a MoM increase of 18.18 percent (N0.42trn) from the turnover recorded in February 2022 (N2.31trn). In the FX Market, the Naira depreciated against the US Dollar, losing 0.05 percent ($/N0.22) to close at an average of $/N416.54 in March 2022 from $/N416.32 recorded in February 2022.

Further, exchange rate volatility remained constant (traded within 100bps) in March 2022 compared to February 2022 as the Naira traded within an exchange rate range of $/N416.00 – $/N417.00 in March 2022 compared to $/N415.75 – $/N416.75 recorded in February 2022.

The DMO sold T.bills valued at N410.72bn across its auctions in March 2022. Although this exceeded the amount offered (N237.29bn) indicating the sustained demand for T.bills, it represents a 13.16 percent (N62.25bn) MoM decrease in T.bills sold relative to February 2022 (N472.97bn).

Similarly, the DMO sold 10Y and 20Y FGN Bonds valued at N297.01bn indicating its sustained demand although it represents a 28.50 percent (N118.41bn) MoM decrease from the N415.42bn sold for the same issues in February 2022.

In March 2022, the CBN sold OMO Bills worth N170.00bn representing 100 percent of the amount offered.

(N170.00bn) and 37.04 percent (N100.00bn) decrease from N270.00bn worth of OMO bills sold in February 2022.

In the non-sovereign securities segment of the market, total value of corporate bonds listed on FMDQ Exchange in March 2022 was N45.30bn representing a 51.03 percent (N47.20bn) MoM decrease from the value of corporate bonds listed in February 2022 (N92.50bn) despite the MoM increase in the number of listings from two to three bonds. Corporate bond listings varied across Oil & Gas (2) and Transportation & Logistics sectors.

Similarly, total value of CPs2 quoted on FMDQ Exchange in March 2022 was N72.06bn, representing a MoM decrease of 26.33 percent (N25.76bn) from the value of CPs quoted in February 2022 (N97.82bn). Quoted CPs varied across financial services (6), Agriculture (1) and manufacturing (4) sectors. In March 2022, total outstanding value for corporate bonds and CPs increased MoM by 3.28 percent (N32.58bn) and 21.84 percent (N50.86bn) to N1, 026.15bn and N283.75bn respectively.