- FMDQ Exchange turnover prints N52.05trn in Q1, 2023
Investors’ activities in the FMDQ Exchange recorded a surge in the first quarter of 2023 compared with what happened in the same period in the last three years as turnover rose to N52.05 trillion compared with N50.32 trillion in the first quarter of 2021, representing a 3.4 percent growth. The figure grew higher by N8.35 trillion or 19.6 percent year on year in the first quarter of 2023 compared with N43.52 trillion printed in the same period in 2022. But the stock market witnessed a decline in the same period as investors sought a safe haven in the alternative market. BAMIDELE FAMOOFO reports.
Investors have found a safe haven in the fixed income market where they get their return on investment in the short to medium term period compared to the equities market where a longer period might be required to cash out, no thanks to the rising inflation rate and enticing lending rate prevalent in the markets.
According to Bismarck Rewane, Chief Executive Officer, Financial Derivatives Company Limited, investors are compelled to rotate their portfolios in favour of fixed-income securities due partly to the 50 basis points rate hike by the Central Bank to curb the rising inflation.
He attributed the declining performance of the equities market in recent times to the decision of investors to drift to the money market where they could get better bargains.
Rewane, also disclosed in the FDC monthly economic bulletin for April that the rise in Nigeria’s headline inflation to 22.04 percent in March has raised concerns about another interest rate hike by the CBN at its next meeting, expecting this to weigh on market performance in the near term.
While investment in the fixed income markets in the first quarter period was attractive, trading activities on the NGX closed on a negative note in the month of March.
The market lost 2.82 percent to close at 54,232.34 points on February 28, from 55,806.26 points on January 28. Also, the market capitalisation decreased by 2.83 percent to N29.54 trillion from N30.40 trillion on February 28.
“While investment in the fixed income markets in the first quarter period was attractive, trading activities on the NGX closed on a negative note in the month of March”
The market year to date return fell to 5.82 percent from 8.89 percent in the review period while the market breadth was negative at 0.63 xs as 35 stocks gained, 66 stocks remained unchanged, and 56 lost.
The market activity level was negative in the review period as the average volume traded decreased by 0.17 percent to 310.36 million units from 310.89 million.
Similarly, the average value of trades fell by 32.77 percent to N3.18 billion from N4.73 billion in the review period.
On the hand, turnover in the fixed income and currency market under the platform of the FMDQ Exchange has recorded a steady increase from the beginning of 2023 with investment turnover rising from N13.04 trillion in January to N14.66 trillion in February and closed the first quarter with N24.35 trillion as at March 31, 2023.
Month on Month Review
Secondary market turnover on FMDQ Exchange in March 2023 was N24.35 trillion, representing a month-on-month and year-on-year increase of 66.07 percent or N9.69 trillion and 60.61 percent or (N9.19trn) from the turnover recorded in February 2023 and March 2022, respectively.
Total turnover for Spot and Derivatives Market was N20.79 trillion and N3.56 trillion respectively in March 2023. Spot FX market turnover was $8.95billion or (N4.13trn) in March 2023, representing a MoM increase of 52.21 percent ($3.07bn) from the turnover recorded in February 2023 ($5.88bn).
Further, the Naira appreciated marginally against the US Dollar in the FX market, with the exchange rate ($/N) decreasing by 0.94bps ($/N0.04) to close at an average of $/N461.50 in March 2023 from $/N461.54 recorded in February 2023, trading within a range of $/N461.00 – $/N462.00.
Similarly, in the Derivatives Market, total turnover in the FX Market segment was N3.56 trillion ($7.71bn), representing a MoM increase of 71.18 percent or (N1.48trn) from February 2023 figures.
Secondary market turnover on FMDQ Exchange in January 2023 dropped to a 17 month low of N13.04 trillion. This represents a month on month decrease of 38.04 percent (8.00trn) and a year on year decrease of 7.75 percent (N1.10trn) from December 2022 and January 2022 figures respectively.
Foreign Exchange, CBN Bills and Money Market transactions dominated secondary market activity in January 2023, accounting for 75.58 percent of the total secondary market turnover.
Total spot market turnover for all products traded in the secondary market was N11.06trn in January 2023, representing a MoM decrease of 37.07 percent (N6.51trn) from December 2022 figures.
The MoM decrease in total spot market turnover was jointly driven by a decline in turnover across all products with contributions by fixed income, foreign exchange and money market decreasing MoM by 26.75 percent (N2.20trn), 41.72 percent (N1.93trn) and 50.49 percent (N2.38trn), respectively in the review month.
The downtrend in MM turnover was driven by a decrease in Repos/Buy backs transactions. Likewise, the decline in FI turnover was jointly driven by the MoM decrease in T.Bills and CBN Bills, respectively which offset the MoM increase in FGN and Other Bonds turnover in January 2023.
Spot FX Market
Spot FX market turnover was N2.69 trillion ($5.38bn) in January 2023, representing a MoM decrease of 41.72 percent (N1.93trn) from the turnover recorded in December 2022 (N4.62trn).
In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate ($/N) increasing by 2.29 percent ($/N10.34) to close at an average of $/N461.55 in January 2023 from $/N451.21 recorded in December 2022. Further, exchange rate volatility decreased in January 2023 as the Naira traded within an exchange rate range of $/N461.00-$/N462.00 compared to $/N445.33-$/N461.67 recorded in December 2022.
Secondary market turnover on FMDQ Exchange in February 2023 was N14.66 trillion, representing a MoM and YoY increase of 12.47 percent (1.63trn) and 3.03 percent (N0.43trn) from January 2023 and February 2022 figures respectively. Foreign Exchange (FX), CBN Bills and Money Market (MM) transactions dominated secondary market activity in February 2023, accounting for 73.90 percent of the total secondary market turnover.
Spot Market Total spot market turnover for all products traded in the secondary market was N12.58 trillion in February 2023, representing a MoM increase of 13.81 percent (N1.53trn) from January 2023 figures.
The MoM increase in total spot market turnover in the review month was jointly driven by an uptick in turnover across all products with contributions by FI, FX and MM increasing MoM by 10.33 percent (N0.62trn), 0.63 percent (N0.02trn) and 37.94 percent (N0.89trn), respectively.
The increase in MM turnover was driven by an increase in Repos/Buybacks transactions. Likewise, the uptrend in FI turnover was driven by a MoM increase in FGN and Other Bonds turnover which offset the MoM decrease in T.bills and CBN Bills transactions, respectively in February 2023.
Market Spot FX market turnover was N2.71trillion ($5.88bn) in February 2023, representing a MoM increase of 0.63 percent (N0.02trn) from the turnover recorded in January 2023 (N2.69trn).
In the FX Market, the Naira appreciated marginally against the US Dollar, with the spot exchange rate ($/N) decreasing by 0.24bps ($/N0.01) to close at an average of $/N461.54 in February 2023 from $/N461.55 recorded in January 2023.
Further, exchange rate volatility increased marginally in February 2023 as the Naira traded within an exchange rate range of $/N461.00 – $/N462.17 compared to $/N461.00 – $/N462.00 recorded in January 2023.
Spot Fixed Income Market FI market turnover was N6.65trillion in February 2023, representing a MoM increase of 10.33 percent (N0.62trn) from the turnover recorded in January 2023 (N6.02trn). The MoM increase in the FI market turnover was jointly driven by the 51.08 percent (N0.93trn) and 13.15 percent (N0.11trn) uptick in FGN Bonds and CBN Special Bills transactions which offset the MoM decline in T.Bills, OMO Bills and Other Bonds turnover respectively.
As a result, the trading intensity (TI) for T.Bills decreased by 0.08 points to 0.23, whilst TI for FGN Bonds increased MoM by 0.05 points to 0.17. The TI for OMO Bills improved by 1.51 points to 6.28 points despite the decline in turnover. This can be attributed to the lower outstanding amount (i.e., no issuances coupled with maturing securities) within the review period.
T.bills and FGN Bonds within the >6M – 12M and >5Y – 10Y tenors respectively were the most traded sovereign FI securities, accounting for 23.04 percent (N0.88trn) and 25.13 percent (N0.96trn) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
In February 2023, the yield spread between the 3M and 30Y sovereign FI securities increased by 0.46ppts to 13.06ppts, indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in February 2023.
Spot Market – (Money Market) Total turnover in the MM segment increased MoM by 37.94 percent (N0.89trn) to N3.23trillion in February 2023. The MoM increase was solely driven by the 41.32 percent (N0.91trn) increase in Repos/Buy-backs turnover which offset the 12.60 percent (N0.02trn) decrease in Unsecured Placement/Takings transactions respectively. The average O/N rate and OPR rate (secured lending rate) increased MoM by 1.97ppts and 2.02ppts respectively, to close at an average of 12.52 percent and 12.11 percent in February 2023.
“Total spot market turnover for all products traded in the secondary market was N11.06trn in January 2023, representing a MoM decrease of 37.07 percent (N6.51trn) from December 2022 figures”
Derivatives Market – (FX Market) Total turnover in the FX derivatives market segment was N2.08trillion ($4.51bn) in February 2023, representing a MoM increase of 5.31 percent (N0.10trn) from January 2023 figures. The MoM increase in the FX derivatives turnover was solely driven by the 71.83 percent (N0.20trn) increase in FX Futures transactions which offset the MoM decline in FX Swaps and FX Forwards turnover by 0.81 percent (N0.01trn) and 11.70 percent (N0.10trn) to N0.80trillion and N0.78trillion respectively.
Naira-settled OTC FX Futures Market in the OTC FX Futures market, the near month contract1 (NGUS FEB 22, 2023) expired and open positions with a total notional value (NV) of $0.14bn were settled. A far month (60M) contract, NGUS FEB 23, 2028 was introduced at a Futures price of $/N696.58, representing the same Futures price ($/N696.58) when the previous far month contract NGUS JAN 26, 2028 was introduced in January 2023. The cumulative NV of open OTC FX Futures contracts as at February 28, 2023, stood at circa $4.84 billion representing a MoM and YoY increase of 7.56 percent ($0.34bn) and 9.26 percent ($0.41bn) from its value as at January 31, 2023 and February 28, 2022, respectively.
In February 2023, market activity in the OTC FX Futures accounted for $0.44 billion worth of trades, representing a MoM increase of 32.76 percent ($0.11bn) relative to the value recorded in January 2023 ($0.33bn).
The NV of OTC FX Futures contracts traded across the short-dated (1M – 13M) contracts increased by 43.13 percent ($0.13bn) to $0.42 billion whilst long-dated (14M – 60M) contracts decreased by 49.51 percent ($0.02) to $0.02 billion, respectively. Specifically, traded value was concentrated within the 7 – 12M tenor range, which accounted for 71.46 percent ($0.31bn) of trading turnover across twenty (20) of the thirty-one (31) deals conducted in the review period.
The Debt Management Office sold T.bills valued at N263.50billion across its auctions in February 2023, representing a 5.03 percent (N13.97bn) MoM decrease on the value of T-bills sold across its auctions in January 2023 (N277.47bn). Similarly, the DMO sold FGN Bonds worth N770.82 billion in February 2023 via re-openings of two (2) 10Y, one (1) 20Y and one (1) 30Y FGN Bonds.
The total sale represented a 214.12 percent oversubscription of the amount offered1, and a 16.33 percent (N108.20bn) MoM increase on the amount sold in January 2023 (N662.62bn) for the same FGN Bond maturities. The CBN did not auction OMO Bills in the primary market for the second consecutive month in February 2023.
The total value of corporate bonds listed on FMDQ Exchange in February 2023 was N115 billion, bucking the trend in the last two (2) months where there were no listings on the Exchange. The two (2) listings were by a single issuer in the telecommunications sector. As a result, the total outstanding value for corporate bonds increased MoM by 6.94 percent (N97.30bn) to N1, 498.64 billion in the review month.
The total value of CPs quoted on FMDQ Exchange in February 2023 was N101.84 billion, representing a MoM increase of 22.40 percent (N18.64bn) from the value of CPs quoted in January 2023.
Quoted CPs were issued by institutions from various sectors including Financial Services (13), Real Estate (7), Manufacturing (3) and Construction (2). As a result, the total outstanding value of CPs increased MoM by 65.31 percent (N144.69bn) to N366.25billion.