FMDQ OTC Sheds N12.6tn of Turnover in Biggest Loss


A major correction in Foreign Portfolio Investment following the 2019 general elections in Nigeria took its toll on the performance of the Fixed Income and Currency Market on the platform of the FMDQ OTC Securities Exchange in April, reducing turnover by N12.6 trillion. Bamidele Famoofo reports that it was the biggest loss the market has recorded

The Fixed Income and Currency Markets recorded its biggest loss year-to-date in April with turnover dropping by N12.61trillion. The post-election loss represents 43.5 percent when put side by side with a turnover of N28.98trillion recorded in the elections month.

The figure in April stood at N16.37trillion but year-on-year, (YoY) the performance of the market in April 2019 was better by 9.57 percent than the turnover in April 2018.

The market recorded a growth of 51.09 percent or N9.80trillion in the elections month of March 2019 from N19.18trillion turnover achieved in February. Year-on-Year, turnover grew by about 85 percent in March.

Turnover in February stood at N19.18trillion, representing 27.19 percent or N4.10trillion Month-on-Month (MoM) increase on the turnover of N15.08trillion recorded in January 2019. The figure in January represents a 52.4 percent year-on-year increase from N12.59trillion recorded in February 2018.

Analysis of the performance of the market in April showed that the Foreign Exchange segment of the market contributed N6.28 trillion (about $17.43billion) to total market turnover which represents a 47.59 percent decrease month-on-month over the previous month’s figure.

However, analysis of FX turnover by trade type indicates an MoM decrease by 34.3 percent, 44.10 percent, and 59.01 percent in FX turnover for Inter-Member, Member-Clients, and Member-CBN3 trades respectively in the review month.

The FMDQ OTC attributed the developments in the market in the month of April to the normalization in Foreign Portfolio Investment inflows following the post-election surge recorded in March 2019.

“Turnover at the Investors & Exporters FX Window in April 2019 recorded a 29.01percent ( about $2.17bn) MoM decrease to close at $5.31billion from the $7.48billion recorded in March 2019, whilst recording a YoY increase of 12.03percent (about$0.57billion) from the turnover of $4.74billion recorded in April 2018.” FMDQ disclosed.

By product type, analysis of FX turnover in April 2019, showed an MoM decrease in both FX Spot and FX Derivatives by 50.33percent ($10.80bn) and 42.60percent ($5.02bn) respectively, with the MoM decrease in FX Spot accounting for 68.25 percent of the total MoM decrease in FX turnover. The MoM decrease in FX Derivatives was driven mainly by decreases in FX Swaps and Futures turnover, jointly accounting for 71.5 percent of the MoM decrease.

The 34th Naira-settled OTC FX Futures Contract (NGUS APR 24 2019) with total open contracts size of $431.16million matured and was settled in the review month, bringing the total value of OTC FX Futures contracts settled on FMDQ since inception to $15.28billion; out of FX Futures contracts worth $23.23billion traded to date. A new 12-month contract (NGUS APR 29 2020) with a notional principal of $1.00billion and futures price of $/N362.41 was introduced in the market in April.

The Naira appreciated against the US Dollar at the I&E FX Window by N0.05 to close the month at $/N360.63 while the parallel market and the CBN Official Spot rates remained unchanged at $/N360.00 and $/N306.95 respectively.

Despite the appreciation of the naira in the I & E FX Window, the FMDQ OTC noted that there was a decline in FX inflows from Foreign Direct Investment, FDI, and FPI inflows as market activities normalized following the post-election euphoria experienced in March.

Total Treasury Bills (including OMO7 bills) outstanding recorded an MoM increase of 1.20 percent (N0.20trn) to close at N17.00trillion in April.

FMDQ OTC disclosed that T.bills outstanding value remained unchanged for the third (3rd) a consecutive month as the CBN continued its liquidity mop-up via OMO auctions to curtail the build-up of inflationary pressure.

“However, the frequency and size of OMO auctions declined in April 2019, as only three (3) auctions for OMO bills worth N693.05billion were held in April 2019, compared to four (4) auctions for OMO bills worth N863.96billion in March 2019. Similarly, FGN bonds outstanding value increased MoM by 1.13 percent (N0.10trn) to close at N8.74trillion as at April 2019. Furthermore, the split in domestic sovereign debt between long- and short -term debt as at April 2019 was 77:23 (long- vs. short-term), slightly higher than the target ratio of 75:25 outlined in the FGN’s Debt Management Strategy.”

The trading intensity in the T.bills and FGN bonds markets decreased from 0.60 and 0.18 in March 2019, to 0.30 and 0.08 in April 2019 respectively. To date, the trading intensity in the markets stood at 1.89 and 0.47 respectively compared to 1.79 and 0.45 as at the same period in 2018. T.bills within the 6-12 months maturity bracket remained the most actively traded in April 2019, accounting for 51.36 percent of the total market turnover.

Weighted average yields on short-term maturities decreased by 0.19points. Conversely, weighted average yields on medium-term and long-term maturities increased by 0.44ppts and 0.49ppts respectively resulting in a steeper yield curve.

Turnover recorded in the Repos/Buy-Backs segment of the Money Market was N4.09trillion in April 2019, representing a 24.01 percent (N1.29trillion) MoM decrease from N5.38trillion recorded in March 2019, and 154.88percent (N2.49trn) YoY increase from the turnover recorded in April 2018.

Similarly, Unsecured Placements/Takings closed the month with a turnover of N94.04billion, representing a 35.63 percent (N52.05bn) MoM decrease from N146.09billion recorded in March 2019, and a YoY increase of 47.54percent (N30.30bn).

Average O/N9 NIBOR10 increased by 3.40ppts to close at 16.28percent in April 2019 from 12.88percent reported for March 2019, indicating a decrease in liquidity in the inter-bank market which is attributable to the 6.13percent (N40.61bn) decrease in the Federation Account Allocation Committee, FAAC, disbursements of N619.9billion shared in April 2019.

Total number of executed trades reported on the E-Bond Trading System in April 2019 was 11,566 representing a 45.67 percent (9,724) MoM decrease from the number of trades executed in March 2019 (21,290), driven by a MoM decrease in T.bills and FGN bonds trades by 8,114 (44.41%) and 1,610 (53.35%) respectively.