Nigeria’s Fixed Income and Currencies (FIC) markets turnover in January 2022 was N14.13trillion; representing month-on-month (MoM) decrease of 31.21percent (N6.41trillion) and year-on-year (YoY) increase of 8.44 percent (N1.10trillion), from turnover in December 2021 and January 2021, respectively, according to recently released report by FMDQ Securities Exchange.
The report noted that Foreign Exchange (FX) and Money Market (mainly Repurchase Agreements [Repos]) transactions were the highest drivers of market turnover, jointly accounting for 57percent of the total FIC markets turnover in January 2022.
Total FX market turnover in January 2022 was $10.13billion (N4.22trillion), representing a MoM decrease of 38.12percent ($6.24billion) from the turnover recorded in December 2021 ($16.37billion). The MoM decrease in total FX market turnover was jointly driven by the 25.03percent ($2.18billion) and 53.02percent ($4.07billion) MoM decrease in FX Spot and FX Derivatives turnover, respectively in January 2022.
The MoM decrease in FX Derivatives turnover was driven by MoM decrease in turnover for FX Swaps, FX Futures and FX Forwards by 69.97percent ($3.12billion), 73.76percent ($0.54billion) and 16.74percent ($0.42billion), respectively. Consequently, the contribution of FX Derivatives to total FX market turnover decreased by 11.27 percentage points (ppts) to 35.61percent in January 2022.
In the OTC FX Futures market, the near month contract (NGUS JAN 26, 2022) expired and open positions with a total notional value (NV) of $0.54billion were settled. A far month (60M) contract, NGUS JAN 27, 2027 was introduced at a Futures price of $/N626.97. The total NV of open OTC FX Futures contracts as at January 31, 2022, stood at circa $4.90billion representing a MoM and YoY decrease of 8.07percent ($0.43billion) and 31.28percent ($2.23billion) respectively from its value as at December 31, 2021, and January 31, 2021.
In the FX Market, the Naira appreciated against the US Dollar, gaining 0.06percent ($/N0.26) to close at an average of $/N416.55 in January 2022 from $/N416.81 recorded in December 2021. Further, exchange rate volatility decreased in January 2022 compared to December 2021 as the Naira traded within an exchange rate range of $/N415.33 – $/N422.67 in January 2022 compared to $/N414.06 – $/N435 recorded in December 2021.
In the primary markets, average discount rates for the 91-day T.bills remained constant at 2.49percent in January 2022. The 182-day T.bills declined by 0.08ppts to 3.37percent, while the 364-day T.bills increased by 0.50ppts. Average discount rates for CBN7 OMO bills with comparable tenors remained flat within the range of 7percent- 10.10percent in January 2022.
Read also: How CBN can make RT200 FX policy hit its target – Experts
In January 2022, the coupon rates of reopened issues of 10Y10 and 20Y FGN Bonds decreased by 0.15ppts and 0.10ppts to 11.50percent and 13percent from 11.65percent and 13.10percent recorded in December 2021 respectively. In January 2022, OMO bills were the most traded FI securities despite the 23.01percent (N0.81trillion) MoM decrease in turnover.
Trading intensity for OMO bills decreased by 25 basis points (bps) to 1.73 from 1.98 in December 2021. Similarly, turnover across other fixed income products such as T.bills, CBN Special Bills and Other Securities also decreased MoM in January 2022, except turnover for FGN Bonds which increased MoM by 12.93percent (N0.19trillion), to N1.66trillion in January 2022.
In January 2022, T.bills within the >6M – 12M tenor range were the most traded sovereign debt securities, accounting for 23.06percent (N0.51trillion) 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 22.72percent (N0.50trillion) of the total turnover for sovereign debt securities.
In January 2022, the yield spread between the 3M and 30Y sovereign debt securities decreased by 0.08ppts to 8.41ppts, indicating a flattening of the sovereign yield curve. Despite the moderation in Headline Inflation, real (inflation-adjusted) yields remained negative across the yield curve in January 2022.
Total turnover in the Money Market segment decreased MoM by 24.11percent (N1.22trillion) to N5.06trillion in January 2022. The MoM decrease was driven by the 24.25percent (N1.21trillion) and 14.29percent (N0.01trillion) decrease in Repos/Buybacks and Unsecured Placement/Takings turnover, respectively.
The average O/N rate and OPR rate (secured lending rate) decreased by 3.51ppts and 3.61ppts respectively, to close at an average of 9.91percent and 9.33percent in January 2022. Despite the decrease in total turnover for FI products, the total number of executed trades reported on FMDQ Trading Systems increased MoM by 26.37percent (877) to 4,203 in January 2022, driven by the MoM increase in trading activity across all FI products excluding T.bills which decreased MoM by 21.86percent. Daily average trade size in January 2022 was relatively flat compared to data recorded in December 2021.
