Turnover in FMDQ Exchange drops 56% YoY as investors pull N29trn in T-Bills

Investment activities in the Fixed Income and Currencies (FIC) markets suffered a setback to the tune of about N26.97 trillion Year-on-Year (YoY) as investment in Treasury Bills dipped by 75 percent.

YoY Performance Analysis

As at July 2021, gross turnover in the market stood at about N109.02trillion (about $267.5billion) compared with about N135.99trillion as at July 2020, representing 56 percent decline. A sharp decline in investment activities in the Treasury Bills segment of the market impacted largely on total market turnover in the period as investors pulled out N27.2trillion from the T-Bills space as at July 2021.

Treasury Bills turnover which stood at N36.4 trillion as at July 2020 dropped to N9.20 trillion year-to- date as at July 2021. Investment in the FIC market on the platform of the FMDQ OTC Exchange witnessed a dismal performance across board with noticeable declines recorded in key segments of the market except Open Market Operation (OMO). Year-on-year, investors injected more funds into the OMO Bills as investment in the space increased by 162 percent year-on-year as at July 2021. Figures obtained from the FMDQ OTC Exchange showed that investors increased their stake in OMO Bills by N15.04trillion.

Investment in OMO Bills increased to N24.32trilion as at July 2021 compared to total turnover of N9.28trillion recorded in seven months in 2020. Breakdown of performance of the market as at July 2021 showed that investment activities in the Foreign Exchange Derivatives segment dropped 30.8 percent or N7.12trillion. Turnover in the space dropped from N23.4trillion as at July 2020 (YTD) to N16.22trillion (YTD) as at July 2021 while trading in Foreign Exchange also dipped by 30.6 percent or N6.39 trillion from N20.89 trillion as at July 2020 to N14.5trillion as at July 2021 (YTD). Investment in Federal Government Bond (FG Bonds) also dropped by 24.2 percent or N3.79trillion to N11.89trillion as at July 2021 (YTD). Investors injected N15.68trillion in FG Bonds as at July 2021.

July 2021 in retrospect Turnover in the Fixed Income Market (FIC) markets in July 2021 was N16.97trillion, representing a 10.84 percent (N1.66trn) month-on-month (MoM) increase and a 9.35 percent (N1.75trn) year-on-year (YoY) decrease from June 2021 and July 2020 turnover figures, respectively. Foreign Exchange (FX) and Money Market transactions were the highest contributors to the FIC markets turnover in July 2021, jointly accounting for 64.87 percent of the total FIC markets turnover. Total FX market turnover in July 2021 was $12.50billion (N5.14trn), representing a MoM increase of 23.52 percent ($2.38bn) from the turnover recorded in June 2021($10.12bn).

The MoM increase in total FX market turnover was jointly driven by the 29.23 percent ($1.44bn) and 18.20 percent ($0.94bn) MoM increase in FX Spot and FX De-rivatives turnover respectively in July 2021 FMDQ disclosed that the MoM increase in FX Derivatives turnover was driven by MoM increase in turnover for FX Swaps, FX Forwards and Other Derivatives by 31.03 percent ($0.61bn), 19.24 percent ($0.30bn) and 57.65 percent ($0.42bn) respectively. However, FX Futures decreased by 40.72 percent ($0.38bn), resulting in the lower MoM increase in FX Derivatives turnover relative to the MoM increase in FX Spot turnover. Consequently, the contribution mix of FX Spot and FX Derivatives to total FX market turnover changed to 50.95 percent and 49.05 percent, respectively. In the OTC FX Futures market, the near month contract (NGUS JUL 28, 2021) with a total outstanding notional value (NV) of $0.24bn matured and was settled, whilst a new long-term (60M4) contract, NGUS JUL29, 2026 was introduced at a Futures price of $/N614.32. The total NV of open OTC FX Futures contracts as at July 30, 2021 stood at circa $4.22bilion representing a MoM decrease of 0.71 percent ($0.03bn)from its value as at June 30, 2021.

At the I&E FX Window, the Naira depreciated against the US Dollar, losing 0.02% ($/N0.8) to close at an average of $/N411.38 in July 2021 from $/N411.30 recorded in June 2021 whilst trading within a range of $/N410.38- $/ N411.75 in July 2021. Similarly, the Naira depreciated against the US Dollar in the parallel market, losing 1.16 percent ($/N5.83) to close at an average of $/N506.40 in July 2021, and trading within a range of $/N503.0-$/N525.00. Consequently, the average spread between the exchange rates in the formal (I&E FX Window) and unregulated (parallel) FX markets increased by $/N5.75 to $/N95.02 in July 2021.

In the primary markets, average discount rates for the 91-day and 182-day T.bills 6 remained flat at 2.50 percent and 3.50 percent respectively, whilst the average discount rate for 364-day T.bills declined by 0.96 percentage points (ppts), to 8.44 percent in July 2021. Similarly, the average discount rates for CBN OMO- 7bills for comparable tenors 8 remained flat at a range of 7.00% -10.10% in July 2021.




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