Investment in the Fixed Income and Currency Market recorded a boost with total turnover in the secondary market rising to N110.25 trillion, an amount enough to finance Nigeria’s budget in 2024 four times.
Turnover increased appreciably from N21.07 trillion in January to N48.87 trillion, representing an increase of 131.94 percent.
Investors’ appetite for fixed income instruments has been spurred by the tightening policy measure of the Central Bank’s Monetary Policy Committee which has raised interest rates significantly since the beginning of the year.
The MPC on May 21 raised the MPR by 150 basis points to 26.25 per cent from 24.75 per cent in March. It retained the asymmetric corridor around the MPR to +100/-300 basis points. It also retained the Cash Reserve Ratio of Deposit Money Banks at 45.00 per cent while Liquidity Ratio remained at 30.00 per cent.
A communiqué issued by the MPC after the meeting disclosed that the key focus of the MPC remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation.
According to the predictions of financial experts that the MPC’s tightening could increase the influx of funds into the economy by foreign investors, more inflow of funds has been injected into the economy through investments in the money, spurred by high rates.
“Given these circumstances, Cowry Research anticipates a potential pause in the rate hike cycle at the next committee meeting in July. This pause could provide a necessary breather to assess the cumulative impact of the previous hikes on the economy and to strike a balance between curbing inflation and fostering growth”
“This trend could encourage investors to further commit funds into Nigeria’s economy, aligning with the goal of achieving a $1 trillion economy by 2030,” Financial experts at Cowry Assets said in a review.
They however warned that this focus on price stability has come at the expense of economic growth, particularly in the context of a weakening naira and high import costs.
Given these circumstances, Cowry Research anticipates a potential pause in the rate hike cycle at the next committee meeting in July. This pause could provide a necessary breather to assess the cumulative impact of the previous hikes on the economy and to strike a balance between curbing inflation and fostering growth.
A further breakdown of performance of investors in the various market segments in the review period indicated that the Debt Management Office sold Treasury Bills worth N5.66 trillion, with funds rising from N381.22 billion in January to N2.69 trillion in March. The DMO sold N2.59 trillion worth of T. Bills in February.
However, participation of Corporates in the Non-sovereign securities in the first quarter recorded a lull as activities only took place in January with N5.5 billion worth of securities listed. No activities were recorded in February and March in that market segment.
Monthly performance review by segments
January 2024
Secondary market turnover on FMDQ Exchange in January 2024 was N21.07trn, representing a MoM decrease and YoY increase of 41.16 percent (N14.74trn) and 61.58 percent (8.03trn) from December 2023 and January 2023 figures, respectively. Foreign Exchange (FX), CBN Bills and Money Market (MM) transactions dominated secondary market activity, accounting for 81.05% of the total secondary market turnover in January 2024.
Sovereign Securities
The DMO sold T.bills valued at N381.22bn across its auctions in January 2024, representing a 67.83 percent (N803.75bn) MoM decrease on the value of T-bills sold across its auctions in December 2023 (N1,184.97 bn). Similarly, the DMO sold FGN Bonds worth N418.20bn via the reopening of three (3) 10Y and one (1) 15Y FGN Bonds in January 2024.
The total sale represents a 16.17 percent oversubscription of the amount offered1 and a 52.83 percent (N144.57bn) MoM increase on the amount sold in December 2023 (N273.63bn) across two (2) 10Y, one (1) 15Y, and one (1) 30Y FGN Bond maturities. In January 2024, the CBN sold OMO Bills worth N1, 008.20bn, representing a 900.20 percent (N907.40bn) MoM increase on the value of OMO Bills sold across its auctions in December 2023 (N100.80bn).
Non-Sovereign Securities
The total value of Non-Sovereign bonds listed on FMDQ Exchange in January 2024 was N5.50bn, compared to the previous month which witnessed no listings. Non-Sovereign bonds listings emanated solely from a corporate issuer in the Quick Service Restaurant sector. As a result, the total outstanding value of Non-Sovereign bonds increased MoM by 0.25 percent (N5.50bn) from N2, 204.01bn in December 2023 to N2, 209.51bn in January 2024.
The total value of CPs quoted on FMDQ Exchange in January 2024 was N168.89bn, representing a MoM decrease of 31.44 percent (N77.44bn) from the value of CPs quoted in December 2023. Quoted CPs were issued by institutions from various sectors including Financial Services (6), Manufacturing (3), Health & Pharmaceuticals (3), Agriculture (2), Retail (2), Construction (1), and General Commerce (1). As a result, the total outstanding value for CPs increased MoM by 8.12 percent (N66.71bn) to N887.96bn in January 2024.
February 2024 Snapshot
Secondary market turnover on FMDQ Exchange in February 2024 was N40.31trn, representing a MoM and YoY increase of 91.31 percent (N19.24trn) and 174.97 percent (25.65trn) from January 2024 and February 2023 figures, respectively. Foreign Exchange (FX) and Money Market (MM) transactions dominated secondary market activity, jointly accounting for 73.43 percent of the total secondary market turnover in February 2024.
Sovereign Securities
The DMO sold T.bills valued at N2, 589.35bn across its auctions in February 2024, representing a 579.23 percent (N2, 208.13bn) MoM increase on the value of T-bills sold across its auctions in January 2024 (N381.22bn). Similarly, the DMO sold FGN Bonds worth N1, 494.91bn via new issuance of one (1) 7Y and one (1) 10Y FGN Bonds in February 2024. The total sale represents a 40.20% under subscription of the amount offered1 and a 275.46 percent (N1, 076.71bn) MoM increase on the amount sold in January 2024 (N418.20bn) across three (3) 10Y and one (1) 15Y FGN Bond maturities. In February 2024, the CBN did not conduct any public OMO Bills auction in the primary market, compared to N1, 008.20bn worth of OMO Bills sold across its auctions in January 2024.
Non-Sovereign Securities
There were no new listings of Non-Sovereign bonds on FMDQ Exchange in February 2024, compared to new NonSovereign bonds listings worth N5.50bn in January 2024. As a result, the total outstanding value of Non-Sovereign bonds remained unchanged at N2, 209.51bn in February 2024.
The total value of CPs quoted on FMDQ Exchange in February 2024 was N50.33bn, representing a MoM decrease of 70.20 percent (N118.56bn) from the value of CPs quoted in January 2024 (N168.89bn). Quoted CPs were issued by institutions from various sectors including Agriculture (4), Financial Services (2), and Manufacturing (2).
However, CPs worth N147.54bn matured and were redeemed resulting in a 10.95 percent (N97.21bn) MoM decrease in the total outstanding value of CPs from N887.96bn in January 2024 to N790.75bn in February 2024.
March performance review
Market Turnover by Products Secondary market turnover on FMDQ Exchange in March 2024 was N48.87trn, representing a MoM and YoY increase of 21.22 percent (N8.55trn) and 100.67 percent (24.51trn) from February 2024 and March 2023 figures, respectively. Foreign Exchange (FX) and Money Market (MM) transactions dominated secondary market activity, jointly accounting for 75.36 percent of the total secondary market turnover in March 2024.
Sovereign Securities
The DMO sold T.bills valued at N2,668.89bn across its auctions in March 2024, representing a 3.07 percent (N79.54bn) MoM increase on the value of T-bills sold across its auctions in February 2024 (N2,589.35bn). Similarly, the DMO sold FGN Bonds worth N608.86bn (inclusive of N133.20bn non-competitive bids) via the issuance of a new 3Y, as well as the re-openings of a 7Y and 10Y FGN Bonds in March 2024. The total sale represents a 35.30% oversubscription of the amount offered1 and a 59.27% (N886.05bn) MoM decrease on the amount sold in February 2024 (N1, 494.91bn) across the 7Y and 10Y FGN Bond maturities. In March 2024, the CBN sold OMO Bills worth N1, 056.30bn at auction in the primary market.
Non-Sovereign Securities
There were also no new listings of Non-Sovereign bonds on the FMDQ Exchange in March 2024. However, Corporate bonds worth N15.00bn matured and were redeemed resulting in a 0.68% (N15.00bn) MoM decrease in the value of Non-Sovereign Bonds outstanding to N2,194.51bn in March 2024.
The total value of CPs quoted on the FMDQ Exchange in March 2024 was N112.62bn, representing a MoM increase of 123.76% (N62.29bn) from the value of CPs quoted in February 2024.
Quoted CPs was issued by institutions from various sectors including Financial Services (10), Manufacturing (4), Retail (2), Health & Pharmaceuticals (1), Agriculture (1), Technology (1), and Chemical Supply & Oil Field Service (1). However, N39.26bn CPs matured and were redeemed resulting in a 9.28% (N73.36bn) MoM increase in the total outstanding value to N864.11bn in March 2024.
As part of efforts to attract and accelerate inflow of foreign currency into the economy, the Federal Government recently unveiled plans to float a $10 billion Nigeria Diaspora Fund.
The move is expected to among other things, improve FX liquidity in the system as well as strengthen the Naira exchange rate.
The Minister of Industry, Trade and Investment, Doris Uzoka-Anite, in a notice shared on her X handle (formerly Twitter), revealed that the Nigeria Diaspora Fund Multi-sectoral Investment Initiative would be designed and managed by fund managers selected through an Expression of Interest (EOI) exercise where winners are expected to emerge.
Owing to this, the ministry has issued an EOI Expression to fund managers for the development and establishment of a multisectoral, multilateral private sector-led investment fund to form the $10 billion Nigeria Diaspora Fund.
The Minister of Finance and Coordinating Minister for the Economy, Wale Edun, also said recently that Nigerians living in diaspora remained a key source of foreign capital projection, adding that a diaspora bond would be launched by June.
“The Minister of Finance and Coordinating Minister for the Economy, Wale Edun, also said recently that Nigerians living in diaspora remained a key source of foreign capital projection, adding that a diaspora bond would be launched by June”
Meanwhile, Uzoka-Anite explained that the 10-year fund, which would be extendable by two years, offers an expected investment period of three to five years with follow-on investments thereafter.
The minister explained that the proposed fund would be managed by fund managers that satisfy the criteria set out in the EOI, adding that the latter would propose fund structures that will focus on various sectors and stages of investments.
She said subject to the preferences indicated by the managers, the fund would contain multiple investment platforms designed to offer investors different mechanisms for participating in the country’s economic transformation.
Uzoka-Anite further clarified that the fund was intended to encourage remittances, attract investments and facilitate philanthropic endeavours aimed at supporting various sectors including infrastructure, healthcare, education and entrepreneurship in the country.
She noted that the intervention remained part of broader efforts to strengthen ties between Nigeria and its diaspora, promote national development, and harness the potential of The Diaspora Community as agents of change and development for Nigeria.
The minister also pointed out that the national launch of the fund would serve as an opportunity to raise interest in and awareness of the fund towards mobilising capital investment from the diaspora community.
Among several other requirements, the tender stated that Greenfield funds may apply provided the promoters demonstrate a deep experience in fund management, investment execution, multilateral development, and a detailed understanding of the Nigerian environment.
Foreign firms are also encouraged to participate, preferably by partnering with reputable local fund managers that meet any or all the requirements.
However, interested foreign firms must be able to demonstrate ability for frontier and emerging market investment experience.