Loss reputed as largest in 4 years
The Fixed Income and Currency market, on the platform of the FMDQ OTC Securities Exchange, has recorded its biggest drop in turnover in four years, as at the end of January 2019.
The turnover, according to figures made available by FMDQ OTC, implied a 14.85 per cent or N2.63 trillion decrease in the first month of business activities in 2019.
An analysis of the data showed that it was the first time in the history of the market that such a sharp drop would be recorded.
Investigations revealed that the closest to the drop recorded in January 2019 was in 2017, when the turnover dropped by 13.09 per cent or N1.65 trillion. History has also shown that it is the culture in the FIC market for investment activities to start in a lower form than it ended the previous year.
Records, according to the data, have shown that turnover of transactions carried out in the FIC market for the month of January 2017 amounted to N10.65 trillion, a 13.09 per cent N1.65 trillion reduction; while for the month of January 2018, the turnover amounted to N11.71 trillion, a 1.28 per cent decrease (N0.15 trillion) from the value recorded in December 2017.
In the last four years, however, turnovers have somewhat appreciated, except in 2016 when it recorded a 33.56 per cent or N3.71 trillion drop. Year-on-year, turnover increased by 28.78 per cent or N3.37 trillion as at January, 2019.
A breakdown of investment activities in the market in January 2019 showed that the Treasury Bills and Foreign Exchange market segments remained the major drivers of turnover in the FIC market, jointly accounting for 78.69per cent of turnover in January and higher by 2.21 percentage points from their contribution to the turnover, in December (76.48 per cent).
Total FX market turnover in January 2019 was $14.91 billion, representing a 35.36 per cent ($3.89 billion) increase from the turnover recorded in December 2018 ($11.01 billion).
According to the FMDQ, “the increase in FX turnover in January can be attributed to the 150.61 per cent and 0.61 per cent rise in Member-Clients and Inter-Member trades, which were only marginally offset by the 27.55 per cent decrease in Member-CBN3 trades.”
“Contrastingly, turnover at the Investors and Exporters FX Window in January 2019 recorded 22.42 per cent ($1.11 billion) and 26.86 per cent ($1.41 billion) decreases, respectively, to close at $3.84 billion from the $4.95 billion and $5.25 billion recorded in December and January 2018 respectively,” FMDQ explained.
Analysis of FX turnover by product type showed that FX Spot was the main driver of the overall increase in FX turnover, with an increase of 462.93 per cent ($7.84 billion).
FMDQ also disclosed that the increase in FX Spot could be attributed to FX inflow for investments in the higher yielding FGN5 fixed income securities.
Conversely, FX Derivatives recorded a decrease of 42.34 per cent ($3.95 billion), driven mainly by a 44.89 per cent decline in Member-CBN FX Swaps’ turnover; while the turnover in FX Futures also declined by 35.66 per cent.
