In a space of 10 months in 2021, turnover in the Fixed Income and Currencies market grew to about N163 trillion as Foreign Exchange and Money Market instruments remained the highest drivers of market turnover. Bamidele Famoofo reports.
Turnover in the Fixed Income and Currencies market stood at N162.59 trillion in a period of 10 months ended October 31, 2021, as investors grabbed N47trillion from the Foreign Exchange segment of the market in the same period.
Turnover in October was N17.21trillion, representing a Month-on -Month (MoM) decrease of 28.38% (N6.82trn) and a Year-on-Year (YoY) increase of 6.43% (N1.04trn) from turnover in September 2021 and October 2020, respectively. Turnover in October accounted for about 10.6% of aggregate market turnover in 10 months.
Turnover in the FX segment accounted for 28.9% of total turnover in the FIC markets in the review period ended October 31, 2021.
Foreign Exchange and Money Market (mainly Repurchase Agreements) transactions remained the highest drivers of market turnover, jointly accounting for 58.33% of the total FIC markets turnover in October 2021.
MONTH-ON-MONTH REVIEW
Turnover in the FIC markets in September 2021 was N24.03trillion, representing a significant increase of 94.89% (N11.70trn) month-on-month (MoM) and 70.79% (N9.96trn) year- on-year (YoY) from the turnover in August 2021 and September 2020 respectively.
Foreign Exchange and Money Market transactions remained the highest drivers of turnover, jointly accounting for 54.22% of the total FIC markets turnover in September 2021.
Open Market Operation and CBN Special Bills’ contribution to FIC Market turnover, increased by 12.52 percentage points (“ppts”) to 23.96%. Total FX market turnover in September 2021 was $17.08billion (N7.05trn), representing a MoM increase of 87.08 percent ($7.95bn) from the turnover recorded in August 2021 ($9.13bn).
The month-on-month increase in total FX market turnover was jointly driven by the 68.61% ($3.33bn) and 108.02% ($4.62bn) MoM increase in FX Spot and FX Derivatives turnover respectively in September 2021.
The MoM increase in FX Derivatives turnover was driven by MoM increase in turnover across all product types, which include FX Swaps, which grew by 34.32%; and FX Forwards, 54.75%. FX Futures recorded a significant growth of 840.07% while Other Derivatives jumped by 128.88%. The contribution of FX Derivatives to total FX market turnover increased by 5.25 percentage points to 52.12% in September 2021.
In August , turnover was N12.33trn, representing a 27.34% (N4.64trn) MoM decrease from turnover in July 2021, and a 13.53% (N1.93trn) YoY2 decrease from the August 2020 turnover figure.
Foreign Exchange and Money Market transactions remained the highest drivers of turnover, jointly accounting for 67.44% of the total FIC markets turnover in August 2021.
Total FX market turnover in August 2021 was $9.13bn (N3.76trn), representing a MoM decrease of 26.96% ($3.37bn) from the turnover recorded in July 2021 ($12.50bn).
“Foreign Exchange and Money Market transactions were the highest contributors to the FIC markets turnover in June 2021, jointly accounting for 64.18% of the total FIC markets turnover
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In July, turnover stood at N16.97trn, representing a 10.84% (N1.66trn) MoM increase and a 9.35% (N1.75trn) YoY decrease from June 2021 and July 2020 turnover figures, respectively.
Foreign Exchange and Money Market transactions were the highest contributors to the FIC markets turnover in July 2021, jointly accounting for 64.87% of the total FIC markets turnover.
Total FX market turnover in July 2021 was $12.50bn (N5.14trn), representing a MoM increase of 23.52 percent ($2.38bn) from the turnover recorded in June 2021 ($10.12bn).
Investors injected N15.31trn into the markets in the month of June, representing a MoM increase of 49.51% (N5.07trn) and a YoY decrease of 7.04% (N1.16trn).
Foreign Exchange and Money Market transactions were the highest contributors to the FIC markets turnover in June 2021, jointly accounting for 64.18% of the total FIC markets turnover.
Total FX market turnover in June 2021 was $10.12billion (N4.16trn), representing a MoM increase of 38.44% ($2.81bn) from the turnover recorded in May 2021 ($7.31bn).
Turnover in May was N10.24trn, representing a MoM and YoY decrease of 36.71% (N5.94trn) and 13.07 percent (N1.54trn) respectively.
Foreign Exchange and Money Market transactions were the highest contributors to the FIC markets turnover in May 2021, jointly accounting for 63.13% of the total FIC markets turnover.
Total FX market turnover in May 2021 was $7.31bn (N3.63trn), representing a MoM decrease of 41.24% ($5.13bn) from the turnover recorded in April 2021 ($12.44bn).
Turnover in the FIC markets for the month ended April 30, 2021 was N16.18trn, representing a MoM and YoY decrease of 17.24% (N3.37trn) and 3.11% (N0.52trn) respectively.
Foreign Exchange and Money Market transactions were the highest contributors to the FIC markets in April 2021, jointly accounting for 54.57% of the total FIC markets turnover.
Total FX market turnover in April 2021 was $12.44bn (N5.11trn), representing a MoM increase of 0.73% ($0.09bn) from the turnover recorded in March 2021 ($12.35bn).
Turnover in March was N19.55trn, representing a MoM increase of 10.20% (N1.81trn) and a YoY decrease of 32.54% (N9.43trn). Foreign Exchange (FX) and OMO bills transactions were the highest contributors to the FIC markets in March 2021, jointly accounting for 56.52% of the total FIC markets turnover.
Total FX market turnover in March 2021 was $12.35bn (N5.07trn), representing a MoM increase of 16.51% ($1.75bn) from the turnover recorded in the previous month ($10.60bn).
Turnover in the FIC markets for the month ended February 26, 2021 was N17.74trn, representing a MoM increase of 36.15% (N4.71trn) and a YoY decrease of 24.41% (N5.73trn).
Foreign Exchange and OMO bills transactions were the highest contributors to the FIC markets in February 2021, jointly accounting for 61.15% of the total FIC markets turnover. Total FX market turnover in February 2021 was $10.60bn (N4.29trn), representing a MoM increase of 27.86% ($2.31bn) from the turnover recorded in the previous month4 ($8.29bn).
For the month ended January, 2021, turnover was N13.03trn, representing a MoM and YoY decrease of 34.49% (N6.86trn) and 43.81% (N10.16trn) respectively.
Foreign Exchange and OMO bills transactions were the highest contributors to the FIC markets in January 2021, jointly accounting for 55.42% of the total FIC market turnover.
Total FX market turnover in January 2021 was $8.29bn (N3.26trn), representing a significant MoM decrease of 57.96% ($11.43bn) from the turnover recorded in December 2020 ($19.72bn), attributable to the reduced interventions by the CBN in the FX market as well as a decline in foreign portfolio investment net flows in the review period.
OCTOBER IN RETROSPECT
Total FX market turnover in October 2021 was $13.48bn (N5.59trn), representing a MoM decrease of 21.08% ($3.60bn) from the turnover recorded in September 2021 ($17.08bn).
The MoM decrease in total FX market turnover was jointly driven by the 13.22% ($1.08bn) and 28.33% ($2.52bn) MoM decrease in FX Spot and FX Derivatives turnover respectively in October 2021.
The MoM decrease in FX Derivatives turnover was driven by MoM decrease in turnover for FX Swaps and FX Futures by 49.86% ($1.92bn) and 33.15% ($0.89bn) respectively. However, FX Forwards increased by 12.08% ($0.29bn). Consequently, the contribution of FX Derivatives to total FX market turnover decreased by 4.78ppts to 47.34% in October 2021.
In the OTC FX Futures market, the near month contract (NGUS OCT 27, 2021) expired and open positions with a total notional value (NV) of $0.20bn were settled. A far month (60M4) contract, NGUS OCT 28, 2026 was introduced at a Futures price of $/N614.32.
The total NV of open OTC FX Futures contracts as at October 29, 2021 stood at circa $5.77bn, representing a MoM increase of 17.28% ($0.85bn) from its value as at September 30, 2021.
In the FX Market, the Naira depreciated against the US Dollar, losing 0.57% ($/N2.35) to close at an average of $/N415.10 in October 2021, from $/N412.75 recorded in September 2021. Further, the Naira traded within a range of $/N413.55 – $/N422.07 in October 2021, compared to $/N410.67 – $/N414.90 recorded in September 2021.
In the primary markets, average discount rates for the 91-day and 182- day T.bills 6 remained flat at 2.50% and 3.50% respectively, whilst the average discount rate for 364-day T.bills decreased by 0.18 ppts, to 7.12% in October 2021, from 7.30% recorded in September 2021. Similarly, the average discount rates for CBN OMO7 bills with comparable tenors8 remained flat within the range of 7.00% – 10.10% in October 2021.
In October 2021, the coupon rates of new 10Y9, 20Y and 30Y FGN10 Bond issues increased by an average of 0.15ppts to close at a range of 11.65% – 13.20% from 11.60% – 13.00% recorded in September 2021.
