BY BAMIDELE FAMOOFO
Turnover in the FIC markets in January 2022 was N14.13trn, representing a month-on-month ( MoM) decrease of 31.21 percent when compared with N6.41trillion recorded in December 2021. The figure also represents an increase of 8.44 percent or N1.10 trillion year-on-year (YoY) from turnover in January 2021.
Foreign Exchange (FX) and Money Market (mainly Repurchase Agreements (Repos) transactions were the highest drivers of market turnover, jointly accounting for 57 percent of the total FIC markets turnover in January 2022.
Total FX market turnover in January 2022 was $10.13 billion (N4.22trn), representing a MoM decrease of 38.12 percent ($6.24bn) from the turnover recorded in December 2021 ($16.37bn).
The month-on-month decrease in total FX market turnover was jointly driven by the 25.03 percent ($2.18bn) and 53.02 percent ($4.07bn) 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 69.97 percent ($3.12bn), 73.76 percent ($0.54bn) and 16.74 percent ($0.42bn), respectively. Consequently, the contribution of FX Derivatives to total FX market turnover decreased by 11.27 percentage points (ppts) to 35.61 percent 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 $0.54 billion 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 $4.90 billion representing a MoM and YoY decrease of 8.07 percent ($0.43bn) and 31.28% ($2.23bn) respectively from its value as at December 31, 2021 and January 31, 2021.
In the FX Market, the Naira appreciated against the US Dollar, gaining 0.06% ($/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 – $/N435.00 recorded in December 2021.
In the primary markets, average discount rates for the 91-day T.bills remained constant at 2.49 percent in January 2022. The 182-day T.bills declined by 0.08ppts to 3.37 percent whilst the 364-day T.bills increased by 0.50ppts. Average discount rates for CBN OMO bills with comparable tenors remained flat within the range of 7.00% – 10.10% in January 2022.
In January 2022, the coupon rates of reopened issues of 10 years and 20 years FGN Bonds decreased by 0.15ppts and 0.10ppts to 11.50 percent and 13.00 percent from 11.65 percent and 13.10 percent recorded in December 2021 respectively.
In January 2022, OMO bills were the most traded FI securities despite the 23.01 percent (N0.81trn) 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 12.93 percent (N0.19trn), to N1.66trn in January 2022.
In January 2022, T.bills within the more than six months and 12 months tenor range were the most traded sovereign debt securities, accounting for 23.06 percent (N0.51trn) of the total turnover for sovereign debt securities, while FGN Bonds with term-to maturity of 20 years or higher were the most traded long-term sovereign debt securities, accounting for 22.72 percent (N0.50trn) of the total turnover for sovereign debt securities.
In January 2022, the yield spread between the 3 months and 30 years 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 24.11 percent (N1.22trn) to N5.06trn in January 2022. The MoM decrease was driven by the 24.25 percent (N1.21trn) and 14.29 percent (N0.01trn) 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 9.91 percent and 9.33 percent in January 2022.
Despite the decrease in total turnover for fixed income products, the total number of executed trades reported on FMDQ Trading Systems increased MoM by 26.37 percent (877) to 4,203 in January 2022, driven by the MoM increase in trading activity across all fixed income products excluding T.bills which decreased MoM by 21.86 percent. Daily average trade size in January 2022 was relatively flat compared to data recorded in December 2021.
