The interest of investors in the fixed-income and currency market recorded a significant surge in February as turnover on the FMDQ platform increased to N40.31 trillion from N21.07 trillion in January 2024.
Secondary market turnover on FMDQ Exchange in February 2024 was N40.31trn, representing a month-on-month and year-on-year increase of 91.31 percent (N19.24trn) and 174.97 percent (25.65trn) from January 2024 and February 2023 figures, respectively.
Foreign Exchange and Money Market transactions dominated secondary market activity, jointly accounting for 73.43 percent of the total secondary market turnover in February 2024.
Total spot market turnover for all products traded in the secondary market in February 2024 was N33.48trn, representing a MoM increase of 98.58 percent (N16.62trn) from January 2024 figures.
The MoM increase in total spot market turnover was jointly driven by an increase in turnover across all spot market product categories, with contributions by FX, MM and FI transactions increasing MoM by 216.87% (N8.74trn), 77.18% (N4.35trn) and 48.99% (N3.52trn), respectively.
The uptick in MM turnover was solely driven by the MoM increase in Repos/Buy-backs, offsetting the MoM decrease in Unsecured Placement/Takings transactions. Similarly, the surge in FI turnover was jointly driven by a MoM increase across all FI products excluding CBN Special Bills and FGN Bonds which declined in the review period.
Spot FX market turnover in February 2024 was $8.54bn (N12.77trn), representing a MoM increase of 95.47% ($4.17bn) from the turnover recorded in January 2024 ($4.37bn).
In the FX Market, the US Dollar steeply appreciated against the Naira, with the spot exchange rate ($/N) increasing by 53.89% ($/N534.05) to close at an average of $/N1,525.01 in Feb. 2024 from $/N990.96 recorded in Jan. 2024. (See Chart 8) Further, exchange rate volatility decreased in February 2024 as the Naira traded within an exchange rate range of $/N1,418.78 – $/N1,665.50 compared to $/N838.95 – $/N1,482.57 recorded in January 2024.
FI market turnover in February 2024 was N10.71trn, representing a MoM increase of 48.99% (N3.52trn) from the turnover recorded in January 2024 (N7.19trn).
The MoM uptick in the FI market turnover was jointly driven by the 113.98% (N2.24trn), 59.44 percent (N1.36trn), and 154.09 percent (N0.05trn) increase in turnover across T.Bills OMO Bills and Other Bonds*, offsetting the 3.33 percent (N0.03trn) and 5.07 percent (N0.10trn) decline across CBN Special Bills and FGN Bonds transactions, respectively. As a result, the trading intensity (TI) for T.Bills increased MoM by 0.27bps to 0.57, whilst TI for FGN Bonds decreased MoM by 0.01bps to 0.09.
T.bills and FGN Bonds within the >6M – 12M and >10Y – 15Y tenors respectively were the most traded sovereign FI securities, accounting for 55.57 percent (N3.39trn) and 12.13 percent (N0.74trn) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
In February 2024, the sovereign yield curve experienced an increase in level and a corresponding 6.56ppts MoM decrease in yield spread1 to 2.81ppts, indicating a bearish flattening of the yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in February 2024, declining further on the back of surging inflation which remains higher than policy interest rates and continues to outpace increase in nominal yields.
Total turnover in the MM segment increased MoM by 77.18 percent (N4.35trn) to N9.99trn in February 2024. The MoM increase was solely driven by the 78.81 percent (N4.40trn) increase in Repos/Buy-backs, offsetting the 73.59 percent (₦0.04trn) decrease in Unsecured Placement/Takings transactions, respectively.
The average O/N rate and OPR rate (secured lending rate) increased MoM by 3.57ppts and 3.70ppts respectively, to close at an average of 21.13 percent and 20.19 percent in February 2024.
Total turnover in the FX derivatives market segment in February 2024 was $4.57bn (₦6.83trn), representing a MoM increase of 0.22 percent ($0.01bn) from January 2023 figures.
The MoM increase in the FX derivatives turnover was solely driven by the 626.26% ($0.58bn) increase in FX Forwards turnover, offsetting the 12.73 percent ($0.57bn) decline in FX Swaps transactions and lack of activity in the FX Futures market, respectively.
