Fixed Income, Currency Markets Decline To N164.32trn In Q3
Turnover in the Nigerian fixed income and currency (FIC) markets dropped by 26.76 per cent to N14.07 trillion in September 2020, according to latest trading figures released at the weekend. Turnover at the FIC markets for the nine-month period ended September 30, 2020, declined by 7.69 per cent to N164.32 trillion by third quarter 2020 as against N178.0trillion recorded by third quarter 2019.
Transaction report and analysis for the month ended September 30, 2020 released at the weekend by FMDQ Exchange showed that total turnover in the fixed income and currency markets declined to N14.07 trillion in September 2020 compared with N19.21 trillion, a decrease of N5.14 trillion. The performance in September 2020 also represented a drop of 1.33 or N0.19 trillion from N14.26 trillion recorded in August 2020.
OMO bills and foreign exchange transactions were the highest contributors to the FIC markets in September 2020, jointly accounting for 54.48 per cent of the total FIC market turnover.
Total foreign exchange (forex) market turnover in September 2020 was $8.66 billion or N3.34 trillion, representing a decrease of 11.27 per cent or $1.10 billion from $9.76 billion or N3.76 trillion recorded in August 2020. The Central Bank of Nigeria (CBN) official spot forex rate closed at an average of $/N379.04, representing a 0.37 per cent or $/N1.39 appreciation of the exchange rate from $/N380.43 recorded in August 2020.
At the Investors’ and Exporters’ (I&E) forex window, the naira appreciated against the dollar, gaining 0.06 per cent or $/N0.25 to close at an average of $/N386.01 in September 2020.
Similarly, in the parallel market, the naira appreciated against the dollar gaining 3.90 per cent or $/N18.55) to close at an average of $/N456.74 last September.
Liquidity challenges in the forex market persisted, despite the interventions by the Central Bank of Nigeria (CBN) in form of forex sales to banks which are the dealing members.
Analysis of forex market turnover indicates that derivatives turnover decreased by 28.94 per cent or $2.04 billion while forex Spot turnover increased by 34.69 per cent or $0.94 billion in September.
In the OTC Forex Futures market, the near month contract-NGUS September 30, 2020 with a total outstanding notional value of $1.54 billion matured and was settled, while a new long-term 60-month contract, NGUS September 24 2025 was introduced at a rate of $/N589.09.
The total notional value of open OTC Forex Futures contracts as at September 30, 2020 stood at $11.13 billion, representing a 9.81 per cent decrease on the $12.34 billion notional value of open contracts as at August 31, 2020. This continued the downward trend in the notional values of open contracts since May 2020.
The total notional value of OTC Forex Futures contracts traded since inception stood at $50.41 billion as at September 30, 2020.
In the primary market, average discount rates for the 91-day and 182-day Treasury bills (T.bills) both decreased nu eight basis points to 1.09 per cent and 1.51 per cent respectively in September 2020, while the average discount rates for the 364-day T.bill decreased by 30 basis points to 2.97 per cent in September 2020. Similarly, the discount rates for OMO bills decreased by an average of three basis points to close at a range of 4.86 per cent to 8.92 per cent in September 2020.
In the primary market for sovereign bonds, the marginal rates for Federal Government of Nigeria (FGN) bonds decreased by an average of 84 basis points to close at a range of 6.00 per cent to 8.94 per cent in September 2020.
The total value of T.bills and OMO bills outstanding as at September 30, 2020 decreased by 1.45 per cent and 12.13 per cent to N2.72 trillion and N7.46 trillion respectively, while the total value of FGN bonds outstanding as at September 30, 2020 increased by 1.05 per cent to N10.54 trillion, leading to a 0.44 per cent increase in local public debt to N13.62 trillion as at September 30, 2020. This represented an increase of 16.01 per cent relative to September 2019.
Turnover for T.bills and OMO bills increased by 36.70 per cent and 11.34 per cent to N1.49 trillion and N4.32 trillion respectively, resulting in an increase in trading intensity to 0.54 for both securities in September 2020 from 0.40 and 0.44 respectively in August 2020. Conversely, FGN Bonds turnover decreased by 8.12 per cent to N2.15 trillion in September 2020, resulting in a marginal decrease in its trading intensity to 0.21 as against 0.23 in August 2020.
There was a general decrease in yields across the sovereign yield curve between August and September 2020 except on the three-month tenor of the curve. Furthermore, the highest spreads were recorded on the securities with two-year and three-year maturities. Weighted average yields on short-term, medium-term and long-term maturities decreased by 5.18 per cent, 1.27 per cent and 0.24 per cent respectively in September 2020. Also, inflation-adjusted yields remained negative across the short, medium and long-term tenors in September 2020.
