The spot foreign exchange (FX) market in Nigeria experienced a decrease in turnover in October 2023, according to the FMDQ Markets Monthly Report. The turnover for the month was $4.66 billion (N3.66 trillion), which represents a 14.96 percent decrease compared to September 2023 when the turnover was $5.48 billion.
The report also highlighted that the US Dollar appreciated against the Naira during the month. The spot exchange rate increased by 5.34 percent to close at an average of $1 to N797.43 in October, compared to $1 to N757.02 in September.
The exchange rate volatility also increased in October, with the Naira trading within a range of $1 to N741.85 to $1 to N993.82, compared to $1 to N722.39 to $1 to N780.00 in September.
In the fixed income (FI) market, the turnover for October 2023 was N11.91 trillion, representing a 29.04 percent increase compared to September 2023 when the turnover was N9.23 trillion.
The increase in turnover was driven by a significant increase in turnover across OMO Bills, CBN Special Bills, and Other Bonds, offsetting the decline in T.Bills and FGN Bonds transactions. The report also noted that the trading intensity (TI) for T.Bills and FGN Bonds decreased slightly compared to the previous month.
The TI for T.Bills decreased by 0.06 to 0.42, while the TI for FGN Bonds decreased by 0.01 to 0.11. Overall, the FMDQ Markets Monthly Report for October provides insights into the performance of the spot FX market and the FI market in Nigeria.
“As a result, the trading intensity (TI) for T.Bills and FGN Bonds decreased MoM by 0.06 and 0.01 to 0.42 and 0.11, respectively.
“T.bills and FGN Bonds within the >6M – 12M and >20Y tenors respectively were the most traded sovereign FI securities, accounting for 33.97 percent (N1.41trillion) and 19.06 percent (N0.79 trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
“In October 2023, the yield spread between the 3M and 30Y sovereign FI securities decreased by 3.13ppts to 8.01ppts, indicating a flattening of the sovereign yield curve.
“Real (inflation-adjusted) yields remained negative across the yield curve in October 2023, declining further on the back of surging inflation which remains higher than policy interest rates and outpace increase in nominal yields,” it said.
According to the report, total turnover in the Money Market (MM) segment decreased MoM by 38.24 percent (N3.04 trillion) to N4.91 trillion in October 2023.
FMDQ noted that the MoM decrease was driven by the 36.03 percent (N2.72 trillion) and 80.00 percent (N0.32 trillion) decrease in Repos/Buy-backs and Unsecured Placement/Takings transactions, respectively.
“The average O/N rate and OPR rate (secured lending rate) decreased MoM by 6.62ppts and 6.53ppts respectively, to close at an average of 4.50 percent and 3.87 percent in October 2023,” it said.
Total turnover in the FX derivatives market segment was $1.55 billion (N1.22 trillion) in October 2023, representing a MoM decrease of 39.27 percent ($1.00 billion) from the September 2023 figures.
The Exchange said that the MoM decrease in the FX derivatives turnover was jointly driven by the 40.19 percent ($0.86 billion), 28.00 percent ($0.07 billion), and 52.94 percent ($0.09 billion) decrease in transactions across FX Swaps, FX Forwards, and FX Futures, respectively.
Non-Deliverable Forwards market, it noted that the near-month contract (NGUS OCT 25, 2023) expired and open positions with a total notional value (NV) of $0.74 billion were settled.
“As a result, the cumulative NV of open Cleared Naira-Settled Non-Deliverable Forwards contracts decreased for the fourth consecutive month to circa $4.16bn as of October 31, 2023./
“This represents a MoM decrease of 15.27% ($0.75 billion) and YoY increase of 1.22 percent ($0.05 billion) from its value as of September 29, 2023 and August 31, 2022, respectively,” it noted.