Outstanding CPs on FMDQ exchange reach N1.03trn, showing 8.50% MoM increase

The total outstanding value of admitted Commercial Papers (CPs) on FMDQ Exchange increased in August 2023 by 8.50 per cent (N80.72 billion) to reach N1.029 trillion, according to the latest financial markets monthly report.

This is compared to N949.26 billion in July 2023, N831.94 billion in June, and N788.43 billion in May. The value of CPs quoted on the exchange in August was N239.04 billion, representing a month-on-month increase of 103.75 per cent (N121.72 billion) from July.

The report also revealed that CPs were issued by institutions from various sectors, including Financial Services, Manufacturing, Agriculture, Commodities Trading, Real Estate, Retail, Oil & Gas, and Transportation.

Additionally, corporate bonds worth N46 billion were listed on FMDQ Exchange in August, compared to no listings in July.

This resulted in a month-on-month increase of 0.07 per cent (N1.20 billion) in the total outstanding value for corporate bonds, which reached N1.795 trillion in the review month.

In terms of secondary market turnover, FMDQ Exchange saw a decrease of 11.24 per cent (N2.24 trillion) in August 2023 compared to July 2023. However, there was a year-on-year increase of 13.84 per cent (N2.15 trillion) compared to August 2022..

Foreign Exchange (FX), Money Market (MM) and CBN Bills transactions dominated secondary market activity, accounting for 80.99percent of the total secondary market turnover in August 2023.

Total spot market turnover for all products traded in the secondary market was N16.54trillion in August 2023, representing a MoM decrease of 10.45 per cent (N1.93trillion) from July 2023 figures.

The MoM decrease in total spot market turnover was jointly driven by a decline in turnover across all spot market products, with contributions by FX, MM and FI transactions decreasing MoM by 7.64per cent (N0.28trillion), 5.36per cent (N0.34trillion) and 15.56per cent (N1.31trillion), respectively.

According to the FMDQ report, the decline in MM turnover was majorly driven by a decrease in Repos/Buy-backs, offsetting the MoM improvement in Unsecured Placement/Takings transactions. Likewise, the downtrend in FI turnover was driven by a MoM decrease across all FI products, excluding CBN Special Bills which increased in the review period. Spot FX market turnover was $4.37billion (N3.34trillion) in August 2023, representing a MoM decrease of 6.13percent ($0.29billion) from the turnover recorded in July 2023 ($4.66billion).

In the FX Market, the US Dollar depreciated against the Naira, with the spot exchange rate ($/N) decreasing by 0.84percent ($/N6.46) to close at an average of $/N763.04 in August 2023 from $/N769.51 recorded in July 2023. Exchange rate volatility decreased in August 2023 as the Naira traded within an exchange rate range of $/N738.18 – $/N789.08 compared to $/N740.08 – $/N803.90 recorded in July 2023.

Fixed Income (FI) market turnover was N7.12trillion in August 2023, representing a MoM decrease of 15.54percent (N1.31trillion) from the turnover recorded in July 2023 (N8.43trillion).

The MoM decrease in the FI market turnover was driven by the 33.69per cent (N0.92trillion), 4.99per cent (N0.12trillion), 36.79per cent (N0.89trillion) and 36.09per cent (N0.01trillion) decline in turnover across T.Bills, OMO Bills, FGN Bonds and Other Bonds, offsetting the 85.08percent (N0.63trillion) MoM uptick in CBN Special Bills transactions, respectively. As a result, the trading intensity (TI) for T.Bills and FGN Bonds decreased MoM by 0.20 and 0.05 to 0.39 and 0.08, respectively.

T.bills and FGN Bonds within the >6M – 12M and >20Y tenors respectively were the most traded sovereign FI securities, accounting for 37.82per cent (N1.26trillion) and 30.83percent (N1.03trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.

In August 2023, the yield spread between the 3M and 30Y sovereign FI securities increased by 1.42ppts to 10.63ppts, indicating a steepening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in August 2023, declining further on the back of rising inflation which remains higher than policy interest rates and outpace increase in nominal yields.

The monthly financial markets report also shows that total turnover in the MM segment decreased MoM by 5.36percent (N0.34trillion) to N6.08triliion in August 2023. The MoM decline was driven by the 6.26percent (N0.40trillion) decrease in Repos/Buy-backs, offsetting the 46.08percent (N0.05trillion) uptick in Unsecured Placement/Takings transactions, respectively.

The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 5.55 percentage points (ppts) and 5.38ppts respectively, to close at an average of 11.46percent and 10.77percent in August 2023.

Total turnover in the FX derivatives market segment was $1.49billion (N1.14trillion) in August 2023, representing a MoM decrease of 57.76percent ($0.79billion) from July 2023 figures. The MoM decrease in the FX derivatives turnover was jointly driven by the 13.38percent ($0.21billion) and 62.05percent ($0.17billion) decline in transactions across FX Swaps and FX Forwards, and the sustained lack of activities in the FX Futures market, respectively.

The report shows that in the OTC FX Futures market, the near month contract (NGUS AUG 30, 2023) expired and open positions with a total notional value (NV) of $0.71billion were settled. A far month (60M) contract, NGUS AUG 30, 2028 was introduced at a Futures price of $/N1,567.49, representing the same Futures price when the previous far month contract (NGUS JUL 28, 2028) was introduced in July 2023.