Turnover in Nigeria fixed income, currency markets drop in July as CBN cuts back forex intervention
Steve Omanufeme is Businessamlive Managing Editor.
You can contact him on steveo@businessamlive.com with stories and commentary.
Transaction turnover in Nigeria’s fixed income and currency markets for the month of July 2017 amounted to ₦11.53 trillion, an 8.62 percent (₦1.08trn) decrease from the value recorded in June and a 10.97 percent (₦1.42trn) decrease year-on-year, according to the FMDQ OTC monthly report for the period.
The report indicated that the falling turnover was due largely to the Central Bank of Nigeria (CBN) cutting back on its interventions in the FX market in the period under review.
The OTC Monthly data indicated that the CBN sold a total of $1.17 billion through various interventions conducted during the period under review, representing a 32.21 percent ($0.56bn) decrease from the figure recorded in June ($1.73bn).
To this end, transactions in the FX market settled at $7.71 billion in July, a decrease of 4.90 percent ($0.40bn) when compared with the value recorded in June ($8.11bn)
The monetary authority was also reported to have maintained its marginal rate for the secondary market intervention sales (SMIS) – wholesale forwards intervention at ₦320/$ and ₦357/$ for small and medium-sized enterprises (SMEs) and invisibles.
In the month under review, rates for the naira converged even further, as the parallel market closed the month at ₦365/$ trading at a premium to the Investors’ & Exporters’ (I&E) FX Window which closed at $/₦367.88.
The CBN official spot rate experienced a slight appreciation, gaining ₦0.30 to close at ₦305.65/$ from ₦305.95/$ at the beginning of the month.
According to the report, total volumes traded in the I&E FX Window settled at $1.85 billion for July, an increase of 13.80 percent ($0.225bn) when compared with volumes recorded in June ($1.63bn), bringing the total volumes traded on the window since its inception stand at $5.42 billion.
Inter-member trades (trades between FMDQ dealing members) for the period under review stood at $0.98 billion in the month of July, an increase of 3.00 percent when compared with trades recorded in June, and a decrease of 44.85 percent year-on-year.
On the other hand, member-client trades stood at $5.56 billion in July, a decrease of 4.91 percent ($0.29bn) from the previous month.
Member to CBN trades for the month stood at $1.17 billion as against $1.73 billion in June, representing a decrease of 32.21 percent ($0.56bn) month-on-month and a decrease of 53.72 percent ($1.36bn) year-on-year.
The 13th Naira-settled OTC FX Futures Contract NGUS JUL 19, 2017, with total open contracts worth $657.57mm, matured and settled in July, whilst a new 12-month contract – NGUS JUN 25, 2018 – for $1.00 billion was introduced at ₦364.33/$.
Over all activities in the foreign exchange (FX) market accounted for 22.01 percent (21.60% in June), while money market (repurchase agreements [Repos]/buy-backs & unsecured placements/Takings) accounted for 29.71 percent (28.91% in June) of total turnover for the reporting period FX Market.
For the fixed income market (treasury bills and FGN bonds) outstanding treasury bills (T-bills) at the end of the month stood at ₦9.06 trillion, an increase of 6.38% month-on-month (₦8.51trn in June), whilst FGN bonds’ outstanding value increased by 1.22 percent (₦0.08trn) month-on-month to close at ₦7.12 trillion in the period under review.
The treasury bills segment, however, continued to dominate market share, accounting for 43.66 percent (43.22% in June) while FGN3 bonds recorded 4.53 percent (6.22% in June) of total turnover in July.