FX market turnover drops 27.68% to $9.12 billion in April – FMDQ reports
Spot FX market turnover in April 2024 was $9.12 billion (N11.14 trillion), representing a Month-on-month (MoM) decrease of 27.68% ($3.49 billion) from the turnover recorded in March 2024 ($12,61 billion).
This was contained in the FMDQ Markets Monthly Report for April seen by Nairametrics
Nigeria’s foreign exchange market has faced considerable challenges, primarily due to fluctuations in global oil prices and economic policies affecting liquidity.
The report noted that in the FX market, the Naira steeply appreciated against the US Dollar, with the spot exchange rate ($/N) decreasing by 22.45% ($/N279.38) to close at an average of $/₦1,244.66 in April 2024 from $/N1,524.04 recorded in March 2024
It added further that exchange rate volatility slightly increased in April 2024 as the Naira traded within an exchange rate range of $/N1,072.74 – $/N1,419.11 compared to $/N1,300.43 – $/N1,627.40 recorded in March 2024.
Spot Fixed Income Market
According to the report, FI’s market turnover in April 2024 was N8.33 trillion, representing a MoM decrease of 30.87% (N3.72 trillion) from the turnover recorded in March 2024 (N12.04 trillion).
FMDQ noted that the MoM decrease in turnover was driven by the 18.35% (N1.03 trillion), 31.94% (N0.90 trillion), and 34.92% (N0.91 trillion), decrease in turnover across T.Bills, FGN & Other Bonds, OMO Bill and Special Bills transactions, respectively
“As a result, the trading intensity (TI) for FGN Bonds and T.Bills decreased MoM by 0.04bps and 0.20bps to 0.08 and 0.40, respectively
T.bills with term-to-maturity (TTM) between >6M – 12M and FGN Bonds with TTM between >5Y – 10Y, were the most traded sovereign FI securities, accounting for 64.87% (N4.18 trillion) and 16.25% (N1.05 trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.
In April 2024, the sovereign yield curve experienced a 4.43ppts MoM decrease in yield spread1 to -0.06ppts, indicating an inversion of the yield curve.
Real (inflation-adjusted) yields remained negative across the yield curve in April 2024, declining further on the back of rising inflation which remains higher than policy interest rates,” it said.
Money Market
According to the report, total turnover in the MM segment decreased MoM by 44.40% (N5.27 trillion) to N6.59 trillion in April 2024. The MoM decrease was driven by the 44.43% (N5.27 trillion) and the 9.44% (N1.02 billion) 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 0.10ppts and 0.23ppts respectively, to close at an average of 29.20% and 28.22% in April 2024,” it said.
FX Derivatives Market
Total turnover in the FX derivatives segment in April 2024 was $1.18 billion (₦1.44 trillion), representing a MoM decrease of 68.22% ($2.53 billion) from March 2024 figures.
The Exchange said that the the MoM decrease in the FX derivatives turnover was driven by the 61.03% ($1.70 billion) and 90.12% ($0.83 billion) decrease in FX Swaps and FX Forwards turnover, respectively, whilst the FX Futures market was inactive during the review period.
In the cleared Naira-Settled (USD/NGN) Non-Deliverable Forwards market, the near month contract (NGUS APR 24, 2024) expired and open positions with a total notional value (NV) of $0.50 billion were settled.
However, no new month (60M) contract was introduced in the cleared Naira-Settled Non-Deliverable Forwards market in the review period, continuing the trend since August 2023.
Consequently, the TTM of the farthest open contract is fifty-two (52) months (i.e., NGUS AUG 30, 2028 contracts).
“As a result, the cumulative NV of open Cleared Naira-Settled Non-deliverable Forwards contracts decreased to $1.59bn as of April 30, 2024, representing a MoM and YoY decrease of 23.92% ($0.50bn) and 69.60% ($3.64bn), respectively, and continuing its downward trend for the tenth (10th) consecutive month,” it noted.
What you should know
Total spot market turnover for all products traded in the secondary market in April 2024 was N26.06 trillion, representing a MoM decrease of 39.68% (N17.14 trillion) from March 2024 figures.
The MoM decrease in total spot market turnover was driven by a decrease in turnover across all spot market product categories, as FX, MM, and FI turnover decreased MoM by 42.27% (N8.15 trillion), 44.40% (N5.27 trillion) and 30.87% (N3.72 trillion), respectively.
The decrease in FI and MM turnover was driven by the MoM decrease across all product categories in the review period.
