Foreign Exchange (FX) and OMO bills transactions were the highest contributors to the Fixed Income and Currencies (FIC) markets in January 2021, jointly accounting for 55.42percent of the total FIC market turnover, according to recent report released by FMDQ Securities Exchange.
The report “FIC Monthly” shows that turnover in the Fixed Income and Currencies markets for the month ended January 29, 2021 was N13.03trillion, representing a month-on-month (MoM) and Year-on-Year (YoY) decrease of 34.49percent (N6.86trillion) and 43.81percent (N10.16trillion) respectively.
FX Market
Total FX market turnover in January 2021 was $8.29billion (N3.26trillion), representing a significant MoM decrease of 57.96percent ($11.43billion) from the turnover recorded in December 2020 ($19.72billion), attributable to the reduced interventions by the CBN in the FX market as well as decline in foreign portfolio investment net flows in the review period.
FX Spot and FX Derivatives turnover decreased MoM by 50.59percent ($3.44billion) and 61.84percent ($7.99billion) respectively in January 2021, with FX Derivatives accounting for 69.90percent of the decrease in turnover.
In the OTC FX Futures market, the near month contract (NGUS JAN 27, 2021) with a total outstanding notional value (NV) of $1.61billion matured and was settled, while a new long-term (60-month or 60M) contract, NGUS JAN 28, 2026 was introduced at a Futures price of $/N613.69, representing a 0.92percent ($/N5.59) MoM increase in the futures price, compared to the offer rate ($/N608.10) of the previous 60M contract (NGUS DEC 31, 2025).
The total notional value of open OTC FX Futures contracts as at January 29, 2021 stood at about $7.13billion, representing a further decrease of 11.87percent ($0.96billion) from its value as at December 31, 2020 (c.$8.09billion), and continuing its downward trend since May 2020.
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The average Central Bank of Nigeria (CBN) Official Spot $/N exchange rate remained constant at $/N379 in January 2021. Conversely, the Naira appreciated against the US Dollar at the Investors’ and Exporters’ (I&E) FX Window, trading within a range of $/N385 and $/N415.76 in January 2021, and gaining 0.23percent ($/N0.90) to close at an average of $/N394.03 in January 2021 from $/N394.92 recorded in December 2020.
Similarly, the Naira appreciated against the US Dollar in the parallel market, gaining 0.28percent ($/N1.35) to close at an average of $/N474.70 in January 2021 from $/N476.05 recorded in December 2020. Consequently, the average spread between the exchange rates in the formal (I&E FX Window) and unregulated (parallel) FX markets reduced by 0.56percent to $/N80.67 in January 2021, from $/N81.13 in December 2020.
Fixed Income (FI) Market (T.bills, OMO bills and FGN Bonds)
In the primary markets, average discount rates for the 91-day, 182-day and 364-day T.bills increased MoM by an average of 0.34 percentage points (ppts), to close at a range of 0.53percent – 1.75percent in January 2021, while the discount rates for CBN OMO bills decreased MoM by an average of 0.30ppts to close at a range of 1.51percent – 5.74percent in January 2021.
Notably, the CBN Special Bills introduced in December 2020 was issued by the CBN at 0.50percent and ended the month trading at a discount with yields reaching 0.52percent on January 29, 2021.The coupon rates for the 10Y, 15Y and 25Y FGN bond issuances in January 2021 increased by an average of 1.91ppts to close at a range of 7.98percent – 8.95percent in January 2021.
The total value of T.bills and OMO bills outstanding as at January 29, 2021 declined MoM by 4.78percent and 33.71percent respectively to N2.59trillion and N3.56trillion respectively, while the total value of FGN bonds outstanding as at January 29, 2021 increased MoM by 1.59percent (N0.17trillion) to N10.87trillion from N10.70trillion recorded as at December 31, 2020, resulting in the 0.29percent (N0.04trillion) MoM increase in sovereign capital market debt outstanding from N13.78trillion to N13.82trillion.
Turnover for T.bills and FGN bonds decreased by 33.51percent (N0.65trillion) and 20.49percent (N0.42trillion) to N1.29trillion and N1.63trillion respectively, resulting in a decrease in their trading intensities to 0.49 and 0.15 in January 2021 from 0.71 and 0.19 recorded in the previous month. Conversely, OMO bills’ turnover increased MoM by 1.54percent (N0.06trillion) to N3.96trillion in January 2021, contributing to the increase in its trading intensity to 1.08 from 0.84 recorded in December 2020.
In January 2021, 6M – 12M OMO bills were the most traded debt securities, accounting for 35.17percent (N2.43trillion) of the total Fixed Income market turnover. Similarly, 6M – 12M T.bills were the most traded sovereign debt securities, accounting for 16.79percent (N1.16trillion) of total Fixed income turnover, while 20Y – 30Y FGN bonds remained the most active long-term sovereign debt securities, accounting for 6.95percent (N0.48trillion) of the total Fixed Income market turnover.
There was an upward shift in the sovereign yield curve between December 2020 and January 2021 across all tenors (excluding the 1Y tenor), with the highest shift recorded on the 20Y tenor as yields increased MoM by 2.83ppts.
The upward shift also resulted in the increase in the spread between the yield of the 3M12 and 30Y sovereign debt securities by 35 basis points (bps) to 745bps in January 2021, indicating a further steepening of the sovereign yield curve. Further, inflation-adjusted yields remained negative across the yield curve in January 2021.
Money Market [Repurchase Agreements (Repos)/Buy-Backs and Unsecured Placements/Takings]
Total turnover in the Money Market segment decreased MoM and YoY by 31.41percent (N1.25trillion) and 36.36percent (N1.56trillion) respectively to a total of N2.73trillion in January 2021.
This was jointly driven by the corresponding MoM and YoY decreases in Repo/Buybacks and Unsecured Placements/Takings turnover by N0.82trillion and N0.43trillion to N2.60trillion and N0.13trillion respectively in January 2021. However, average overnight (O/N) and open buy back (OBB) rates increased by 2.47ppts and 2.27ppts to close at 3.83percent and 3.28percent respectively in January 2021 from 1.36percent and 1.01percent recorded in December 2020.
Market Surveillance
Despite the decrease in overall market activity, the total number of executed trades reported on the Bloomberg E-Bond Trading System increased MoM by 11.47percent (387) to 3,761 in January 2021 from 3,374 recorded in December 2020. This was driven by the MoM increase in the number of OMO bills and FGN bond trades in January 2021, despite the 13.13percent (55) decrease in T.bills trades during the review period.
