FX spot market reports $4.66bn turnover in October – Report

Bisola David
Bisola David
FX spot market reports $4.66bn turnover in October - Report

The October 2023 spot foreign exchange market turnover was $4.66 billion (N3.66 trillion), a Month-on-Month decline of 14.96% ($0.82 billion) from the September 2023 turnover of $5.48 billion.

The Times reported that this was stated in the FMDQ Markets Monthly Report for October.

According to the report, the US dollar strengthened its position against the Naira in the foreign exchange market. The spot exchange rate ($/N) increased by 5.34% ($/N40.41) to close at an average of $/N797.43 in October 2023, up from $/N757.02 in September 2023.

The report states that the October 2023 FI market turnover was N11.91 trillion, a MoM increase of 29.04% (or N2.68 trillion) over the September 2023 turnover (or N9.23 trillion).

The MoM increase in the FI market turnover, according to FMDQ, was driven by increases in turnover of 5.10% (N0.15 trillion), 170.76% (N2.92 trillion), and 24.06% (N0.01 trillion) across OMO Bills, CBN Special Bills, and Other Bonds, respectively.

These increases offset MoM declines in T.Bills and FGN Bonds transactions, which were 12.28% (N0.28 trillion) and 5.68% (N0.13 trillion), respectively.

“As a result, the trading intensity for T.Bills and FGN Bonds fell by 0.06 and 0.01 points, respectively, to 0.42 and 0.11.

The most traded sovereign fixed-income securities were T.bills and FGN Bonds in the >6M–12M and >20Y tenors, respectively. These securities accounted for 33.97% (₦1.41trn) and 19.06% (₦0.79trn) of the secondary market turnover for sovereign fixed-income securities in the spot market, respectively.

The yield spread between the 3M and 30Y sovereign FI securities flattened out in October 2023, falling 3.13 percentage points to 8.01 percentage points.

“October 2023 saw real (inflation-adjusted) yields stay negative across the yield curve, continuing to fall due to rising inflation that outpaces increases in nominal yields and is still higher than policy interest rates,” the statement said.

The report states that in October 2023, the Money Market (MM) segment’s total turnover dropped by 38.24% (or N3.04 trillion) to N4.91 trillion.

According to FMDQ, the decline in Unsecured Placement/Takings transactions (N0.32 trillion) and Repos/Buy-backs transactions (N2.72 trillion) accounted for 80.00% and 36.03% of the MoM decrease, respectively.

“To close at an average of 4.50% and 3.87% in October 2023, the average O/N rate and OPR rate (secured lending rate) decreased MoM by 6.62ppts and 6.53ppts, respectively,” the statement stated.

The FX derivatives market segment’s total turnover in October 2023 was $1.55 billion (N1.22 trillion), a MoM decrease of 39.27% ($1.00 billion) from the September 2023 figures.

According to the Exchange, the decline in transactions across FX Swaps, FX Forwards, and FX Futures was responsible for 40.19% ($0.86 billion), 28.00% ($0.07 billion), and 52.94% ($0.09 billion) of the MoM decline in the FX derivatives turnover.

The near-month contract (NGUS OCT 25, 2023) expired and open positions with a total notional value (NV) of $0.74 billion were settled, according to the Cleared Naira-Settled Non-Deliverable Forwards market.

“As a result, the cumulative NV of open Cleared Naira-Settled Non-Deliverable Forwards contracts fell for the fourth consecutive month in October 31, 2023 to around $4.16 billion.

“This represents a MoM decrease of 15.27% ($0.75bn) and YoY increase of 1.22% ($0.05bn) from its value as of September 29, 2023 and August 31, 2022, respectively,” it noted.

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