FX, other turnovers decline by 6.70% to N19.12trn

.As CBN clarifies proposed policy on FX restriction to importers of milk

.Lifts FX market with another $210m

Motolani Oseni

The total turnover in the Fixed Income and Currency (“FIC”) markets, including the Foreign Exchange (FX) market, Treasury Bills (T-Bills), among other markets for the month ended June 30, 2019, declined by 6.70 per cent to N19.12trillion, against the total turnover of N20.49trillionrecorded in May.

The latest FMDQ OTC reports over the weekend showed that the 6.70 per cent drop represented a total sum of N1.37 trillion, while comparing Month on Month (MoM1) decrease in the turnover recorded in May 2019 of N20.49 trillion, whilst recording a 10.93 per cent (N1.88 trillion) YoY increase from N17.23 trillion recorded in June 2018.

But The Daily Times checks revealed that the report indicated that the Treasury Bills and FX product segments remained the major contributor to turnover in the OTC market, jointly accounting for 70.72 per cent of the total OTC market turnover in June 2019 and representing a 1.75 per cent increase on their joint contribution in May 2019.

For instance, the total FX market turnover in June 2019 was $16.78 billion (N6.05trn at $/N360.74), representing a MoM decrease.

Further analysis of FX turnover by trade type indicated MoM decreased across all categories, with Member-Clients trades recording the highest MoM decrease at 14.35 per cent ($1.75 billion).

Analysis by product type indicated that the MoM decrease in FX turnover was driven by the 23.15 per cent ($2.47 billion) MoM decrease in FX Spot, despite the 7.13 per cent ($0.57 billion) MoM increase in FX Derivatives turnover.

In June 2019, the 36th Naira-settled OTC FX Futures Contract (NGUS JUN 26 2019) with total open contracts size of $529.10 million matured and was settled, bringing the total value of OTC FX Futures Contracts offered and settled on the Exchange since the introduction of the product to $16.74 billion, with a total of $25.86 billion in open contracts.

Also, the new 12-month contract (NGUS JUN 24 2020) introduced in June at a price of $/N362.38, a newly introduced contract, the 13-month contract (NGUS JUL 29 2020) with futures price of $/N362.53 was also listed in June 2019 to enable market participants obtain a full 365-day hedge on their FX exposures, which was not possible under the previous existing market structure.

In June 2019, the CBN Official Spot rates and the average exchange rate of the Naira against the US Dollar at the I&E FX Window appreciated from the rates recorded in May 2019 by $/N0.05 and $/N0.09 close at $/N306.90 and $/N360.64 respectively, while the average parallel market rate remained constant at $/N361.00.

In June 2019 average OMO6 bills outstanding was N14.96 trillion, representing a MoM increase of 2.86 per cent (N0.42trillion) from N14.54 tri9llion recorded on May 2019.

Conversely, average T.bills outstanding recorded a MoM decrease of 0.89 per cent (N0.02trn) from N2.58trn in May 2019 to N2.56trn in June 2019. On the other hand, average FGN bonds outstanding recorded a MoM increase of 1.12 per cent (N0.10trn) to close at N8.84trn in June 2019 from N8.74trn in May 2019.

Trading intensity, representing the ratio of turnover to an outstanding amount for FGN bonds increased from 0.17 in May 2019 to 0.18 in June 2019 while it remained unchanged for T.bills.

Trading intensity in the T.bills and FGN bonds markets YTD7 stood at 2.74 and 0.82 respectively compared to 2.67 and 0.71 for the same period in 2018. T.bills within the 6-12 months maturity bracket remained the most actively traded in June 2019, accounting for 49.52 per cent of the total FI market turnover.

In June 2019, weighted average yields on the medium-term and long-term maturities decreased by 0.47 per cent and 0.13 per cent respectively, whilst weighted average yields on short-term maturities increased by 0.15 per cent due to the increase in yield on 1M securities.

This may be attributable to sustained demand for securities with longer-term maturities as market participants are focused on booking profits in anticipation of a further decrease in OMO stop rates by the CBN.

Furthermore, inflation-adjusted yield in the period under review remained positive for the 1 month tenor.

Meanwhile, the Central Bank of Nigeria (CBN) has clarified its stands over the proposed policy on FX restriction to importers of milk.

The apex bank in a statement over the weekend stated that its attention has been drawn to attempts by some interests, who feel hurt by the planned policy aimed at promoting the local production of milk in Nigeria, to mislead the general public by misrepresenting the ordinarily unassailable case for investments in local milk production and the medium to long-term benefits of the planned policy.

“While we are aware that some of our policies may hurt some business interests, we are thankful to Nigerians for the buy-in and intense interest in the policies of the CBN. As a people-oriented institution, however, we shall remain focused on the overarching and ultimate welfare of the Nigerian masses.

“We, therefore, wish to, once again, reiterate our policy case as it relates to the planned restriction of access to the Nigerian Foreign Exchange market by importers of milk”, it stated.

Meanwhile, the CBN last week injected another $210 million into the Nigerian inter-bank foreign exchange market to ensure liquidity, maintain stability and to meet up with customers demand.

Isaac Okorafor, Director, Corporate Communications, CBN, had explained that authorised dealers in the wholesale sector of the market received $100 million while the Small and Medium Enterprises (SMEs) and the Invisibles segments received $55 million each.

Okorafor added that the CBN is pleased with the level of stability of the forex market in the country.

“The CBN management as noted by the governor in his post-monetary policy committee meeting briefing on Tuesday, July 23, 2019, welcomed the continued stability in the foreign exchange market and the steady accretion to the country’s external reserves”, he said.