Fixed Income, Currencies Trade by Investors Hit N62.86trn as Pressure Mounts on FX

Kayode Tokede 

Investors in the Fixed Income and Currencies (FIC) market of the FMDQ Exchange traded a total of N62.86 trillion in the first four months of 2022, representing nearly 7 per cent decline from N67.59 trillion traded in the first four months of 2021.  

Contributions to FMDQ’s FIC are Foreign Exchange market, Treasury Bills, Open Market Operations (OMO) and Central Bank of Nigeria (CBN) Special Bills, FGN & Other Bonds.

THISDAY analysis of data released by FMDQ showed that foreign exchange market dominated trading in the FMDQ Exchange’s FIC market, contributing 32.3 per cent between January and April 2022.

According to FMDQ data, total foreign exchange market turnover increased by 14.6 per cent to N20.33trillion in the first four months of 2022 from N17.73 trillion reported in first four months of 2021. 

Analysts noted that increasing business activities played a critical role in the foreign exchange demand, stressing on the Central Bank of Nigeria (CBN) sustained interventions has reduced investors and exporters surge demand. 

The Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, also attributed the growth to increasing demand for foreign exchange to improvement in the global economy, stressing that the crisis between Ukraine and Russia might affect demand going forward. 

According Omordion, the domestic economy has seen more business activities in the first four months of 2022 and demand for foreign exchange has increased significantly.

On his part, analyst at PAC Holdings, Mr. Wole Adeyeye attributed the growth recorded in the total foreign exchange turnover in the first four months to increasing economic activities.

He said: “The demand by investors and exporters foreign exchange in the first four months of 2022 has depreciated the local currency and we have witnessed volatility in the foreign exchange market.”

With the increasing total foreign exchange turnover in the FMDQ, the Naira has continued to depreciate in 22022. 

According to FMDQ report, Naira has depreciated from an average N416.55 against the Dollar traded in January 2022 to N417.55 against the Dollar as of April 2022.  

The FIC report noted that Naira depreciated against the US Dollar, losing 0.24 per cent or $1 01/N to close at an average of N417.55 in April 2022 from N416.54 recorded in March 2022.

The report noted that, “Further, exchange rate volatility increased in April 2022 compared to March 2022 as the Naira traded within an exchange rate range of N416.50 – N419.50 in April 2022 compared to N416.00- N417 00 recorded in March 2022.”

In its recent report, the Chief Executive Officer, Centre for the Promotion Of Private Enterprise (CPPE), Dr Muda Yusuf had highlighted that the country’ s foreign exchange challenges is fuelling inflation, eroding investors’ confidence, aggravating the cost of operations & costs of production and accelerating business mortality.

A member of the MPC, a Professor of Economics at the University of Benin, Mike Obadan had in his personal statement during the March meeting noted that, “The increase in core inflation in the country was strongly linked to two factors: the high cost of energy products, arising from shortages, and profiteering by economic agents, particularly, relating to petrol, diesel and aviation fuel; and the continuous demand pressure in the foreign exchange market which has led to depreciation of the exchange rate and high prices of imported goods in Nigeria.”

Meanwhile, the FMDQ report stated that total market turnover for all products traded in the spot market was N15.86 trillion in April 2022 representing a MoM increase of 20.89per cent or N2.74trillion from the turnover recorded in March 2022.

The report stated that, “The MoM increase in total spot market turnover was driven by the 39 61 per cent or N1.08trillion and 55.96per cent or N1.83trillion increase in foreign exchange market and money market (turnover, respectively, which offset the 2 39per cent or N0.17 trillion) decrease in fixed income (market turnover in April 2022.

“The MoM decrease in FI market turnover was driven by the MoM decrease in bonds turnover by 33.71 or N0 60 trillion). 

“Although, the turnover for T-bills also decreased MoM by 7.56per cent or N0.09 trillio), total bills turnover increased MoM by 7.85 or N0 42 trillion) due to the combined MoM increase in OMO and CBN Special Bills turnover by 12.26per cent or N0 51 trillion).”