Fixed income securities and FX trading by investors hits 62.86 trillion naira as pressure mounts on FX

Kayode Tokede

Investors on the FMDQ exchange’s fixed income and foreign exchange (FIC) market traded a total of 62.86 trillion naira in the first four months of 2022, representing a decline of almost 7% compared to the 67.59 trillion naira traded in the first four months of 2021.

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

THISDAY’s analysis of data released by the FMDQ showed that the forex market dominated trading on the FMDQ Exchange’s FIC market, contributing 32.3% between January and April 2022.

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

Analysts have noted that increased trading activity has played a key role in driving demand for foreign exchange, pointing out that sustained interventions by the Central Bank of Nigeria (CBN) have curtailed growing demand from investors and exporters.

Chief Operating Officer of InvestData Consulting Limited, Mr. Ambrose Omordion, also attributed the growing demand for foreign currencies to the improving global economy, noting that the crisis between Ukraine and Russia could affect demand in the future.

According to Omordion, the national economy has witnessed more business activity in the first four months of 2022 and the demand for foreign currency has increased significantly.

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

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

With the increase in total currency turnover in the FMDQ, the Naira continued to depreciate in 22022.

According to the FMDQ report, the naira depreciated from an average of 416.55 naira against the dollar traded in January 2022 to 417.55 naira against the dollar in April 2022.

The FIC report noted that the naira depreciated against the US dollar, losing 0.24% or $101/N to close at an average of 417.55 naira in April 2022 from 416.54 naira recorded in March 2022.

The report notes that “Additionally, exchange rate volatility increased in April 2022 compared to March 2022, with the naira trading within an exchange rate range of N416.50 to N419.50 in April 2022 compared to at N416.00- N417 00 recorded in March. 2022.”

In his recent report, the Director General of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, pointed out that the country’s foreign exchange problems are fueling inflation, eroding investor confidence, aggravating the cost operations and production costs and the acceleration of business mortality.

Member of the MPC, professor of economics at the University of Benin, Mike Obadan had in his personal statement at the March meeting noted that “the rise in underlying inflation in the country was strongly linked to two factors: the high cost of energy products, resulting from the shortages and profits of economic agents, particularly in terms of gasoline, diesel and kerosene; and continued demand pressure in the foreign exchange market which has resulted in a depreciating exchange rate and high prices of imported goods in Nigeria.

Meanwhile, the FMDQ report said that the total market turnover for all commodities traded in the spot market was 15.86 trillion naira in April 2022, representing a monthly increase of 20 .89% or 2.74 trillion naira compared to the turnover recorded in March 2022.

The report states that “the month-to-month increase in total cash market turnover was driven by the increase of 39.61% or 1.08 trillion naira and 55.96% or 1. 83 trillion naira from the foreign exchange market and money market (turnover, respectively, which offset the 2 39% decline or 17 trillion naira from the fixed income securities (market turnover as of April 2022 .

“MoM’s decrease in FI market turnover was driven by MoM’s decrease in bond turnover of 33.71 or N0 60 trillion).

“Although Treasury bill turnover also decreased MoM by 7.56% or N0.09 trillion), total bill turnover increased MoM by 7.85% or N0.42 trillion) due MoM’s combined increase in OMO and CBN Special Bills revenue of 12.26 percent or N51 trillion).

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