Nigeria’s financial markets experienced notable declines in turnover during April 2024, according to the FMDQ Markets Monthly Report. The Spot FX market recorded a turnover of $9.12 billion (N11.14 trillion), marking a 27.68% decrease from the $12.61 billion reported in March 2024.
Economic Challenges
The country’s foreign exchange market has faced substantial challenges due to global oil price fluctuations and economic policies impacting liquidity. The report highlighted a significant appreciation of the Naira against the US Dollar, with the spot exchange rate dropping by 22.45% to an average of $/₦1,244.66 in April from $/N1,524.04 in March. Additionally, exchange rate volatility slightly increased, with the Naira trading within a range of $/N1,072.74 – $/N1,419.11 compared to the previous month’s range of $/N1,300.43 – $/N1,627.40.
Fixed Income Market Decline
The Fixed Income (FI) market saw a turnover of N8.33 trillion in April 2024, a 30.87% decrease from N12.04 trillion in March. This decrease was attributed to reductions in turnover across T.Bills (18.35%), FGN & Other Bonds (31.94%), and OMO Bill and Special Bills transactions (34.92%). The most traded securities were T.Bills with a term-to-maturity (TTM) between >6M – 12M and FGN Bonds with TTM between >5Y – 10Y, accounting for 64.87% and 16.25% of secondary market turnover, respectively. The sovereign yield curve inverted, with a 4.43ppt MoM decrease in yield spread to -0.06ppts, and real yields remained negative due to rising inflation surpassing policy interest rates.
Money Market Challenges
The Money Market (MM) segment also saw a significant decline, with total turnover decreasing by 44.40% to N6.59 trillion in April. This was primarily driven by a 44.43% decrease in Repos/Buy-backs and a 9.44% decrease in Unsecured Placement/Takings. The average overnight (O/N) rate and Open Buy Back (OPR) rate fell to 29.20% and 28.22%, respectively.
FX Derivatives Market
The FX derivatives market turnover in April 2024 was $1.18 billion (₦1.44 trillion), representing a 68.22% decrease from March 2024. The decrease was driven by a 61.03% drop in FX Swaps and a 90.12% drop in FX Forwards, with the FX Futures market remaining inactive. The cumulative notional value of open Cleared Naira-Settled Non-Deliverable Forwards contracts decreased to $1.59 billion, marking a MoM and YoY decrease of 23.92% and 69.60%, respectively.
Overall Market Turnover
Total spot market turnover for all products traded in the secondary market in April 2024 was N26.06 trillion, a 39.68% decrease from March. This decline was due to decreases across all spot market product categories, with FX, MM, and FI turnover dropping by 42.27%, 44.40%, and 30.87%, respectively.
The report underscores the ongoing challenges in Nigeria’s financial markets, driven by both domestic economic policies and external factors such as global oil prices. The substantial decreases across various market segments highlight the need for strategic interventions to stabilize and boost market performance.
