The total spot market turnover for all products traded in Nigeria’s secondary market in September 2024 amounted to N33.59trn, reflecting a 10.75 per cent month-on-month (MoM) decline from the August figure of N37.64trn.
This represents a significant decrease of N4.05trn, driven primarily by lower activity across the foreign exchange (FX), money market (MM), and fixed income (FI) segments.
This was contained in the FMDQ Markets Monthly Report for September 2024 seen by NewsNGR.
The report detailed a 4.17 per cent MoM drop in FX turnover (N0.66trn), while MM and FI turnovers declined by 3.96 per cent (N0.39trn) and 24.75 per cent (N3.00trn), respectively.
The fall in MM turnover was attributed to decreased activity across all money market product categories, and the decline in FI turnover was due to reduced transactions in all fixed income product categories.
Notably, the Central Bank of Nigeria’s (CBN) Special Bills remained inactive during the review period.
The decline in spot market turnover highlights ongoing volatility in Nigeria’s foreign exchange market, which has faced significant headwinds due to external and internal factors.
Global oil price fluctuations, combined with domestic economic policies affecting liquidity, have created an environment of uncertainty in the FX market.
In September 2024, the spot FX market recorded a turnover of $9.46bn (N15.08trn), marking a 4.44 per cent MoM decline from $9.90bn in August.
During this period, the Naira further depreciated against the US Dollar, with the average spot exchange rate increasing by 0.40 per cent (N6.33) to close at N1,592.89 per dollar, compared to N1,586.56 in the previous month.
Exchange rate volatility also surged, as the Naira traded within a wider range of N1,539.65 to N1,667.42 in September, compared to N1,543.84 to N1,617.08 in August.
This increased fluctuation in the Naira’s value underscores the challenges faced in maintaining stability in the market, posing difficulties for businesses reliant on foreign exchange and making it harder for investors to hedge risks.
The volatility in the FX market reflects broader economic concerns. The sharp fluctuations in the Naira have impacted various sectors, increasing operational costs for businesses that rely on imported goods and services.
Additionally, the unpredictable exchange rate has complicated long-term investment planning, as investors face higher levels of uncertainty regarding the value of their returns.
The interplay between external factors such as global commodity prices and internal policy decisions on foreign exchange management has underscored the complexity of managing Nigeria’s foreign exchange reserves. This, in turn, has far-reaching consequences for economic growth, inflation, and investor confidence.
The report also highlighted the significant decline in turnover within the fixed income (FI) and money market (MM) segments. FI market turnover in September 2024 was N9.13trn, representing a 24.75 per cent MoM decrease from the N12.14trn recorded in August.
This drop was driven by reduced activity in treasury bills, open market operations (OMO) bills, federal government bonds, and other bonds during the period. As a result, the trading intensity for treasury bills and FGN bonds decreased marginally by 0.03 basis points to 0.25 and 0.07, respectively.
According to the FMDQ report, treasury bills with a term-to-maturity (TTM) of between 6 to 12 months and FGN bonds with a TTM of between 5 to 10 years were the most traded sovereign fixed income securities, accounting for 40.28 per cent (N1.95trn) and 26.31 per cent (N1.27trn) of sovereign FI market turnover, respectively.
The decline in these key market segments reflects broader liquidity challenges within the economy. Reduced access to liquidity can hamper the ability of businesses and government institutions to raise funds for investments, slowing down economic activity and development projects.