.As dollar continues to trade above N900/$ at black market
FMDQ Securities Exchange has posted a total turnover of $417.9 million in its foreign exchange (FX) spot and derivatives market segment for the week ended August 25, 2023.
The figure represents a decrease of 32.61 per cent ($202.2 million) from $620.1 million reported for the week ended August 18, 2023.
The drop came amidst continued crisis in the market, the wobbly performance of naira against other currencies and heightened illiquidity across different windows.
The renewed crisis continued till the weekend with naira trading around N905/$ at the parallel market on Saturday. Dealers, who were waiting for major dealers for new rates for the week, said the expected funding of the bureau de change (BDC) operators by the Central Bank of Nigeria (CBN) could ease the pressure in the market.
The CBN expects the operators to sell at a margin of -2.5 per/+2.5 per cent of the Nigerian Foreign Exchange Market window weighted average rate of the previous day. However, there are questions about how the apex bank would source FX to finance the registered dealers, which 5,689 as at December 2021.
Whereas the apex bank is quiet about the funding plan, regulator funding of the activities of the dealers would be a major drain. Left at $10,000 weekly allocation to each operator, as it was before the funding was frozen two years ago, the CBN will need $56.9 million weekly to sustain BDC operators. The bank has been kneecapped by low FX earnings and the activity of informal remittances routes among others.
Recently, J.P. Morgan put the net external reserves of the country at $3.7 billion as at end of last year, a far cry from an average of $33 billion reported by the CBN in recent weeks.
But Director of the Monetary Policy Department, CBN, Hassan Mahmud, pushed back on the American investment bank’s claim during a television appearance, saying: “That is not the first time we have seen people and institutions reeling out numbers. They must have their intentions to do that, whether to rouse market sentiments or to mislead the public.”
According to FMDQ, the week-on-week (WoW) decrease in total turnover was driven by the 33.4 per cent ($207.09 million) decrease in FX Spot turnover, despite the 555.7 per cent ($4.89 million) increase in FX derivatives turnover.
FMDQ stated that the WoW increase in Forex derivatives turnover was solely driven by the 555.68 per cent ($4.89 million) increase in FX Forwards turnover, noting that there was a sustained lack of activity in both Exchange Traded FX Futures and Naira-Settled OTC FX Futures markets.
Also, in the FX Spot market, the total value of transactions for the week ended August 25, 2023, was $412.13 million, representing a decrease of 33.4 per cent ($207.09 million) from the value of transactions executed in the week ended August 18, 2023 ($619.22 million).
It further noted that there were no trades executed in the Exchange-Traded FX Futures & extant Naira-Settled OTC FX Futures markets for the week ended August 25, 2023.
Furthermore, the average Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate was $/₦772.68, compared to ₦772.14 recorded in the week ended August 18, 2023, representing a depreciation of the Naira against the dollar by 0.07 per cent ($/₦0.54).
Meanwhile, a turnover of 1.8 billion shares worth N29.3 billion was recorded in 31,163 deals by investors on the floor of the Nigerian Exchange Limited (NGX), in contrast to a total of 1.7 billion units, valued at N29.4 billion that was exchanged in 29,477 deals during the preceding week.
The financial services industry (measured by volume) led the activity chart with 936.7 million shares valued at N10.1 billion traded in 12,886 deals; thus contributing 51.68 per cent to the total equity turnover.
The conglomerate industry followed with 461.5 million units worth N2.3 billion in 3,451 deals. The consumer goods industry ranked third with a turnover of 127.3 million shares worth N5 billion in 5,792 deals.
Trading in the top three equities namely Transnational Corporation Plc, Fidelity Bank Plc and Access Holdings Plc (measured by volume) accounted for 693.5 million shares worth N5 billion in 5,450 deals, contributing 38.2 per cent to the total equity turnover.
On the price movement chart, the market reversed last week’s losses, followed by investors’ increased appetite in BUA foods, (+7.9 per cent), Dangote Sugar Refinery (+35.7 per cent) and Transcorp (+39.4.per cent).
Consequently, the all-share index and market capitalisation appreciated by 1.3 per cent to close the week at 65,558.91 and N35.881 trillion respectively.
Similarly, all other indices finished higher except NGX CG, NGX Premium, NGX Banking, NGX AFR. Bank Value, NGX MERI Value, NGX Oil and Gas, NGX Industrial Goods and NGX Growth indices which depreciated by 1.63 per cent, 0.96 per cent, 3.57 per cent, 1.82 per cent, 0.71 per cent, 1.69 per cent, 0.01 per cent and 1.74.per cent respectively while the NGX ASeM and NGX Sovereign Bond indices closed flat.
With the development, the month-to-date and year-to-date gains increased to +0.6 per cent and +26.3 per cent, respectively.
Reacting on market performance, analysts at Cordros Capital said: “Looking ahead, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income market.
“Overall, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.”
Analysts at Futureview said: “We anticipate the continuation of bullish momentum into the upcoming week. We advise investors to invest in high-quality stocks with strong fundamentals supporting them.”
A total of 11,914 units of Exchange Traded Products (ETPs), valued at N3.98 million were traded in 72 deals compared with a total of 30,336 units worth N2 million transacted in 69 deals during the preceding week.
Also, 103,716 units of bonds, valued at N107.3 million were exchanged in 30 deals compared with a total of 292,995 units valued at N294.9 million that was recorded in 48 deals.
