FMDQ posts N59.3tr turnover in three months as CPs hit N412b

FMDQ Securities Exchange secondary market turnover hits N59.3 trillion between June and August.

The figure is higher than N53 trillion achieved in the corresponding period in 2022.

Secondary market turnover on FMDQ Exchange in August 2023 stood at ₦17.68 trillion, up from N15.53 trillion recorded in the same period in 2022.

Similarly, turnover on the platform closed at N19.92 trillion in July 2023, up from N19. 76 trillion posted in the same period in 2022.

In June, a total turnover of N21.7 trillion was recorded on the platform, up from ₦18.2 trillion posted during the corresponding period in 2022.

Also, within three months, Commercial Papers (CPs) quoted on FMDQ Securities exchange hit N412 billion, higher than the N277 billion figure achieved in the corresponding period in 2022.

The issuance of short-term corporate debt has spiked as Nigerian firms took advantage of the low cost of finance and short maturity period to boost their working capital, especially because it is cheaper and used for quick investment needs.

Experts said some companies would rather opt for commercial papers because they can be cleared from their balance sheets in a year.

A breakdown of the CP data from FMDQ showed that corporates raised CP worth N52.13 billion in June, up from N40.9 billion issued during the same period in 2022.

CPs issued on the platform also rose from N21.2 billion in July 2022 to N121.7 billion in July 2023. The figure hits N239 billion in August 2023 higher than N215 billion recorded during the same period in 2022.

In the three months of 2023, the major issuance was MTN CP issuance valued at N125 billion. The offer recorded 146 per cent subscription with N125 billion issued across both series. This represents the largest aggregate CP issuance within a calendar year by any corporation in Nigeria’s debt capital markets.

Company secretary, MTN Nigeria, Uto Ukpanah, stated that it sought to raise N100 billion and the transaction was 125 per cent subscribed with a total of N125 billion to enable the company to disburse the fund on short-term working capital and funding requirements.

FMDQ Exchange through its Board Listings and Markets Committee approved the registration of the Nigerian Breweries Plc N100 billion CP Issuance Programme on its platform in August 2022. This was the highest issuance in the review period.

Reacting on the high volume of trade and commercial papers recorded on the platform within the period, Vice President of Highcap Securities, David Adonri said the rise in the three-month turnover compared to 2022 is because of the depreciation suffered by Naira when it was floated in Q2 2023.

“Turnover of transactions on FMDQ is usually very high compared to the capital market because they deal in short-term money market instruments and currency. Liquidity and velocity of turnover of short-term money assets are usually very high.

“The rise in their turnover compared to 2022 is because of the depreciation suffered by Naira when it was floated in Q2 2023. More Naira poured in to pursue the available hard currencies thereby increasing the value of transactions.

“I&E Window is domiciled in FMDQ and currency forwards with CBN as counterparty occurs there too. From all indications, it does appear that the major facilitator of their huge growth is FX transactions rather than their debt market,” he said.

Chief Executive Officer of Wyoming Capital and Partners, Tajudeen Olayinka, said the growth in market turnover is still within the growth trajectory of that market, given its status as a wholesale market.

“We must understand that banks and pension management companies trade on the platform and the fact that they are duty-bound to trade and hold the instruments traded on that exchange in their books, means that we will regularly see the kind of numbers printed by FMDQ Exchange as market turnover.

“It is evidence of the wholesale status of the fixed income market, the same way we have it around the world. Fixed income and foreign exchange markets are quite big.”