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FMDQ: Investors Splash N17.23trn on Fixed Income, Currency Instruments in June

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FMDQ Group - Investors King
  • FMDQ: Investors Splash N17.23trn on Fixed Income, Currency Instruments in June

Investors, who earn a living from short-and medium-term instruments offered in the money market, increased their spending by 20.53 per cent in June as total investments in the Fixed Income and Currency (FIC) markets rose to N17.23trillion.

“Transaction turnover in the markets for the month ended June 30, 2018 amounted to N17.23trillion, a 20.53 per cent (N2.93trillion) increase from the value recorded in May and a 36.49 percent (N4.61trillion) increase year –on- year(YoY),”a statement from FMDQ OTC revealed.

The treasury bills and FX segments jointly accounted for 79.35 per cent of total turnover in the FIC market in June, representing a marginal increase of 3.44 percentage points from the 75.91 per cent recorded in May. FX market turnover recorded the highest month-on-month increase, growing by 34.50 percent (N1.79trillion), while unsecured placement/takings turnover recorded the highest month-on-month (MoM) decrease, falling by 42.54 percent (N0.03trillion).

Total FX market turnover in the review month was $19.80billion, a 34.04 percent ($5.03billion) increase from the turnover recorded in May ($14.77billion). Turnover at the Investors & Exporters (I&E) FX Window in June was $3.93billion, representing a 38.59 percent ($2.47billion) MoM decrease from the value recorded in May ($6.40billion), and resulting in a decrease in its contribution to the total FX market turnover to 19.85per cent from 43.33per cent in May. However, the total turnover at the I&E FX Window for half year -ended June 2018, increased to $30.28billion.

Analysis of FX turnover by trade type showed that turnover increased across all trade types, with Inter- Member trades recording the highest relative MoM growth in turnover, increasing by 82.65per cent ($1.35billion), while Member-Clients trades recorded the highest nominal MoM growth in turnover, increasing by $2.52billion (28.97 per cent). Member-CBN trades also recorded a MoM increase in turnover by 26.11 per cent ($1.16billion).

In terms of contribution to total FX turnover, Inter-Member trades contributed 15.05 per cent to total FX turnover in June, a 4.01ppts increase from the 11.04 per cent contribution recorded in May. Member-Client and Member- CBN trades both contributed 56.62 per cent and 28.28 per cent to total FX turnover in June, decreasing from 58.90 per cent and 30.06percent in May respectively

Analysis of FX turnover by product type showed that turnover in FX Spot and Derivatives increased MoM in line with the trend in total FX turnover, with both increasing by 29.82per cent and 46.60per cent respectively.

FX Spot remained the main driver of total FX turnover, with a MoM increase by $2.80billion (29.70 per cent), while FX Derivatives recorded a MoM increase of $2.25billion (41.59 per cent) driven mainly by FX Futures turnover which increased MoM by $2.39billion (292.68 per cent).

In June, the 24th naira-settled OTC FX Futures contract (NGUS JUN 27, 2018) with a contract size of $638.87million, matured and was settled, whilst a new $1.00billion 12-month contract (NGUS JUN 26, 2019) was offered by the CBN at $/N362.60.

Also, in June, the naira depreciated at the I&E FX Window, losing N0.35 to close at $/N361.32 (from $/N360.97 as at May 31, 2018). The depreciation of the naira at the I&E FX Window resulted in a lower spread of N0.68 between the $/N rate at the I&E FX Window and the parallel market, due to the appreciation of the Naira by N1.00 at the parallel market in June to close at $/N362.00 (from $/N363.00 as at May 31, 2018). The CBN Official Spot rate appreciated by N0.20 to close at $/N305.75 (from $/N305.95 as at May 31, 2018)

The total turnover in the fixed income market was N7.85trillion in June, representing a 19.73 per cent (N1.29trn) MoM increase in turnover. The increase in turnover was driven mainly by an 18.13per cent (N1.02trillion) MoM increase in T.bills turnover, as it remained the major driver of liquidity in the fixed income market, accounting for 84.95per cent of the total fixed income market turnover, albeit 1.15 percentage points lower than its contribution in May.

Total T.bills outstanding as at June 30, 2018 stood at N13.76trillion, representing a 1.75 per cent (N0.24trillion) MoM decline, driven by a net redemption of T.bills in the month of June. Conversely, total FGN Bonds outstanding increased marginally by 0.41 percent (N0.03trillion ) MoM to close at N7.83trillion, suggesting the FGN refinanced some of its short-term obligations with longer term FGN Bonds while increasing cash liquidity in the market

Trading intensity in the T.bills and FGN Bonds markets increased from 0.41 and 0.11 in May, to 0.48 and 0.15 in June respectively, while trading intensity for T.bills and FGN Bonds in first half of 2018 were 2.67 and 0.71, compared to 3.75 and 0.79 in H1 2017 respectively. T.bills within the 6-12 months maturity remained the most actively traded, accounting for 28.28 percent of the total fixed income market turnover in June, despite decreasing from the 37.42 percent contribution reported in May.

Turnover recorded in the secured money market (i.e. Repos/Buy-Backs) was N2.32trillion for June, representing a 4.70 per cent (N0.11trillion) MoM decrease from the value recorded in May (N2.44trillion), and a YoY decrease of 33.98 per cent in June, compared to the 6.98 per cent YoY decrease recorded in May.

Similarly, unsecured placements/takings closed the month with a turnover of N42.66billion, representing a 42.54 percent (N31.59billion) MoM decrease on the turnover recorded in May (N74.25billion), and a YoY decrease of 68.23per cent (N91.64billion).

Average O/N7 NIBOR8 decreased by 11.12ppts to close at 11.65 per cent in June from 22.77 per cent reported for May, suggesting an increase in liquidity in the inter-bank market, possibly driven by injection of cash in the market from the FGN’s activity in the fixed income market during the month.

Total number of executed trades reported on the E-Bond Trading System in June was 13,101, representing a MoM decline of 5,969 in the number of executed trades, as total executed trades in T.bills and FGN bonds declined by 5,162 (31.15 per cent) and 807 (32.32 per cent) respectively in June 2018.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

OPEC+ Delegates Seek Steady Oil Production Levels as Committee of Ministers Meet Next Week

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OPEC - Investors King

With the recent hike in the prices of oil at the international markets, the delegates of the Organisation of Petroleum Exporting Countries (OPEC) have canvassed for a steady oil production output.

This is coming a few days before the Joint Ministerial Monitoring Committee of the organisation would meet to deliberate on the demand and supply chain of crude oil in the global space.

The meeting of the Advisory Committee of Ministers is said to hold online as top OPEC officials continue to push for unchanged oil production levels.

Investors King reports that there has been an uncertain recovery in global demand for oil as international oil prices had climbed in the past two weeks.

It was gathered that Saudi Arabia and its partners are planning to hold a review of output levels on February 1, 2023 after agreeing significant cutbacks late last year to keep world crude markets in balance.

While awaiting clarity on the recovery in consumption in China and the impact of sanctions on Russian supply, the delegates said they expected the Ministers not it tamper with the output.

The Opec+ is embracing conservative stance even China, the biggest oil importer in the world battles devastating effects of COVID-19 pandemic.

Also, Opec+ is expecting the full impact of European Union sanctions on member-country Russia over its invasion of Ukraine.

Analysts at Eurasia Group have said, in a report, that there are possibilities of Opec+ maintaining the status quo beyond next week’s meeting.

According to the report, prices of oil have stabilised while there are significant levels of uncertainty surrounding both supply and demand.

It was gathered that feedback from the top OPEC hierarchy would go a long way in forming the decision to hold steady or not.

The Secretary-General of petroleum exporting countries, Haitham Al-Ghais has expressed hope on the global economy as the nascent rebound in China is tempered by weakness in advanced economies.

For Saudi Energy Minister, Prince Abdulaziz bin Salman, Opec+ would be proactive and preemptive to keep markets in equilibrium.

The head of commodity strategy at RBC Capital Markets LLC, Helima Croft, said there were pointers that Saudi Arabia wants to adopt the policy of preemption and keep production constraints in place until there are clear indications that there is sufficient demand for additional supply.

Analysts at Goldman Sachs Group Inc. and Energy Aspects Ltd. revealed that Opec+ will only start to reverse its supply curbs, which were formally about 2 million barrels a day, and increase production in the second half of the year.

At this period, accelerating demand would have tightened the market.

Meanwhile, the 23-nation alliance is scheduled to meet at OPEC’s Vienna headquarters in early June to review production levels for other months in the year.

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Crude Oil

Oil Gains Marginally on Possible Demand Recovery in China

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Crude Oil - Investors King

Oil prices inched slightly higher on Wednesday as optimism for a demand recovery in China and expectations that major producers will maintain current output policy offset global recession worries.

Brent crude oil, against which Nigerian oil is priced, appreciated by 17 cents, or 0.2%, to $86.30 per barrel after falling by 2.3% on Tuesday. U.S. West Texas Intermediate (WTI) crude climbed 7 cents, or 0.1%, to $80.20, after a 1.8% drop on Tuesday.

“Expectations that China’s fuel demand will recover in the second half of the year are growing and are likely to support market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Analysts from the Bank of America Securities said the reopening of the Chinese economy after years of tough COVID restrictions could unleash a large wave of pent-up demand over the next 18 months.

On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, is expected to keep its output policy unchanged.

An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by worries over inflation and the global economy.

OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.

However, gains in oil prices were capped by a bigger-than-expected build in U.S. oil inventories that was reported after the market settled on Tuesday.

U.S. crude stocks rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing American Petroleum Institute figures. That was triple the forecast for an about 1 million build in a preliminary Reuters poll on Monday.

Nissan’s Kikukawa, however, expects the build “to be temporary as the supply disruptions from a cold snap in the United States a few weeks ago would only impact data in the next couple of weeks”.

Official data from the U.S. Energy Information Administration will be released later on Wednesday.

Kikukawa expects WTI to trade in a range between $75 and $85 a barrel in the coming weeks.

Markets are also watching out for interest rate decisions from central banks for more trading cues.

“It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth,” Yeap Jun Rong, market analyst at IG, said in a note.

Investors are waiting to see if the U.S. Federal Reserve will “react to recent downside surprise in inflation and growth” when it meets next week, the analyst added.

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Fuel Scarcity: IPMAN Decries 50% Reduction of Product Supply Since July 2022

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Petrol Importation - investorsking.com

The Independent Petroleum Marketers Association of Nigeria, IPMAN has faulted the oil sector’s incapability to cater for the full fuel supply order of oil marketers nationwide.

Investors King learnt that the volume of products supplied to marketers dropped by 50 percent since July, 2022 which has worsened the fuel scarcity situation.

The Deputy National President of IPMAN, Zahra Mustapha, during a Television interview stressed that there is confusion in the nation’s oil sector.

Mustapha, who said the fuel subsidy issue is complex, explained that the federal government is overwhelmed by the burden of fuel subsidy which is not sustainable.

“The fact of the matter is that we are in a very complex situation because the burden of subsidy that the government is carrying is no more sustainable and the volume that the NNPC for now, being the sole importer of the petroleum product, PMS, has been hit hard, because of that the supply that we receive as the marketers at the loading point is being reduced by over 50 per cent.

“It doesn’t seem that they (NNPC) are bringing in more, if they are, we will be getting the volume we usually get before. Since July/August last year the volume we receive now is not up to 40 or 50 percent of what we usually get. As of today, the volume we are getting is not enough,” he said.

Mustapha stated that the situation has been reported to the oil sector regulatory bodies and the oil marketers are expecting their actions.

He further lamented the high supply cost and transportation which makes them sell it at a much higher rate to the consumers.

“We are supposed to get this product at N148 but we are buying at N22o and it keeps increasing. 240 in Lagos, 235 in Warri, 240 in Port Harcourt, in Calabar it is as high as N250 per litre for marketers, and you buy and transport yourself to where your retail outlet is. We cannot buy the product between 220 to 240 naira, transport it for about N50, which is already N300, then expect the marketer to sell to the public for N200 or N190. It is not realisable.

“There are a lot of confusions in the industry, which the government must come in and address these confusions so that the common man can get the product for the approved price,” said Mustapha.

 

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