Turnover in the repurchase agreements/buy-backs segment (repos) of the money market has declined consistently from March 2019 where turnover stood at N5.38 trillion.
A repo is a form of short term borrowing mainly in government securities (employed by the Central Bank of Nigeria), where the dealer sells an underlying security to investors and buys them back shortly afterwards at a slightly higher price.
According to market sources the decline is as a result of decreases seen in the overnight and open buy back money market rates.
Data from the Financial Market Dealers Quote (FMDQ) shows that in June 2019, turnover was recorded at N3.64 trillion, representing a 21.40 percent or a N1 trillion month-on-month (m-o-m) decrease from N4.63 trillion recorded in May 2019. A year-on-year (y-o-y) comparison however shows a 56.95 percent or N1.32 trillion increase in turnover which was N2.32 trillion as at June 2018.
An analysis of turnover in unsecured placements/takings in June 2019 showed a spike. Turnover for the unsecured placements increased m-o-m by 40 percent to N0.30 trillion, from the N0.22 trillion recorded in May 2019, and a y-o-y increase of 612.84 percent (N0.26trn) from the turnover recorded in June 2018 (N0.04trn).
The m-o-m decrease in total turnover in the money market is attributable to the 0.93 percent and 0.71 percent decrease in average money market O/N and OBB rates respectively, which closed at 8.08 percent and 7.50 percent in June 2019 from 9.01 percent and 8.21 percent in May 2019, the FMDQ said. Adding that this indicates an increase in liquidity in the inter-bank market.
A survey of the market’s performance in the review period showed that total number of executed trades reported on the E-Bond Trading System in June 2019 was 11,478 representing a 23.20 percent or 3,467 m-o-m decrease.
This was in contrast to the number of trades executed in May 2019 which stood at 14,945, and was driven by a m-o-m decrease in treasury bills and federal government bonds.