Short-Term Funding Drives FMDQ’s Record N676.7trn Turnover

By Enam Obiosio

Nigeria’s fixed income and currency markets generated N676.71 trillion in total turnover on FMDQ Exchange in 2025, underscoring the scale of liquidity flows across the financial system.

The activity, executed over 247 business days, translates to an average daily turnover of N2.74 trillion, with trading heavily concentrated in foreign exchange and short-term liquidity instruments.

DECISION HIGHLIGHT
Market structure in 2025 was dominated by liquidity management rather than long duration capital formation.

Foreign exchange trades and repurchase agreements alone accounted for more than N421 trillion of activity, highlighting the system’s strong bias toward short term funding and currency positioning.

FMDQ Group COO, Tumi Sekoni, signalled continued institutional focus, stating, “As the year unfolds, we will deepen collaboration with regulators and stakeholders to strengthen governance, enhance market liquidity and promote sustainable market growth.”

DECISION MEMO
The N676.71 trillion turnover recorded on FMDQ in 2025 reflects deep market activity, but the composition of trades reveals a financial system still heavily oriented toward liquidity recycling rather than long term capital mobilisation.

At face value, the scale is impressive. An average daily turnover of N2.74 trillion indicates robust participation from banks, institutional investors and monetary authorities. However, the dominance of foreign exchange transactions at 42.68 percent and repos at 24.67 percent suggests the market’s centre of gravity remains short duration and policy driven.

This structure is consistent with Nigeria’s current macro environment. Elevated interest rates, active liquidity sterilisation and persistent currency management needs have naturally tilted market activity toward instruments that support balance sheet management and monetary operations. The strong showing of Open Market Operations bills, which recorded N139.08 trillion in turnover, reinforces the Central Bank’s continued footprint in system liquidity control.

By contrast, longer term capital market instruments remain relatively small in the mix. Federal Government bonds accounted for only 5.51 percent of turnover, while Treasury bills contributed 6.50 percent. This imbalance points to a market that is liquid but still shallow in terms of long duration financing depth.

The presence of N34.42 trillion in foreign exchange derivatives is notable. It signals growing hedging behaviour among market participants amid ongoing currency volatility. That trend, if sustained, could gradually deepen Nigeria’s risk management ecosystem.

Sekoni’s emphasis on strengthening governance and promoting sustainable growth suggests FMDQ recognises the next phase challenge. Liquidity alone does not equate to capital market maturity. The strategic objective now is likely to be broadening instrument diversity and deepening non monetary trading activity.

For policymakers, the data presents a mixed picture. Nigeria’s financial markets are clearly active and responsive to policy signals, but the heavy skew toward short term instruments underscores the unfinished task of building deeper long term funding markets.

DATA BOX

• Total FMDQ turnover 2025: N676.71 trillion
• Business days: 247
• Average daily turnover: N2.74 trillion
• FX transactions: N254.42 trillion (42.68 percent)
• Repurchase agreements: N166.91 trillion (24.67 percent)
• OMO bills: N139.08 trillion (20.55 percent)
• Treasury bills: N44.00 trillion
• FGN bonds: N35.31 trillion
• FX derivatives: N34.42 trillion
• Eurobonds: N1.15 trillion
• Sukuk bonds: N815.76 billion

WHO WINS / WHO LOSES
Commercial banks and active trading institutions benefit from the high liquidity turnover and active repo market. Monetary authorities retain strong transmission channels for liquidity management.

Long term project financing segments remain relatively under served, while corporate bond market depth continues to lag.

POLICY SIGNALS
The data reinforces the Central Bank’s continued reliance on market based liquidity sterilisation tools. It also signals that Nigeria’s financial architecture remains more money market centric than capital market deep.

Future policy attention may increasingly shift toward developing longer tenor instruments and broadening investor participation.

INVESTOR SIGNAL
For institutional investors, the strong turnover confirms deep secondary market liquidity in short term instruments and FX products.

However, the relatively modest bond turnover suggests limited depth for investors seeking long duration local currency exposure, a gap that may persist until structural reforms deepen the debt market.

RISK RADAR
Several structural risks remain evident.

• Market activity is heavily concentrated in short term instruments.
• FX volatility continues to drive defensive positioning.
• Long duration capital market depth remains limited.
• Liquidity conditions are closely tied to monetary policy stance.
• Over reliance on repo and OMO activity could mask underlying funding fragility.

FMDQ’s turnover reflects a highly active market. The next stage of maturity will depend on whether Nigeria can convert this liquidity intensity into deeper, longer term capital formation.