FINANCIAL MARKETS TODAY – 18 November 2021

MACROECONOMIC UPDATE

The National Bureau of Statistics (NBS) published the Gross Domestic Product (GDP) figures for Q3’2021, which showed that the economy grew by 4.03% year-on-year (vs. 5.01% in Q2’2021 and 0.51% in Q1’2021). This reflects the fourth consecutive quarter of sustained growth after exiting the recession witnessed in 2020. The growth was largely driven by the non-oil sector, as the gradual return to a semblance of normalcy following the lockdown, has spurred economic activity and sustained recovery.

The Oil sector contracted by -10.73% year-on-year (an improvement from –12.65% in Q2’2021) while the non-oil sector grew by 5.44% year-on-year (slower than 6.74% in Q2’2021). In addition, the non-oil sector contributed 92.51% to GDP in Q3’2021 (vs. 92.58% in Q2’2021 and 91.27% in Q3’2020) while the Oil sector contributed 7.49% in Q3’2021 (vs. 7.42% in Q2’2021 and 8.73% in Q3’2020).

Economic growth is expected to pick up pace in Q4’2021, with the fading impact of the pandemic, increase in the nation’s reserve levels, and easing inflationary pressures. Downside risks to these projections rest on oil price volatility as well as exchange rate instability and insecurity which could hamper economic growth.

Money Markets

Interbank system liquidity eased today, opening with a credit balance of ca ₦11.25 billion, lower than the previous day’s balance of ca ₦89.66 billion. Nonetheless, the Open Buy Back (OBB) remained stable at 13.00%, while the Overnight (ON) rate declined by 39 bps to settle at 13.56%.

Treasury Bills

The NTB secondary market sustained a bullish theme, with major trading interest tilted to the August – November 2022 NTB papers at ca 5.70% levels. However, selloffs were observed on the short-dated papers and CBN special bills, as market players swiftly made liquidity provision ahead of the bond auction settlement tomorrow. Overall, the average rate dipped ca 4bps, to settle at 4.99%.  

Bonds

Following the recent hike on the 2050s at yesterday’s auction, bearish sentiments dominated the FGN bonds secondary market. The volume of trades executed remained low, amid uncertainty on yield direction. The auctioned papers – 2026s, 2037s, and 2050s traded at bid margins of 11.63%, 13.00%, and 13.30%, respectively while offers were on average 7bps far off. Overall, the average yield rose ca 6bps, day-on-day at 11.69%.

Eurobonds

The Eurobonds space witnessed another bearish trading session, with selloffs seen across the sovereign curve. Overall, average yield rose by ca 5bps, day-on-day to 6.93%.

Equities

The domestic bourse sustained bearish sentiments, as the Nigerian Stock Exchange All Share Index (NGX ASI) lost 0.15% day-on-day to close at 43,285.97pts, while year-to-date returns further reduced to +7.49%. This performance leaned to continued profit-taking activities in Bellwethers like First Bank of Nigeria Holdings Plc (-6.50%) and Guaranty Trust Holding Company Plc (-0.76%).

The NSE Banking, Oil & Gas, and Industrial Goods indices lost ca 0.19%, 0.19%, and 0.12% respectively, while the NSE Consumer Goods index gained ca 0.14% day-on-day.

Sterling Bank Plc led the volume chart with ca 60.19 million units while Airtel Africa Plc topped the value charts with ca ₦669.95 million.

Foreign Exchange

FMDQ Nigerian Autonomous Foreign Exchange Fixing (NAFEX) appreciated to ₦414.80/US$1.00 from ₦415.10/US$1.00.

Commodities

Global crude oil prices declined today, following reports that the United States has requested major oil importers like China and Japan, consider a consolidated release of crude oil from their strategic reserves to lower global energy prices. Thus, Brent Crude oil price lost ca 0.05% day-on-day to settle at US$80.24pb, while WTI also dipped ca 0.31% to US$78.14pb, as at report time. Spot Gold lost ca 0.32% day-on-day to settle at US$1,864.20 per ounce as at report time.

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