Macroeconomic Review
Inflationary Pressures Mount as Nigeria’s CPI Hits 15.92% Y-o-Y

Nigeria’s inflation rate accelerated to 15.92% in March 2022 (12bps higher than Bloomberg’s consensus estimate), representing a 22bps increase from 15.70% recorded in February 2022.  Food inflation remained elevated at 17.20%, up from 17.11% recorded the previous month, due to global supply chain delays and increased commodity prices. The annual core inflation index, which includes volatile agricultural produce prices, dipped to 13.91% in February from 14.01% the previous month. Likewise, the Urban and Rural inflation rates rose by 16.44% and 15.42% up, from 16.25% and 15.18% recorded in February 2022.

On a monthly basis, the food and core sub-indices moved in opposite directions, with the latter at 0.98% for March 2022, down from 1.33% printed in Feb’22 while the former grew by 1.99% (an increase of 12bps from 1.87% recorded in February 2022). The increase in the food index was premised on higher food prices during the planting season; however, the core index deflected market expectations, implying that inflationary pressures on energy prices had eased in March.


We expect inflationary pressures to be sustained as the effect of local supply chain bottlenecks are expected to weigh on food prices during the planting season. Furthermore, the escalating political tensions caused by the Russia-Ukraine crisis are likely to cause a rise in energy and other imported materials prices.

Fixed Income Market Review

Activity in the local fixed income and Eurobonds’ markets were similar, amid a series of related events that drove an overall bearish theme. On the local front, the relative dearth of market liquidity, increase in 1-year stop rate, upsurge in customary bond auction offerings (need to shore up widening fiscal deficit); all ensured a cautious but bearish approach to trading in both the bills and bonds markets.

Money Market Review and Outlook… Weak OMO Maturities and Sustained CRR Debits Tightened Liquidity

The money market kickstarted Q2’22 with ample liquidity, largely buoyed by late FAAC inflows. However, successive mop-ups by the CBN and reduction in OMO maturities, ensured the month was less liquid. In absolute terms, system liquidity in April averaged ₦128.54bn (vs ₦239.66bn in Mar’22), with Interbank rates closing relatively higher, as the Overnight Policy Rate (OPR) and Overnight (ON) rates printed on average 8.25% and 8.77% from 6.52% and 7.05% in Mar’22 respectively.

We expect the market to be less buoyant amid expected maturities (OMO- c. ₦125bn; NTB – c. ₦273bn) and bond coupon payments (c. ₦22bn). Thus, average OPR and OVN rates should steady at 10% to 11% levels.

Foreign Exchange Market Review and Outlook… Naira depreciates at NAFEX

Nigerian foreign reserves increased by $32.52 million and closed at $39.58 billion at the end of April, amidst the continuous intervention of the CBN. The FMDQ Nigerian Autonomous Foreign Exchange Fixing (NAFEX) depreciated month-on-month to settle at ₦419.00/$1.00, from ₦416.17/$1.00 recorded the previous month. The reference to the CBN SMIS Window indicated that the greenback remained stable against the dollar at ₦430.00/$1.00.

In the absence of significant changes in market conditions, we expect rates to remain stable.

Equities Market Review and Outlook

Equities Market in November… Earnings Releases bolster Market Return in April

After slowing down from the bullish start to the year, significant buy interest was noticed in the market in April on the back of renewed interest from investors in market bellwethers. Consequently, the benchmark All Share Index, expanded 5.7% M-o-M, reaching a 14-year high to close at 49,638.94points. As such YTD return also expanded to 16.2%. Market breadth – gainers against losers – also reflected the positive sentiment as 67 stocks advanced while 27 declined.

Mixed Sentiments Across Sectors…All Sectors Advance

Performance across sectors was positive as all indices advanced M-o-M. The Oil & Gas index was the best performing sector index, expanding 19.1% on the back of gains in SEPLAT. Similarly, the Consumer goods index improved by 11.5% on the back of renewed interest in brewers following improved financial results. The Banking and Insurance indices also followed suit, jumping 6.2% and 3.7% respectively while the Industrial goods index closed out the positive performance with a 3.3% appreciation.

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