Macroeconomic Review
Nigerian Economy Grew Faster than expected in Q2 2022 while CPI Soared to a high of 19.64% in July
Nigeria’s Real Gross Domestic Product (GDP) reportedly grew by 3.54% Y-o-Y in the second quarter of the year (beating the Bloomberg estimate of 2.90%). The seventh consecutive growth since the recession in 2020 represents an increase compared to 3.11% recorded in the first quarter of 2022, and a decrease when compared to 5.01% in Q2 2021. Growth was majorly driven by a 4.77% increase in the non-oil sector (particularly the services and agriculture subsector) with a contribution of 93.67% to total real GDP while the Oil sector recorded contracted by 11.77% with a contribution of 6.33% to total real GDP as oil production per barrel declined to 1.43mpb in Q2 (vs 1.49mpb in Q1).
Fixed Income Market Review and Outlook
Bearish bias dominated market activity at both the primary and secondary local fixed income space, as parsimonious system liquidity caused market players (especially banks) to sell-off their short to mid dated papers to raise liquidity to fund their obligations.
The SSA and other African sovereign Eurobonds, witnessed a mixed to bearish market, amid Fed Chair Powell’s aggressive stance at this year’s Jackson hole symposium and global recession fears…
Money Market Review and Outlook… Tight system liquidity amid weak coupon flows spurred higher interbank rates
System liquidity was tight during August, as there were no significant flows barring late FAAC credits. Average system liquidity was c.₦27bn compared to (c.₦137bn) recorded in July, with the Overnight Policy Rate (OPR) and Overnight (ON) rates averaging 13.34% and 13.75% from 14.32% and 14.45% in July respectively. There was also reduced CBN intervention at the Retail SMIS auction due to low system liquidity.
T-Bills Market Review and Outlook – Bearish market driven by tight system liquidity
Activity in the Treasury bills market started on a bearish note, as short tenored papers were offered at double digits c.12.00%, between 9.00% and 10.00% on mid tenors, while the long end remained muted. The sell-off in the secondary market was bolstered by thin liquidity status (low coupon inflows and OMO maturities) and the bi-weekly retail SMIS auction, thus forcing most Banks to sell their short to mid-dated securities (CBN special bills, NTBs and OMOs) to raise liquidity to fund their obligations…
Bonds Market Review and Outlook – Bearish bias encouraged by thin coupon inflows
Selling interest dominated the early sessions in the month, with 2025s, 2028s, 2032s and 2042s being the most offered papers. Offer yields across the curve kept increasing as liquidity thinned out of the system, averaging c.23bps increase W-o-W, with sellers being desperate to raise cash to fund their needs…
Eurobond Market – Mixed to bearish sentiment amid aggressive Fed Chair tone and global recession fears
At the start of the month, it appeared recession risks may have eased concerns on how aggressive the US Fed will be as regards future interest rate hikes. Thus, the African Eurobond markets witnessed buying interests across the curve, with Nigeria and Angola seeing the most traction…
Foreign Exchange Market Review and Outlook… Marginal decline in NAFEX rate and reduced CBN intervention
Sustained efforts by the CBN so far this year to strengthen the Naira have been abortive, as excess demand by market forces continue to weigh on the limited forex liquidity. In August, the Nigerian foreign exchange reserve decreased by c.$194 million M-o-M to close at $39.03 billion, amidst reduced intervention by the CBN…
Equities Market Review and Outlook – Mixed sentiment amid announcement of interim dividend payment
Despite the published earnings report which spilled into August, the NGX All Share Index fell 1.1% M-o-M to 49,836.51 points, while the YTD return trimmed to +16.7%. Investor sentiment, measured by market breadth (advancers/decliners) was relatively flat at 1.1x with 44 stocks advancing while 39 declined…
