Macroeconomic Review
Q3:2022 growth numbers for Nigeria and sustained hawkish CBN amid mounting inflationary pressures
The Nigerian economy grew by 2.25% Y-o-Y (Est. 2.90%) in the third quarter of 2022 (vs 3.54% and 4.03% recorded in Q2:2022 and Q3:2021 respectively), as reported by the NBS. This represents the eighth quarter of growth but at the slowest rate since Q1:2021, attributable to the base effect of the recession and the challenging economic conditions that have hampered productive activities. However, real GDP grew at 9.68% Q-o-Q in Q3:2022, reflecting a higher economic activity in Q3:2022 than the preceding quarter…
Fixed Income Market Review and Outlook
The local fixed income market witnessed a bullish theme in November, amid aggressive deposit money banks’ interest in short-dated papers driven by FAAC inflows, CBN Special bills maturities, and significant interest from pension houses, insurance companies and asset managers on the high yielding FGN bond securities.
The Eurobond market also observed a bullish market with extended period of rally across the major African markets, driven by lower-than-expected US CPI and a soft-toned US Fed. However, there were few instances of selloffs, spurred by unrest in China amid Covid-19 restrictions and country-specific issues (most especially Ghana) …
Money Market Review and Outlook – Relatively buoyant market and lower interbank rates despite an increase in MPR
System liquidity in November was significantly higher compared to October, which is quite a surprise, given our postulations as at the end of last month. At an average liquidity of ₦185.05bn (vs -₦12.46bn in Oct’22), and significant reduction in the average Overnight Policy Rate (OPR) and Overnight (ON) rates to 12.38% and 12.76% from 16.08% and 16.47% in Oct’22 respectively, we observed that late October FAAC inflows in the early period of November, less frequent CBN’s discretionary CRR debits, OMO and CBN Special bills maturities were the major drivers of the relatively buoyant money market…
T-Bills Market Review and Outlook –Bullish market spurred by surfeit liquidity and aggressive demand by banks
Activity in the treasury bills market was overall bullish, as late October FAAC inflows in the early period of November drove significant demand across the mid and long dated papers by banks and asset managers. In addition, the preliminary NTB auction for the month reflected a bullish theme particularly on the 364-day paper, thus causing the DMO/CBN to close the stop rate for the 1-year paper at c.51bps lower relative to October’s close…
Bonds Market Review and Outlook – Mixed to bullish market, amid elevated interest from large ticket players
The early period of the month witnessed a muted theme, with pockets of trades recorded across select maturities (2032s and 2037s), mostly sideways interests amid weak coupon flows (c.₦22bn).
As the month progressed, the market eased to a bullish theme with large ticket interests from Pension houses, some Insurance companies and Asset managers, recorded across 2026s, 2029s, 2032s, 2037s, 2049s and 2050s, however offers were scanty, thus causing a significant drop in yields on these papers…
Eurobond Market – Bullish market amid lower than expected US CPI and less hawkish Fed chatters
The Eurobond space remained frail to start the month with few interests recorded across the African sovereign papers. Ghana, Nigeria, and Angola all witnessed positive sentiments with prices appreciating on average 1.5pts, with the former getting some comfort from the recent encouraging speech by the Ghanaian President, Nana Akufo-Addo that external debt holders will not incur losses on their holdings.
The US FOMC meeting took center stage a couple of days later, where a 4th consecutive 75bps rate hike was envisaged amid higher-than-expected JOLTS data. Expectedly, the 75bps hike was delivered, more importantly, the Fed chair Powell dismissed any glimmer of hope of a dovish Fed, after indicating the hike would persist to higher levels than previously anticipated albeit at a slower pace. The markets traded mixed sentiments afterwards with sideways interest recorded across the major SSAs sovereign papers…
Foreign Exchange Market Review and Outlook – FX reserves deplete further; Naira worsens against the dollar
Nigeria’s foreign exchange reserves continued to decline significantly in November, as the Nigerian FX reserve lost c.$274 million M-o-M to close at $37.11 billion, amidst sustained intervention by the CBN. The Central Bank of Nigeria (CBN) interventions in foreign exchange market reached $12.74billion in eight months of 2022, as reported by CBN economic reports, albeit lower by 13.60% from the same period in 2021…
Equities Market Performance in November – Curveball on Index Performance
In line with the historical trend seen in the fourth quarter of the year, we saw a largely positive performance at the domestic bourse as investors rebalanced their portfolios to close the year. Overall, this propelled a bullish record as opposed to market performance in the last four months, where a southward trajectory was witnessed. The NGX All-Share Index gained 8.7% M-o-M to close November at 47,660.04 points, while YTD returns extended to +11.6%. Market breadth, a measure of investor sentiment, was positive, settling at 1.1x as 45 stocks advanced while 42 declined…
