Macroeconomic Review
Inflation continues to blow hot in the Nigerian Economy, dampens yuletide celebrations
Nigeria’s inflation for November 2022 quickened to 21.47% Y-o-Y (Est. +21.30%), an increase of c.0.38% from 21.09% Y-o-Y recorded in October 2022. In addition, the headline inflation grew at 1.39% M-o-M in November 2022 vs 1.24% recorded in October 2022…..
Fixed Income Market Review and Outlook
There was significant demand for short-dated securities in the local fixed income space, due to ample system liquidity. The longer dated papers (bonds) also traded bullish, as idle cash from big ticket players needed to be reinvested before the close of the year, short coverings also aided the bullish bias…
Money Market Review and Outlook – Ample system liquidity to close the year
The year closed in a buoyant state, as higher than expected FAAC inflows (₦902bn), CBN Special bill maturities, FX swap maturities, FGN bond maturity and less frequent mop-ups by the CBN, ensured system liquidity hovered around positive territory all through Dec’22. Average liquidity during the month was ₦279.18bn (vs ₦185.05bn in Nov’22), and there was a decline in the average Overnight Policy Rate (OPR) and Overnight (ON) rates to 11.35% and 11.88% from 12.38% and 12.76% in Nov’22.
Treasury Bills Market Review and Outlook – Buyside interest dominate market activity amid surfeit liquidity.
Following the release of Q1 2023 Nigerian Treasury Bills issuance calendar, the pulse in the secondary market swayed to a muted theme briefly, as investors tried to analyze the information. However, with heavy inflows hitting the system from maturities (FX swap and CBN Special bill), market players (especially banks and institutional clients) had no choice than to deploy the excess liquidity to available outlets. The demand was mostly skewed to long dated bills, as it was trading at double digits (c.13.20%)…
FGN Bonds Market Review and Outlook – Mixed theme amid year-end position covering and profit taking.
Activity in the FGN bonds space was bullish at the start of the month, amid fears that the longest on-the-run paper (2037s) may not be reissued at December’s FGN bond auction. Surrounding tenors also witnessed buyside interest from Pension houses, Insurance companies and Asset managers who are big on long dated securities….
Eurobonds Market Review and Outlook – Mixed market sentiments amid Central banks’ interest rate decisions and Ghana’s economic woes
It was a bullish start to the month, fueled by the Fed Chair Powell’s dovish speech on interest rate trajectory and optimism over the potential reopening of the Chinese economy. Risk on sentiments dominated the African space leading to an average price appreciation of c.2pts across the curves, as market players liked the signaling of a reduction in the pace of rate hikes, although peak rates seemed to be ‘somewhat higher’ than earlier projected….
Foreign Exchange Market Review and Outlook – FX reserves decline further; Naira sustains its free fall against the dollar
The FX market has witnessed a tumultuous 2022 amid several policies and moves by the CBN. December 2022 was a much calmer month with less volatility in the official and unofficial markets. The exchange rate closed the year at an official rate of ₦461.5/$1 at the Investor and Exporter (I&E) window, representing a 5.7% depreciation within one year. However, at the unofficial market, the exchange rate closed between ₦730/$1 – ₦735/$1 on cash trades, while Inflows closed at ₦740/$1….
Equities Market Review and Outlook – Increased buyside interest at the end the year
The year ended on a positive note, as investors increased their buying pressure in the domestic bourse. Overall, this propelled a bullish record as opposed to market performance for the last four months, where a southward trajectory was maintained. The NGX All-Share Index gained 7.5% M-o-M to close December at 51,251.06 points, while YTD returns extended to +19.9%. Market breadth, a measure of investor sentiment, was positive, settling at 1.1x as 45 stocks advanced while 42 declined.
