Macroeconomic Review
Nigeria’s Inflation – Annual headline inflation nudged higher
Nigeria’s annual inflation rate increased to 21.91% in February 2023, up from 21.82% the previous month and beyond market expectations of 21.85%. Food prices, the most important component of the CPI basket, rose further to 24.35% in February, after rising by 24.32% the previous month, owing to the scarcity of the new Naira notes and chronic food shortages – Vegetables, grains, and cooking oil prices were the main factors driving price increases…
Nigeria’s MPC Meeting – MPC maintained hawkish stance amid persistently high inflation
The Monetary Policy Committee (MPC) met on March 20th and 21st, 2023, confronted with new and existing challenges, including the recent bank failures in the United States and Switzerland, amidst widespread monetary policy tightening, which added a new dimension to the risks confronting the global financial system, as well as persistent but declining global inflation…
Fixed Income Market Review and Outlook
The theme in the local fixed income market was overall mixed to bearish. Early periods were bullish due to the surfeit liquidity while latter periods were bearish as liquidity dwindled significantly due to the sustained statutory debits and primary market auctions. The DMO also released Q2’2023 FGN bond issuance calendar, where they replaced the existing 2037 and 2049 papers with 2042 and 2050 maturities, while retaining the 2028 (but replaced with 2029 in June 2023 FGN bond auction) and 2032 papers…
Money Market Review and Outlook –Surfeit liquidity weakened by sustained statutory debits and primary market auctions
System liquidity was buoyant at the start of the month, bolstered by late Feb’2023 FAAC inflows that spilled into the new month. Interbank rates held steady at 10.00% – 13.00% for an extended period before liquidity thinned out from the system due to the bi-weekly Retail FX SMIS, CRR debits, oversupplied FGN bonds and Treasury bills at the primary market auctions. Although, the FGN bond coupon inflows (c.₦352.1bn) and OMO maturity (c. ₦90bn) were healthy in Mar’2023, the funding pressure during the month outweighed the credits into the system…
T-Bills Market Review and Outlook – Early buyside activity dampened by tight system liquidity
Bullish bias dominated the early periods of the month, supported by elevated system liquidity. The bulk of the transactions were skewed to the mid-long dated papers, with 22-Feb-2024 (the current 1-year bill at the time) trading between 5.60% and 6.00%. Sustained buyside activity was also fueled by the risk of leaving funds idle just for it to be mopped up by the CBN at zero cost…
FGN Bonds Market Review and Outlook – Bullish bias waned amid tight liquidity conditions; 2037 and 2049 bonds retired by the DMO
Activity in the FGN bonds market witnessed the same bullish fate as that of the treasury bills. The on-the-run bonds (2028s, 2032s, 2037s and 2049s) witnessed the most traction as investors expressed interest to invest in these papers. Feb’23 FGN bond auction winners also saw this as an opportunity to exit their holdings at profitable levels…
Eurobond Market – Mixed to Bearish theme spurred by US & Euro Banks’ financial crisis
The Eurobonds market extended its bearish momentum at the start of the month, as the market anticipated the release of the US ISM manufacturing sector activity report to assess the likely impact on monetary policy decisions. Sell offs spilled across board in the SSA region. However, Nigeria’s curve recovered some of its losses in the previous month, as few investors banked on the expected removal of fuel subsidy based on President-elect, Senator Bola Tinubu’s manifesto…
Foreign Exchange Market Review and Outlook – Sustained decline in Gross FX reserves; Naira appreciates against the dollar at the I&E Window
The FX market was much calmer in Mar’23 post-election, with reduced demand for USD at the unofficial window. However, reduced allocation for deposit money banks at the official windows has spurred delayed payment/delivery of FX obligations by market players and by extension, students studying in the diaspora. Cash trades at the unofficial window traded mostly between $/₦735 – $/₦740, while Inflows closed at $/₦742…
Equities Market Performance in March – Decline in the stock market’s performance amid higher inflation and political unrest
The Nigerian Exchange (NGX) market capitalization fell by ₦857 billion in March 2023 due to political instability, inflationary pressure, and a lack of local currency in the domestic economy. Nigerians went to the polls on February 25 and March 18, 2023, to determine their country’s leadership, prompting foreign investors to exit some fundamental stocks on the Exchange. In addition, according to the National Bureau of Statistics (NBS), the inflation rate jumped to 21.91 percent in February 2023 from 21.82 percent in January, this dampened investors’ sentiments and ultimately impacted the stock market return. Overall, the stock market gained ₦1.63 trillion in market capitalization in the first quarter, as it closed at ₦29.544 trillion on March 31, 2023, , up from ₦27.915 trillion when it opened…
