Macroeconomic Review
Nigeria’s CPI hits new 17-year High of 20.77% in September
The Nigerian Bureau of Statistics (NBS) reported headline inflation for the month of September 2022 at 20.77%, the highest printed since September 2005. This represents an increase of c.25bps from 20.52% recorded the previous month and c.414bps from 16.63% recorded in September 2021. However, on a month-on-month basis, headline inflation declined for the second consecutive time to 1.36% (vs. 1.77% recorded in August), largely attributed to the food index’s increase at a declining rate…
Fixed Income Market Review and Outlook
The spillover effect of the hawkish September MPC meeting was a bearish theme in the local fixed income market in October. In the treasury bills market, successive mop-ups by the CBN, thus stifling liquidity from the market, led to an extended period of sell-off by Deposit Money Banks to fund their commitments. Similarly, in the FGN bonds market, Investors sold off in anticipation of higher yield levels and more borrowing by the DMO. Overall, the market was bearish, however coupon inflow and late FAAC credits drove a bullish theme to end the month…
Money Market Review and Outlook – Higher interbank rates post-Sept’22 MPC meeting; Liquidity hovered in negative territory
Q4 2022 started moderately liquid, buoyed by late FAAC credits, OMO maturities and coupon inflows. However, persistent mop-ups by the CBN on the back of revised CRR and the bi-weekly Retail FX SMIS, threw the money market space into negative territory for a major part of the month. Comparatively, system liquidity in October averaged (-₦12.46bn) (vs ₦104.86bn in Sep’22), with Interbank rates significantly higher, as the Overnight Policy Rate (OPR) and Overnight (ON) rates printed on average 16.08% and 16.47% from 11.71% and 12.17% in Sep’22 respectively…
T-Bills Market Review and Outlook –Bearish market overall, amid tight system liquidity and increased stop rates at the primary auctions.
Tight system liquidity owing to increased mop-ups by the CBN – a fallout of September’s MPC meeting, ensured the month of October was overall bearish in the Treasury bills market. The anticipation of increase in rates amid upward review of the MPR fostered a somewhat bearish theme, albeit coupon inflows towards the end of the month eased the sell-off as investors sought to reinvest the excess cash.
Most of the activity was skewed to CBN Special bills (November 2022, December 2022 and March 2023), February OMO bills and NTBs (April, September and October 2023 papers)…
Bonds Market Review and Outlook – Investors sold off in the local bonds market, amid expectation of rise in yields
Selling interest dominated the local FGN bonds market, as investors expected an uptrend in yield levels on the back of a bearish September FGN bond auction and the need for the FGN to borrow excessively to shore up the widening budget deficit.
During the month, there were talks by the Nigerian government to convert the c.₦20 trillion loans taken from the CBN to fund budget deficits, to bonds over a 40-year period at an interest rate of 9%…
Eurobond Market – Sentiments remain frail amid US Fed’s stance and country-specific economic issues
The SSA and other African Eurobond markets started the month with a reversal in the bearish theme that has plagued the market over the past weeks, amid recovery in the stock markets (pushing near 3% gains) after weak U.S. Manufacturing data tempered views on the US Feds’ existing hawkish chatters.
The bullish theme was however short-lived amid better-than-expected non-farm payrolls and jobs data report, alongside the US CPI for September printing higher than market expectations at 8.20% (vs Est. 8.10%), thus rekindling another round of selloffs across the SSA markets…
Foreign Exchange Market Review and Outlook – FX reserves deplete further; free fall of the Naira continues
The FMDQ Nigerian Autonomous Foreign Exchange Fixing (NAFEX) depreciated by 1.12% M-o-M to settle at ₦442.63/$1.00, from ₦437.74/$1.00 recorded the previous month.
The Gross FX reserves continued to diminish despite price appreciation in the oil market, amid sustained CBN intervention, albeit not sufficient given the unmet demand in the official and unofficial markets. In October, the Nigerian FX reserve decreased by c.$808 million M-o-M to close at $37.44 billion…
Equities Market Performance in October – Bearish Sentiments Dominated Trading Activities
The overhanging bearish sentiments in the market was sustained in October, as the NGX All Share Index dipped 10.6% M-o-M to close at 43,839.08 points, while YTD returns dropped to +2.6%. This performance was largely influenced by the price depreciation in AIRTEL which amplified the bearish trend. Investors sentiments, measured by gainers against the decliners, was bearish, settling at 0.4x as 22 stocks advanced against 54 decliners…
