One of the major developments that trended last week was the declaration by President Muhammadu Buhari to run for re-election in the upcoming 2019 general election. However, the declaration failed to elicit any meaningful reaction on the movement of stocks and equities at the Nigerian Stock Exchange (NSE).
Besides, the week started with what can be seen as a cheerful news for the economy as the National Bureau of Statistics (NBS), revealed that Nigeria’s headline consumer price index recorded its fourteenth consecutive deceleration, moderating to 13.34% y/y (compared to 14.33% in February 2018).
Also the claims by the Director General of National Population Commission (NPC), Mr. Eze Duruiheoma during a presentation in the United States within the week that Nigeria’s population now stood at 198m was not taken seriously by many as the statement was not backed by any fact or credible figures because the country is yet to conduct any census since 2006. Besides, the country lacks credible documentation in recording deaths and even births in several parts of the country, hence opinion leaders failed to react to the announcement by NPC.
On month-on-month basis, the headline index increased by 0.84% (vs. 0.79% the previous month).
Within the week under review, the Central Bank of Nigeria (CBN) released its Business Expectations Survey Report for the month of March which showed an increase in the respondents’ overall confidence index (CI) on the macroeconomy to 24.5 index points (vs. 14.5 points in February), on the back of improvements in volume of total order, business activity, and internal liquidity positions (financial conditions).
The businesses outlook for April 2018 also indicated greater confidence in the macroeconomy at 64.1 index points (vs. 57.8 points previously).
Experts were upbeat that business confidence will maintain an upward trajectory due to the continued improvement in macroeconomic conditions.
However, constraining factors cited — insufficient power supply, high interest rate, insufficient demand, and unfavourable political climate — remain downside risks to the outlook.
On equities, proceedings in the equities market turned positive, with the ASI inching higher by 0.21% w/w to 40,928.70 points, amidst a three-to-two positive trade session during the week. Accordingly, the Month-to-Date and Year-to-Date returns improved to -1.39% and 7.02%, respectively.
Meanwhile, total volume and value of trades were 19.82% and 26.04% lower this week, despite crosses in value stocks such as NB, ZENITHBANK, DANGCEM, and GUARANTY. It is also worth stating that there were 36 gainers and losers apiece, led by LEARNAFRCA (+18.56%) and CILEASING (-18.02%) respectively.
Still-strengthening macroeconomic fundamentals and declining fixed income yields continue to strengthen our medium-to-long term outlook for Nigerian risky assets, while relatively lower prices of value stocks buoy likelihood of bargain-hunting in the short term.
Looking at Money Market last week, the overnight lending rate softened by 108 bps w/w to 2.92% (lowest since 14 December 2017), against last week’s close of 4.00%. High system liquidity from the prior week carried on into this week, buoyed by inflows from matured OMO (NGN476.21 billion) bills. The CBN intervened once, via OMO auction, selling a total of NGN500.00 billion worth of bills.
Expected inflows of NGN349.15 billion from OMO (NGN276.08 billion) and treasury bill maturities (NGN73.07 billion) are expected to support liquidity in the coming week, leading to further moderation in the overnight money market rate.
On Treasury Bills, Business Hilights Intelligence Unit (BHIU) observed that proceedings in the NTB market were bullish, on the back of buoyant system liquidity and a further deceleration in inflation rate to 13.34% in March (vs. 14.33% a month before).
As a result, average yield fell by 54 bps w/w to 13.80%. High demand for the 20DTM (-218 bps), 153DTM (-154 bps), and 307DTM (-124 bps) bills caused yield contraction at the short (-65 bps), mid (-52 bps), and long (-50 bps) ends of the curve, respectively.
Yields are expected to drop further in the meantime, supported by expected buoyant system liquidity. At the NTB auction scheduled for next week, the CBN is expected to offer NGN58.49 billion – NGN5.85 billion of the 91-day, NGN29.25 billion of the 182-day, and NGN23.40 billion of the 364-day – worth of bills to the market.
On the Bond market segment, sentiments in the bond market were upbeat, buoyed by (1) high market liquidity and (2) the release of the March inflation figure (13.34% vs. 14.33% in February). Consequently, average yield declined by 31 bps w/w to 13.31%, with yields contracting at the short (-53 bps), mid (-15 bps), and long (-22 bps) segments. Notable bonds include the JUL-2019 (-139 bps), JAN-2026 (-24 bps), and JUL-2030 (-24bps), respectively.
The Foreign Exchange market was not without bruises as the USD/NGN broke off from the NGN362/USD rate during the week, to close at NGN363/USD in the parallel market, while it weakened by 0.09% to NGN360.32/USD in the I&E FX window.
Total turnover in the I&E FX window inched 6.78% higher to USD1.09 billion, with bulk (70.88%, vs 52.61% in the previous week) of trades settled within the NGN360-NGN369/USD band. Meanwhile, all OTC FX futures open contract rates remained flat from the previous week — 1-month, 3-month, and 6-month contracts with settlement dates of 25-Apr-2018, 27-Jun-2018, and 26-Sep-2018 closed at NGN360.31, NGN360.61, and NGN361.06 respectively.
Experts say the FX market may continue to remain stable, as oil revenues – supported by rising oil prices and production – continue to shore up the foreign reserves.