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Investors Lose N41.82bn WoW as NGX ASI Decrease by -0.16% to Close the Week in Red.

The NGX ASI closed the week in red for the first time this year by 0.16% as it closed negative in 3 of the 5 trading sessions during the week. It declined on the back of selloffs in large caps such as OKUOMUOIL (-10.00%) and UNILEVER (-4.36%). Consequently, at 47,202.30 points, the equities market’s Year-to-Date return decreased to 14.08% as market capitalisation fell by 0.16% to close at N25.44 trillion.

Market breadth (a measure of investor sentiment) advanced in the previous week, increasing from 1.20x to 1.42x as 44 stocks appreciated against 31 stocks that declined. SCOA and RTBRISCO topped the market gainers with 42.40% and 32.29% WoW respectively, while PHARMADEKO and OKOMUOIL were the top losers with declines of -16.67% and -10.00% respectively WoW.

The activity level was mixed as the trade volume declined by 25.70% while the total value improved by 15.76% WoW. A total turnover of 1.331 billion shares worth N22.70 billion in 24,039 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume namely ACCESS, GTCO, and FIDELITYBK. They accounted for 316.758 million shares worth N4.353 billion in 3,476 deals; contributing 23.80% and 19.18% to the total equity turnover volume and value respectively

Weekly Sectorial Performances of the NGX

Outlook for the Week

We expect positive performance to return in the coming week as the equities market still presents decent opportunities for investors chasing positive real returns on investments.

The Nigerian Fixed Income

There was a mixed sentiment in the bond market last week as two of the five tenor yields under coverage closed lower, the 1 and 30-Year closed flat at 3.89% and 12.97% respectively while the 10-Year bond increased by 1bp. The 3 and 5-Year tenor bonds compressed by 44bps and 3bps.

There was relatively bullish sentiment in the Nigerian Treasury Bills Market as the 91 and 182-day paper yields compressed by 1bps and 7 bps to close at 4.03% and 4.38% respectively while the 364-day paper yield improved by 10bps WoW. 

In the Money Market space, the Open Buy Back (OBB) and Overnight (O/N) rates decreased to 3.33% and 4.00% from 13.00% and 13.25% respectively WoW.

Outlook for the Week

We expect market activity in the fixed income market to be influenced by liquidity levels and foreign investor participation.

Local Economic Updates

Last week, in a bid to alter the FX bidding process, the CBN introduced the RT200 FX program (Race to US$ 200 billion in FX Repatriation). This policy initiative aims to achieve US$200 billion FX repatriation from non-oil export in 3 to 5 yrs. In addition, the CBN aims to make Deposit Money Banks self-sufficient in meeting FX needs by boosting non-oil exports. The RT200 Programme will have the following five (5) key anchors: Value-Adding Exports Facility, Non-Oil Commodities Expansion Facility, Non-Oil FX Rebate Scheme, Dedicated Non-Oil Export Terminal, and Biannual Non-Oil Export Summit.

Also, petrol stations in Nigeria saw abnormal queues due to a shortage of supply after over 100.0mn liters of adulterated petrol had to be recalled. The government said it found methanol in recently imported fuel at levels far higher than allowed, leading to fuel scarcity in major cities and a 10-day shortage in national fuel reserve capacity. The GMD NNPC said to prevent the distribution of petrol. The company promptly ordered the separation of all un-evacuated volumes and the holding back of all the affected products in transit (both truck & marine). However, to boost supply, the Chief Executive Officer, NMDPRA, disclosed the arrival of 300.0m litres of PMS in six vessels to close the supply gap.

The CBN conducted a Nigerian Treasury Bills (NTB) auction to roll over N98.1bn worth maturing NTB. The auction was met with significant demand with total offers of about N446.3bn, implying a bid to cover ratio of 4.5x. Overall, the CBN took advantage to oversell the auction, selling N215.0bn worth of bills. As a result, the stop rate on the 364-day bill fell by c.20bps to close at c.5.4%, while the 91-day and 182-day bills stayed flat.

Elsewhere, the IMF, via its Article IV report on Nigeria, posits that the Nigerian economy is recovering from a historic downturn thanks to policy support, rebounding oil prices, and international financial assistance. COVID-19 infection rates and fatalities have been contained, benefiting from the authorities’ proactive approach. With higher oil prices and the country entering into the 2023 Presidential election cycle, there are delays in much-needed fiscal and exchange rate reforms. However, macroeconomic and structural policies should build confidence and ensure a robust exit from the crisis.

Global and Emerging Market Economic Updates

Last week, the U.S. Consumer Price Index soared to 7.50% Y/Y, the highest since 1982. The major drivers for this increase are increased demand for fuel, new vehicles, used vehicles, shelter, and food costs, as they rose by 46.50%, 12.20%, 40.50%, 4.40%, and 7.00%, respectively. Also, monthly, both Headline and Core CPI for Jan’22 were up by 0.60%, exceeding an expected 0.40% increase.

In the same vein, the current U.S. Inflation rate renews concerns that the Federal Reserve reacted too slowly to the threat posed by the price upsurge and would have to be more drastic in its policy actions aimed at taming inflation. Also, the yield on the 10-year treasury rose sharply upon the release of the inflation data, soaring as high as 2.00% for the first time since August 2019.

Elsewhere, tensions over Russia’s military buildup near Ukraine are entering a potentially decisive week, with the U.S. warning an invasion may be imminent and President Vladimir Putin accusing America of failing to meet his demands. Russia has repeatedly denied its plans to invade its neighbor, and a diplomatic push to resolve the situation continues. The uncertainty is dealing another blow to markets that are already skittish about increasing high inflation and the prospect of aggressive Federal Reserve interest-rate hikes to tame it. A deterioration in Ukraine could stoke concerns about price pressures if it disrupts Russian energy and Ukrainian grain supplies. The U.S. and U.K. have already informed their citizens to evacuate Ukraine as the tension between Russia and Ukraine heightens.

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