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Nigerian Exchange Group Records 0.24% Profit w-o-w, to Close the Week Positive.

Last week saw the Nigerian Stock Market reverse previous week’s loss as positive sentiment returns to the Bourse. Nigerian Exchange Group’s ASI advanced by 0.24%, closing positive in three of the five trading sessions during the week. It increased on the back of buying interest in large caps such as OKOMUOIL (+12.09%) and FBNH (+9.95%). Consequently, at 51,829.67 points, the equities market’s Year-to-Date return increased to 21.33% as market capitalization rose by 0.22% to close at N27.94trillion.

Market breadth (a measure of investor sentiment) increased in the just concluded week, advancing from 0.29x to 1.17x as 34 stocks appreciated against 29 stocks that declined. JOHNHOLT and CORNERST topped the market gainers with 30.16% and 20.97% respectively WoW, while PZ and UPL were the top losers with declines of 18.40% and 10.42% respectively WoW.

The activity level strengthened as the total trade volume and value advanced by 20.54% and 78.76% WoW. A total turnover of 1.348 billion shares worth N24.487 billion in 22,155 deals was traded this week by investors on the floor of the Exchange. Trading in the top three equities namely Mutual Benefits Assurance Plc, Living Trust Mortgage Bank Plc and Guaranty Trust Holding Company Plc (measured by volume) accounted for 484.839 million shares worth N2.414 billion in 2,410 deals, contributing 35.97% and 9.86% to the total equity turnover volume and value respectively.

We expect positive sentiment to persist this week as the equities market still presents decent opportunities for investors chasing positive real returns

The Nigerian Fixed Income Market

Last week, there was bearish sentiment in the bond market as three of the four tenor yields under coverage inched up while the yield on the 5-Year bond closed flat. The yields on the 3, 10 and 30-Year bonds advanced by 5bps, 7bps and 16bps respectively.

Similarly, the Nigerian Treasury Bills Market closed bearish as the 91, 182 and 364-day paper yields inched higher by 157bp, 41bps and 10bps to close at 5.04%, 6.09% and 6.19% respectively WoW.

In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates closed flat at 14.00% and 14.00% 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

The CBN Money and Credit data revealed that credit to the private sector reached N38.1trillion in May 2022, an increase of 8.5% or N3.01 trillion from N35.18 trillion reported in January 2022. On Year-on-Year performance, credit to the private sector rose by 18.9% (N6.08 trillion from N32.12 trillion).

The NNPC revealed it failed to carry out its statutory obligations to the federation account for the fifth month in May. NNPC said all the revenue had gone into various expenditures, including petrol subsidy, oil search, Pipeline Security & Maintenance cost, National Domestic Gas Development and Nigeria Morocco Pipeline cost, among others. NNPC has expended N1.27 trillion on petrol subsidy in the last five months, about 31% of the N4 trillion provision for the year.

Elsewhere, the World Bank’s latest Nigeria Development Update report, titled, ‘The Continuing Urgency of Business Unusual‘. said that inflation shock is projected to push about 15 million more Nigerians into poverty between 2020 and 2022. The World Bank added that the number of poor Nigerians is projected to hit 95.1 million in 2022. In combating poverty, specific reforms were recommended, which include fiscal, trade, and exchange-rate policies that could help diversify the economy; invigorate structural transformation; and create good, productive jobs, especially wage jobs.

Nigerian Naira

As a sign of commitment to promptly honour its debt obligations, the DMO, on its website, said it had redeemed its $300 million diaspora bond, which matured on June 27. The diaspora bond was issued on June 27, 2017, for a tenor of five years in the International Capital Market, and the proceeds of the diaspora bond were used partly to finance the deficit in the 2017 budget.

Lastly, following an unprecedented rally that increased the equities market’s H2’2022 returns by 21.31%, the Nigerian Pension Fund Administrators (PFA) has increased its investment in the stock market by N8.73 billion to N1 trillion from N999 billion recorded in the previous month (May). Also, PFA’s total assets under management rose to their highest level at N14.19 trillion, from N13.76 trillion achieved at the end of the year.

Global and Emerging Market Economic Updates

In the U.S, the personal consumption expenditure price index increased by 0.6% month-over-month in May of 2022, higher than 0.2% in April. The annual rate, however, was unchanged at 6.3% after touching a record high of 6.6% in March. Energy prices increased 35.8% (vs 30.4% in April) while food inflation quickened again to 11% from 10%. Excluding food and energy, PCE inflation eased to 4.7% from 4.9%, below forecasts of 4.8%.

Eurozone inflation reached a new record high in June, just ahead of the European Central Bank’s first rate increase in 11 years. Headline inflation came in at 8.6% (year-on-year) for June. Among the four components, energy expanded by 41.9% from 39.1% in the preceding month, while non-energy industrial goods, services, and, food, alcohol & tobacco rose by 4.3%, 3.4%, and 8.9%, respectively, on a yearly basis. The rate reached 8.1% in May, meaning the cost of living continues to surge across the eurozone nations. The ECB has vowed to tackle the price surge and is due to meet in late July to announce its rate hike. The central bank has said it will hike again in September if the inflation outlook does not improve.

Crude Oil

The International Energy Agency (IEA) is warning that Russia might choose to completely cut natural gas deliveries to Europe during the winter months. The IEA said that having already partially cut off gas to Germany and Italy last week, Russia might choose to go further to gain “leverage” in its dispute with Europe. A cutoff, which could temporarily hurt Russia’s finances, would be very serious for Europe and cause a recession.

Reserved Bank of Zimbabwe

Elsewhere, Zimbabwe’s Monetary Policy Committee (MPC) more than doubled its key policy rate, raising it to 200.0%, from 80.0% previously, becoming the most aggressive central bank in the world. Furthermore, it reintroduced the U.S dollar as a legal currency to tame surging inflation and stabilise the country’s tumbling exchange rate.