Mon - Fri : 08:00am - 5:00pm
info@pfi-ltd.com
+234 701 313 9693

Research

Weekly Market News for Investors in Nigeria

The NGX ASI improved by 2.33%, with Positive Performance in 3 of the 5 Trading Sessions During the Week.

The NGX ASI closed the week in green by 2.33% as it closed positive in 3 of the 5 trading sessions during the week. It improved on the back of buy pressures in bellwether stocks such as SEPLAT (+10.13%) and CONOIL (+20.73%). Consequently, at 47,279.92 points, the equities market’s Year-to-Date return improved to 10.68% as market capitalization increased by 2.33% to close at N25.48 trillion. 

Market breadth (a measure of investor sentiment) weakened in the previous week, decreasing from 1.33x to 1.20x as 42 stocks appreciated against 35 stocks that declined. RTBRISCO and ACADEMY topped the market gainers with 40.00% and 31.91% WoW respectively, while COURTVILLE and CAVERTON were the top losers with declines of -11.67% and -11.43% respectively WoW. 

The activity level strengthened as the trade volume and value improved by 23.62% and 2.78% respectively WoW. A total turnover of 1.785 billion shares worth N19.614 billion in 27,822 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume namely FIDELTYBK, TRANSCORP and GTCO. They accounted for 415.095 million shares worth N3.205 billion in 3,556 deals; contributing 23.25% and 16.34% to the total equity turnover volume and value respectively.

Outlook for the week 

We expect positive performance to persist 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 mixed sentiment in the bond market last week as two of the five tenor yields under coverage closed lower, the 5 and 30-Year tenor bonds increased by 22bps and 2bps while the 1-Year closed flat at 3.89%. The yields on the 3 and 10-Year tenor bonds declined by 5bps and 11bps WoW respectively.  

There was relatively quiet activity in the Nigerian Treasury Bills Market as the 91 and 182-day paper yields closed flat at 4.04% and 4.45% respectively while the 364-day paper yield compressed by 1bp WoW.   

In the Money Market space, the Open Buy Back (OBB) and Overnight (O/N) rates increased to 13.00% and 13.25% from 1.00% and 1.25% respectively WoW.  

Weekly Sectorial Performance Nigerian Stock Exchange

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, the CBN newly introduced “100 for 100 Policy for Production and Productivity (PPP)” initiative saw the disbursement of a total of N23.2bn in the form of loans to 28 companies (14 in the manufacturing sector, 12 in the agricultural sector and 2 in the health sector). The primary objective of the CBN in introducing the initiative was to ensure that priority was accorded to companies that displayed verifiable progress in the bank’s import substitution and job creation drive. Emefiele further explained that the intervention programme could significantly accelerate manufacturing output, promote further economic diversification, and facilitate faster non-oil export growth.  

Elsewhere, the external reserves have fallen below the $40bn mark to the lowest point in over three months, figures from the Central Bank of Nigeria have revealed. The reserves dropped to $39.93bn as of Thursday, 3rd February 2022, from $40.53bn as of December 30, 2021. Recall that Nigeria’s foreign reserve hitched higher from $39.82bn on October 15 2021 to a high of $41.83bn on October 29, 2021, on the back of IMF SDR and Eurobond inflow. However, the CBN has been forced to rely on external reserves to defend the naira due to pressures from the foreign exchange market, coupled with the limited crude sales inflow despite the recent oil price rally.    

Also, the commercial credit to Nigeria’s public sector rose from a moderate N4.9tn to N13.7tn in five years (from Dec’16 to Dec’2021), raising concerns about the increasing exposure of banks to the government. 

The oil production survey revealed that Nigeria’s crude oil production rose by 50kbpd m/m, from around 1.4mbpd average in Dec-2021 to 1.46mbpd in Jan-2022. However, it is below the monthly output target of 1.68mbpd. Notwithstanding, OPEC+ has added 400,000bpd for March amidst pressures from the US and India, given the supply deficit in the oil market. As a result, the bloc increased our production quota for March to 1.72mbpd from 1.68mbpd in Jan’22. However, Nigeria may struggle to exhaust the higher output quota provided due to vandalism, poor infrastructure, and investments in the sector. 

Global and Emerging Market Economic Updates 

Although expectations of an Omicron denied labour market in Jan’22, the recently released nonfarm payroll report revealed the opposite. The U.S. monthly jobs update shows that the U.S. Labour Department noted that 467,000 jobs were gained in January, dwarfing Wall Street expectations of a 150,000 gain. Moreover, the most significant upswings were seen in leisure and hospitality, professional and business services, and retail, recording job gains of 151000, 108000, and 61000, respectively. As a result, the nonfarm payroll performance could birth concerns that the U.S. Fed might be even more aggressive in implementing hawkish policies that focus on taming inflation, given the sturdy job gains and wage growth of 5.7% YoY.  

Elsewhere, The Bank of England has raised interest rates for a second time in three months, to 0.5%, as it warned that surging energy bills would push inflation higher than expected, to more than 7% by April. The move to raise rates to 0.5%, which City economists widely anticipated, comes after the official measure of annual inflation hit a 30-year high of 5.4% in December, an increase fueled by a sharp rise in household energy bills and supply chain logjams pushing up the cost of the weekly shop. Against a backdrop of rising household energy prices, the Bank said inflation was on course to peak close to 7.25% in April, a sharp adjustment to its previous forecast of 6%. 

Global oil prices continue to show strength as Brent crude rallied to remain above $90.0/bbl. after initially dipping during the week. Brent closed the week at $92.78/barrel, gaining 3.05% w/w. The sustained increase in oil price has been due to growing tensions between Russia, Ukraine, and the West. In addition, the inability of OPEC+ members to meet its production increase targets amid rising oil demand has left the oil market tighter than in recent years.