Afrinvest Monthly Market Report
The NGX-ASI closed the month with a 4.6% uptick to print at 104,562.06 points. Resultantly, YTD return printed at 39.8% (previously 33.7%) while market capitalisation advanced 8.1% m/m to ₦59.1tn. Monthly trading activity improved as average volume and value traded rose 9.7% and 88.4% m/m to 595.7m units and ₦16.4bn, respectively. TRANSCORP (1.3bn units), GTCO (625.1m units), and UBA (621.5m units) were the top traded stocks by volume for the month, while GTCO (₦28.8bn), TRANSCORP (₦22.4bn), and ZENITH (₦18.4bn) led by value.
Across the sectors within our purview, performance was largely positive as five indices gained while the Oil & Gas index closed flat. The Insurance and Banking indices led the gainers, up 2.6% and 0.6% m/m respectively on the back of improved buying interest in NEM (+19.5%), LINKASSU (+17.8%), GTCO (+32.6%), and ACCESSCO (+27.9%). Similarly, price appreciation in MTNN (+4.1%) and CWG (+35.1%) boosted the AFR-ICT index by 0.3%. Following suit, the Industrial and Consumer Goods indices rose 10bps apiece on the back of price uptick in WAPCO (+19.1%), JBERGER (+18.7%), FLOURMILL (+27.7%), and PZ (+23.8%).
Investor sentiment, as measured by market breadth, improved to 0.4x from -1.2x recorded last month as 58 stocks gained, 36 stocks lost while 58 were unchanged. The top performing stocks for the month were JULI (+178.3%), TRANSPOWER (+57.1%), and NEM (+50.0%) while DAAR (-22.1%), VITAFOAM (-21.4%), and SUNUASSU (-20.4%) were the top underperforming stocks. We anticipate that the positive sentiment would linger in April spurred by increased corporate activities following banks recapitalisation announcement and growing FPI traction into equities.
Foreign Exchange Market
Brent crude oil price gained 4.1% m/m to close the month at $87.00/bbl. This rise can be attributed to recent Ukraine drone attack on Russian oil refineries, affecting at least 21.0% of the country’s supply and compounding global supply deficit as OPEC+ maintained production cuts.
On the domestic scene, CBN foreign reserves rose by 0.7% m/m to close at $34.0bn supported by inflows from creditors, oil sales and offshore investors amid ongoing reforms in the FX market. These factors compensated for the decline in crude oil production as OPEC reported that Nigeria’s oil production dropped to 1.3mbpd in February as against 1.4mbpd recorded in January 2024.
In the currency market segment, our projection for March turned out positive as the Naira strengthened in both the official and parallel market segments following the CBN’s move to clear all verified FX backlogs (final tranche of $1.5bn). As such, Naira strengthened 21.8% m/m against the base currency (USD) to exchange at ₦1,309.39/$1.00 at the NAFEM window. In the parallel market segment, the Naira gained 19.6% m/m against the USD to close at ₦1,300.00/$1.00. Similarly, daily average turnover in the NAFEM segment improved by 8.7% m/m to settle at $857.8m (as at 28/03/2024).
Our outlook for April suggests that the naira would trade within similar band as the CBN continues its activities to mop up liquidity and attract more capital inflow via increased OMO sales following its decision to raise MPR by 200 bps to 24.75%.
Money Market
In the month of March, system liquidity declined 38.9% m/m to settle at ₦352.0bn as outflows from SDF (₦196.4bn) and primary market sales (₦3.3tn) outweighed average inflows from SLF (₦1.1tn) and primary market repayments (₦1.9tn). Consequently, OPR and OVN rates went up 4.3ppts m/m apiece to 27.3% and 28.2%, respectively.
In the primary market, the CBN conducted three rounds of T-Bills auctions with a total offer of ₦660.7bn across the 91, 182, and 364-day instruments. Investors’ appetite was moderately strong, with the overall bid-to-offer ratio at 8.7x, relative to 3.3x in February. The 182-day instrument enjoyed the most buy interest with bid-to-offer ratio of 12.2x (February: 0.8x). Trailing, the 364-day instrument had a bid-to-offer ratio of 8.8x, while the 91-day instrument was the least competitive, with a bid-to-offer ratio of 5.4x. Overall, stop rates for the 91, and 182-day instruments declined 76bps and 50bps, respectively to settle at 16.2% and 17.0% while the 364-day instrument gained 2.1ppts to print at 21.1% from the prior month. Elsewhere, the CBN held an OMO auction, totalling ₦500.0bn across three offerings (95-day: ₦75.0bn, 179-day: ₦75.0bn, and 361-day: ₦350.0bn). Demand was strong (bid-to -offer: 2.3x), and resultantly, the CBN allotted ₦1.1tn across all tenors.
In the secondary T-Bills market, average yield rose 23bps m/m to 18.6%, following selloffs on the 91 (up 21bps to 15.5%), 182 (up 15bps to 17.9%), and 364-day bills (up 34bps to 22.3%). Despite, the ₦148.4bn and ₦80.0bn worth of maturities expected from TBills and OMO maturities in April, we anticipate the bearish performance to be sustained in line with monetary policy adjustments and reforms by the CBN.
Bonds Market
The month of March was marked by a sustained bearish performance as investors’ attention was tilted towards auctions conducted by the Debt Management Office (DMO), particularly the new issuance. The DMO conducted its March 2024 bond auction with a total offer of ₦450.0bn for three instruments – 19.94% FGN MAR 2027 (newly listed) and reopening of 18.50% FEB 2031 and 19.00% FEB 2034. The FEB 2031 bond was undersubscribed with bid-to-offer ratio of 0.3x (offer: ₦150.0bn, subscription: ₦51.8bn, allotment: ₦47.9bn, stop rate: 20.0%). On the other hand, the newly listed 3Y benchmark bond was 1.8x oversubscribed (offer: ₦150.0bn, subscription: ₦264.6bn, allotment: ₦151.9bn, stop rate: 19.9%) while the FEB 2034 bond was 2.0x oversubscribed (offer: ₦150.0bn, subscription: ₦298.6bn, allotment: ₦275.9bn, stop rate: 20.5%).
Meanwhile, performance in the secondary market was bearish as the average yield rose 1.9ppts m/m to 19.2%. Short-dated bonds sold off the most (+2.7ppts), followed by the mid (+2.3ppts) and long (+1.2ppts) dated instruments. Elsewhere, SSA Eurobonds space was all green save the Zambia 2024 maturing next month. As such, average yield fell 1.6ppts m/m to 15.8%. Most of the interest was on the Ghanaian bonds with an average yield downtick of 6.0ppts to 49.3% as the sovereign made progress in the comprehensive restructuring of its $13.0bn debt with her Eurobond investors. Similarly, the performance of the Corporate Eurobond market was positive as average yield fell 47bps m/m to 7.9% supported by interest in ECOBANK 2024 and EBN FINANCE CO BV 2026 instruments with yield downticks of 2.1ppts and 0.8ppt m/m respectively.
In April, we expect aggressive liquidity mop-ups by the CBN and DMO to outweigh the impact of the ₦405.3bn matured FGN bond inflows. Hence, we anticipate a bearish performance in secondary debt market. For the Eurobond Markets, we expect buy interest to be sustained due to the relatively attractive yields and improving macro fundamentals in key SSA markers.
