Economy & Market

Economic and Market Report: Week Ended 19-04-2024

Global Economy

According to the National Bureau of Statistics (NBS) of China, the Chinese economy beat market expectations (+5.0% y/y) as it grew by 5.3% y/y in Q1-24 (Q4-23: +5.2% y/y and Q1-23: +4.5% y/y). We highlight that the improved growth is in line with various measures implemented by the government to restore balance, including investment in infrastructure and high-tech manufacturing, despite the persistent property sector challenges and mounting local government debt. Notably, growth was significant in industrial production (+6.1% y/y vs Q1-23: +3.0% y/y), underpinned by a solid improvement in high-technology manufacturing. At the same time, growth in retail sales (+4.7% y/y vs Q1-23: +5.4% y/y) moderated but remained positive due to increased spending on sports and entertainment activities, cigarettes and alcohol, and catering services. On a quarter-on-quarter basis, the Chinese economy expanded by 1.6% (Q4-23: +1.2% q/q), signaling the seventh consecutive quarter of expansion and the highest print since Q1-23 (+2.3% y/y). While we expect government stimulus to support economic activities in the near term, we believe the weak real estate sector and slow domestic demand will weigh on overall growth prospects. Accordingly, the IMF forecasts China’s growth to settle at 4.6% y/y in 2024E relative to 2023FY (+5.2% y/y).

According to the Office for National Statistics (ONS), consumer prices in the United Kingdom (UK) eased by 20bps to 3.2% y/y in March (February: 3.4% y/y) – the lowest print since September 2021 (3.1% y/y). We highlight that the slowdown in the inflationary pressure was primarily due to the slower increase in food prices (+4.0% y/y vs February: +5.0% y/y), restaurants and hotels (+5.8% y/y vs February: +6.0% y/y) and recreation and culture (+5.3% y/y vs February: +5.4% y/y), while housing costs (-1.6% y/y vs February: -1.7% y/y) further declined. Meanwhile, on a month-on-month basis, consumer prices held steady, settling at 0.6% (February: +0.6% m/m). While we acknowledge the potential of further deceleration in consumer prices due to the favourable base effects from the prior year and lagging impacts of elevated interest rates, we anticipate the recent uptick in energy prices will pose an upside risk to inflationary pressures over the short to medium term. As a result, we believe the BoE may choose to wait for further data releases to confirm that inflationary pressures have been brought under control before considering policy easing. Simultaneously, the financial market now anticipates the possibility of the first rate cut occurring during either the September or November policy meetings, with a possible reduction of 25bps.

Global Equities

Risk-off sentiment persisted in the global stock market this week due to geopolitical tensions in the Middle East. The ongoing speculation that the Fed may delay rate cuts added to the sentiment. Accordingly, US equities (DJIA: -0.5%; S&P 500: -2.2%) remained negative as investors reacted negatively to (1) hawkish Fed comments and (2) rising bond yields bolstered by ongoing turmoil in the Middle East. Similarly, European equities (STOXX Europe: -1.7%; FTSE 100: -1.9%) were on track for a weekly loss driven by concerns over the Middle East conflict and shift in interest rate expectations. In Asia, the Japanese market (Nikkei 225: -6.2%) recorded significant losses due to heightened geopolitical tensions and fears of a tech industry slowdown triggering heavy sell pressures on semiconductor-related shares. Conversely, hopes of more government stimulus and positive GDP data helped spur gains in the Chinese market (SSE: +1.5%). Lastly, the Emerging Markets Index (MSCI EM: -2.2%) closed lower, undermined by bearish sentiments in India (-2.2%) and Taiwan (-5.8%). The Frontier Markets index (MSCI FM: -2.9%) also posted losses driven by huge selloffs in Vietnam (-7.1%).

Nigeria: Domestic Economy

According to the National Bureau of Statistics (NBS), consumer prices maintained the recent uptrend, rising by 150bps to 33.20% y/y in March (February: 31.70% y/y). We attribute the persistent price pressures to the synchronised effects of (1) exchange rate pass-through on consumer prices, (2) lingering structural challenges impeding food supply, (3) elevated gas and energy prices, and (4) unfavourable base effect from the prior year. Thus, food prices (+209bps to 40.01% y/y) remained at a 19-year high, while core inflation (+77bps to 25.90% y/y) is at its highest level since March 2004 (32.60% y/y). However, on a month-on-month basis, the headline inflation moderated by 10bps to 3.02% m/m, primarily due to the moderation in food price increases. In the near term, we expect the headline inflation to be influenced by the (1) base effects from the prior year, (2) the recent hike in electricity tariffs, and (3) increased demand which accompanied the Eid-el-Fitr festivities. Consequently, we now look for a m/m headline inflation of 3.27% in April, translating to a y/y reading of 34.98%.

In the April edition of its World Economic Outlook (WEO), the IMF expects Nigeria to grow by 3.3% y/y in 2024E (2023FY: +2.9% y/y) – 30bps higher than the January forecast (+3.0% y/y). The revised growth forecast was primarily hinged on a plethora of factors, including (1) improved business activities, (2) policy adjustments, (3) recovery in the country’s oil sector, and (4) improved agriculture sector activities. Accordingly, the IMF expects African oil-exporting countries to grow by 3.2% y/y in 2024E (2023FY: +2.4% y/y) in line with their growth expectations for Nigeria and Angola (2024E: +2.6% y/y vs 2023FY: +0.5% y/y). Further out, the IMF anticipates a steady outlook for the global economy (2024E: +3.2% y/y vs 2023FY: +3.2% y/y) amid concerns about potential supply disruptions and the emergence of new price spikes due to geopolitical tensions. Although we align with the IMF on Nigeria’s growth outlook, our projection (2024E: 2.79%) is below the IMF’s forecast. For us, the persistent effect of currency pressures, high energy costs, and tight financial conditions will exert downward pressure on economic activities.

Capital Markets: Equities

The Nigerian equities market sustained its descent for the fifth consecutive week. Although, bargain hunting activities briefly tempered the downtrend midweek, continued profit-taking activities on Tier-1 Banking stocks drove the market lower, with the All-Share Index settling below the 100,000-points mark, closing at 99,539.75 points. Notably, sustained sell pressures on GTCO (-19.1%), ZENITHBANK (-11.3%), UBA (-13.7%), FBNH (-10.3%) and ACCESSCORP (-11.9%) resulted in a 2.7% w/w decline in the All-Share Index, with the Month-to-Date and Year-to-Date returns settling at -4.8% and +33.1%, respectively. The trading activity level was positive, with an 41.1% increase in total trading volume and a 12.8% rise in total trading value. On sectors, the Banking (-11.5%) index recorded the most significant weekly loss, followed by the Insurance (-2.8%), Industrial Goods (-2.7%) and Consumer Goods (-1.0%) indices. The Oil and Gas index was unchanged.

We anticipate a continuation of bearish sentiments, especially with the likelihood of profit-taking following the recent announcement regarding the suspension of the Dangote Foods merger and ongoing reactions to the recapitalisation exercise in the banking sector. In the short-medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and corporate actions.

Money market and fixed income

The overnight (OVN) rate inched higher by 18bps w/w to 30.3%, as settlement obligations for the net NTB issuances (NGN802.19 billion) and FGN bond PMA (NGN626.81 billion) and CRR maintenance debits outstripped the inflows from FGN bond coupon payments (NGN145.98 billion) and CRR maintenance refunds. Nonetheless, the average system liquidity closed higher at a net long position of NGN1.03 trillion (vs. a net long position of NGN255.45 billion in the previous week), reflecting the DMBs’ usage of the apex bank’s SLF facility (Average: NGN975.58 billion).

Next week, we envisage a possible net NTB issuance at the Wednesday auction, which may offset the expected inflows from FGN bond coupon payments (NGN185.55 billion) and keep the OVN rate elevated.

Treasury bills

Sentiments in the Nigerian Treasury bills secondary market ended this week on a bearish note as the average yield across the market expanded significantly by 475bps to 23.4%. We note substantial sell pressures across the curve as foreign players reacted to the ongoing Middle East conflict while local participants sought to fulfil their funding needs. Across the market segments, the average yield advanced by 632bps to 25.2% in the NTB secondary market and increased by 25bps to 18.4% in the OMO segment.

In the upcoming week, we anticipate that yields in the Treasury bills secondary market will sustain the uptrend from this week’s end, following the likely dearth in system liquidity. In addition, the CBN is scheduled to hold an NTB PMA on Wednesday (24 April) where it will roll over maturities worth NGN142.57 billion.


This week, activities in the FGN bond secondary market were muted for most of the week but turned bullish on the last trading day as the average yield dipped by 23bps at 19.0%. Across the benchmark curve, the average yield declined at the short (-64bps) and mid (-7bps) segments as players demanded the MAR-2025 (-112bps) and JUL-2030 (-17bps) bonds, respectively, but advanced moderately at the long (+1bp) end due to the profit-taking activities on the MAR-2050 (+3bps) bond. At this month’s bond PMA, the DMO offered instruments worth NGN450.00 billion to investors through new issuance of the 19.30% FGN APR 2029 (Bid-to-offer: 1.6x; Stop rate: 19.30%) bond and re-openings of the 18.50% FGN FEB 2031 (Bid-to-offer: 0.9x; Stop rate: 19.75%) and 19.00% FGN FEB 2034 (Bid-to-offer: 3.7x; Stop rate: 20.00%) bonds. Demand was higher at the auction as the total subscription level settled at NGN920.09 billion (previous: NGN615.01 billion), with the DMO allotting bonds worth NGN626.81 billion across the four instruments, resulting in a bid-to-cover ratio of 1.5x.

In the meantime, we expect demand in the Treasury bonds secondary market to remain subdued, given investors’ sustained preference for shorter-dated instruments amid the weak macroeconomic profile. Over the medium term, we expect yields to remain elevated, driven by the (1) anticipated monetary policy administration globally and domestically and (2) sustained imbalance in the demand and supply dynamics.

Foreign Exchange

Nigeria’s FX reserves declined considerably this week, as gross reserves fell by USD502.99 million w/w to a seven-year low of USD32.11 billion (18 April). Similarly, the naira paused its appreciation streak as it depreciated by 2.4% to NGN1,169.99/USD at the Nigerian Autonomous Foreign Exchange Market (NAFEM). However, total turnover at the window surged by 110.5% WTD to USD1.25 billion (as of 18 April 2024), with trades consummated within the NGN981.04 – NGN1,227.00/USD band. In the Forwards market, the naira rates recorded for the 1-month (+3.5% to NGN1,172.38/USD), 3-month (+3.1% to NGN1,211.71/USD) and 6-month (+2.5% to NGN1,272.39/USD) contracts increased, while the rate on the 1-year (-0.2% to NGN1,406.65/USD) contract decreased.

We point out the current pressure in the FX market resulting from FPIs exiting the domestic capital market primarily due to external shocks, such as the uncertainties surrounding the escalation of the war in the Middle East. We highlight that the prolonged conflict in the Middle East, as well as the US Fed keeping interest rates higher for longer, are major risks to the sustenance of FPI inflows into the country. We think that the naira could be under pressure in the short term, given that these uncertainties remain as inflows from FPIs have been a major source of the improved liquidity seen in the near-recent past. We point out that FX inflows from external trade remain constrained and may limit the CBN from sufficiently intervening in the market.


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