Economy & Market

Inflationary Pressure Mounts to New Height

Domestic Macroeconomy: Inflationary Pressure Mounts to New Height… FX Conversion Gains Support New Record Level VAT and CIT
This week, we spotlight the three national statistics published by the NBS – the Consumer Price Index (CPI) data for February 2024, Company Income Tax (CIT), and Value Added Tax (VAT) numbers for FY:2023 respectively.

Starting with CPI data, Nigeria’s headline inflation rate advanced for the fourteenth consecutive month by 180bps y/y to 31.7% in February 2024 – a new record high in over three decades based on CBN and NBS data. From a m/m perspective, the headline rate printed at 3.1% (prior month: 2.6%), reflecting continued price pressure on both the food and core inflation sub-baskets. Diving deep, the food inflation index nudged higher to a record 37.9% y/y (previously: 35.4%), while the m/m reading printed at 3.8% from 3.2% in January 2024, making it the highest since the NBS began tracking the data in 2009. We hold that the rising food prices are due to local supply shortfalls resulting from prolonged insecurity and large-scale sabotage, negative pass-through of high energy goods prices on logistic costs, imported inflation, as well as continued Naira depreciation (the official NGN-USD rate fell further by 9.6% to ₦1,595.11/$ at the end of February)…

Global Equities Market: US hotter-than-expected CPI Fuels Bearish Sentiment
This week, global equities market performance was guided by a flurry of macroeconomic events – US hotter-than-expected February inflation and better-than-expected UK GDP. Overall, the MSCI World index fell 0.6% w/w. In the US, expectation of interest rate cut by June was dampened by hotter-than-anticipated inflation of 3.2% in February (January: 3.1%, February forecast: 3.1%). Consequently, the NASDAQ index fell 0.5% w/w while the S&P 500 index rose mildly by 0.1%. In the UK, m/m GDP improved by 0.2% from a contraction of 0.1%, hence fueling a positive sentiment in the FTSE All Share index with a 0.8% w/w gain…

Domestic Equities Market: Bullish Outing on the Bourse… ASI up 3.7% w/w
The domestic equities market closed the week on a positive note as the NGX-ASI gained 3.7% w/w to 105,085.25 points. Resultantly, market capitalization increased 3.7% (or ₦2.0tn) w/w to ₦59.4tn, hence pushing the YTD return to 40.5% from 35.5% previously. Activity level dipped as average volume and value traded fell 17.8% and 51.4% w/w to 217.2m units and ₦5.0bn respectively. The top traded stocks by volume were TRANSCORP (303.5m units), GTCO (169.3m units), and ACCESSCORP (138.0m units), while GTCO (₦7.2bn), TRANSCORP (₦5.3bn), and ACCESSCORP (₦3.0bn) led in terms of value…

Foreign Exchange Market: Local Currency Appreciates Amid Market Stability
The price of benchmark Brent crude rose 3.2% this week to $84.71/bbl., fuelled in part by the lingering geopolitical crisis in the Middle East and Eastern Europe, and on the other, favourable oil demand projection by the International Energy Agency (IEA). Notably, in its latest report, the IEA raised global crude oil demand projection for 2024 by 1.3mbpd to 103.2mbpd, while expecting OPEC+ extended output cuts to impact supply output…

Money Market: Bullish Outing in the Secondary Market
This week, system liquidity dipped 48.6% w/w though primary repayments worth ₦936.7bn kept it sturdy at ₦1.6tn. As a result, the OPR and OVN rates inched higher by 46bps and 7bps respectively to 30.3% and 31.1%.

At the primary T-bills market, the CBN issued instruments to mop up maturing papers worth ₦1.1tn. Specifically, the apex bank issued 91-day (Offer: ₦728.2m; Subscription: ₦85.5bn; Sale: ₦5.7bn), 182-day (Offer: ₦918.4m; Subscription: ₦49.7bn; Sale: ₦4.9bn) and 364-day (Offer: ₦159.9bn; Subscription: ₦1.4tn; Sale: ₦150.8tn) instruments at stop rates of 16.2%, 17.0% and 21.1% respectively, relative to 17.2%, 18.0% and 21.5% in the prior session…

Bonds Market: Negative Trading on Local and SSA Fronts
Bears extended hold in the secondary FGN bond market, as the average yield spiked 40bps w/w to 18.1%. Specifically, yields rose by 92bps, 29bps and 16bps on the short, mid and long ends respectively, signalling strong repricing across the curve…

Afrinvest Research

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