Unfavourable Base to Keep Inflation Red Hot

Domestic Macroeconomy

This week, we focus on the March CPI data published by the NBS and IMF’s revised economic outlook for 2024. In March, the headline inflation rose sharper-than-anticipated to 33.2% – relative to 31.7% in February and our projection of 32.2%. The latest data marks 17 straight months of uptick in inflation and the highest print since March 1996 (41.9% y/y). On a m/m basis, the overall inflation slightly eased 10bps to 3.0% but stayed above 12-month average of 2.4%. We attribute the moderate step-down in monthly price pressure to better farm (down 42bps to 3.4%) and processed food (down 10bps to 3.7%) inflation rates.

Global Equities Market: Performance Wane Amid Geopolitical Tension Escalation

This week, the age-long proxy war between Israel and Iran escalated after retaliation attacks from both countries. This has spooked concerns around a wider Middle Eastern war and worsening global geopolitical tension. While a full-blown war is unlikely, investors’ concern has heightened. Away from global tension, mixed inflation data, expectations around a possible no cut or longer-than-expected rate cut, and post Q1 corporate earning corrections dampened investor sentiment.

Domestic Equities Market: Bears Maintain Tight Grip on the Bourse… ASI down 2.7% w/w

This week, unabating sell pressure on the banking tickers pinned the bourse to its fifth consecutive weekly loss as the NGX-ASI fell 2.7% w/w to 99,539.75 points. Likewise, market capitalisation declined 2.7% to ₦56.3tn while YTD return cut back to 33.1% (previously 36.8%). Meanwhile, average volume and value traded fell 43.6% and 54.9% to 257.9m units and ₦6.5bn, respectively. The top traded stocks by volume were ACCESSCORP (176.5m units), UBA (171.3m units) and ZENITH (124.7m units).

Foreign Exchange Market: FX Reserves Dip as CBN Settles Obligations

The price of benchmark Brent Crude faltered by 3.1% this week, to close at $87.6/bbl. This happened after prices briefly rallied to just over $90.0/bbl. at the beginning of the week, due to crisis in the Middle East. On the domestic scene, CBN’s foreign reserves lost 1.5% w/w to $32.1bn (as of 18/04/2024). The reserve balance, the lowest since Sept. 2017, indicates settlement of obligations as highlighted by CBN Gov. Cardoso during the week.

Money Market: Bearish Outing in the Secondary Market

This week, system liquidity closed at ₦1.1tn, 4.4x higher than the previous week. The upsurge, despite primary market sales worth ₦626.8n relative to inflows of ₦191.5bn, was supported by banks tapping into the SLF to the tune of ₦1.0tn. As such, OPR rate declined 0.3ppts to 29.4% w/w although OVN rate rose 0.2ppts to print at 30.3% w/w.

Bonds Market: Mixed Sentiments in Bonds Space

This week, the Debt Management Office (DMO) reopened the FGN FEB 2031 and 2034 bond papers, alongside fresh FGN APR 2029 bond. A total of ₦450.0bn was offered, while demand was 1.8x across all papers with notable preference for the FEB 2034 (3.6x). At the end of the auction, the CBN allotted ₦79.9bn, ₦85.1bn, and ₦461.9bn on the FEB 2029, 2031, and 2034 bonds, improving bid-to-cover rate to 1.5x (previously 1.3x). Accordingly, the average stop rate across board fell by 45bps to 19.68%.


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