Global Economy
Earlier this week, the US Census Bureau released retail trade data. According to the Census Bureau, advance estimates of U.S. retail and food services sales for February 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were USD700.7bn, up 0.6% MoM from January 2024, and up 1.5% YoY from February 2023. Total sales for the December 2023 through February 2024 period were up 2.1% YoY from the same period a year ago. Additionally, according to the US Bureau of Labor Statistics, the Consumer Price Index increased 0.4% MoM in February 2024 on a seasonally adjusted basis, after rising 0.3% MoM in January 2024. On a YoY basis, the headline index increased by 3.2% (vs. 3.1% YoY in January 2024). Core inflation, less food and energy, was unchanged MoM at 0.4% MoM. YoY, it rose by 3.8%.
Domestic Economy
Earlier Today, the National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) for February 2024. The headline inflation went up by 180bps to 31.70% YoY (vs. 29.90% YoY in January 2024). This increase was driven by surge in its two (2) significant subcomponents: food (+251bps to 37.92% YoY) and core (+154bps to 25.13% YoY) inflation. On a Month-on-Month (MoM) basis, headline inflation rose by 48bps to 3.12% MoM (vs. 2.64% MoM in the January), this was driven increase in food inflation (+57bps MoM to 3.79%). However, core inflation declined by 7bps to 2.17% MoM. Elsewhere In a recent statement, the Central Bank of Nigeria (CBN) reaffirmed its guidelines on how banks should manage foreign exchange (FX) revaluation gains. According to the CBN, these gains should be used to absorb fluctuations in the exchange rate, not for dividends or operational costs. This policy was previously outlined in a circular issued on September 11, 2023. We believe that this the part of the CBN’s measures to ensure that banks have enough buffer to protect the value of shareholder funds from periods of sustained volatility. Consequently, we think that the policy might remain in place for the foreseeable future, especially if the Nigerian economy continues to experience currency volatility.
Equities and stock recommendation
The NGX All Share Index (ASI) gained 3.71% WoW to settle at 105,085.25 points, bringing the market to a bullish close at the end of this week. Consequently, the market recorded 40.54% YtD returns, an increase from last week’s 35.52% YtD. This week, all the sectors under our coverage closed positive except the Oil and Gas sector (-0.11% WoW). Specifically, the Banking sector (+12.84% WoW) led sectoral gains for the week, followed by the Insurance (+2.52% WoW), Consumer Goods (+1.41% WoW) and Industrial Goods (+0.20% WoW) sectors. The top gainers for the week were JBERGER (+30.6% WoW to NGN72.60), OMATEK (+23.1% WoW to NGN0.80) and MTNN (+21.0% WoW to NGN267.80). However, INTENEGINS (-27.4% WoW to NGN1.22), SUNUASSUR (-19.1% WoW to NGN1.27) and LASACO (-14.5% WoW to NGN2.00) led the decliners for the week. In the coming week, we expect performance of the equities market to be driven by the direction of yields in the fixed income market and the anticipation of the release of the 2023FY earnings results of some tickers.
Fixed Income
At the recent Nigerian Treasury Bills auction held by the Central Bank of Nigeria (CBN), the CBN offered and sold all NGN161.49bn worth of treasuries across the 91-day, 182-day, and 364-day instruments. The average stop rates declined by 79bps to 18.12% from 18.91% at the previous auction, this was driven by decreases across the instruments (91-day: -100bps to 16.24%, 182-day: -100bps and 364-day: -37bps to 21.12% bills). However, the average bid-to-cover ratio soared by 435bps to 9.27x (vs. 4.92x at the last auction). Overall, the total instruments offered were sold. The Nigerian fixed income market continued its downward trend in the secondary market this week. The average yield on the Nigerian Treasury bills market declined by 19bps WoW to close at 18.61%. Conversely, the FGN bond market closed on a bearish note as the average yield surged by 39bps WoW to 18.40%, this was driven by selling pressures across the yield curve specifically in the MAR-2027 (+30bps), JUN-2033 (+45bps), JUN-2038 (+91bps).and JUL-2045 (+66bps). Overall, the Naira fixed income market closed negative as the average yield rose by 10bps to settle at 18.50%.
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