Global Economy
Earlier this week, according to a private sector survey, the Caixin/S&P Global manufacturing Purchasing Manager Index (PMI) rose to 50.4 points in August 2024 from 49.8 points the previous month, more positive than the recent official PMI survey showing manufacturing activity extended declines in August 2024. According to the survey, which mostly covers smaller, export-oriented firms, new orders increased after falling in July 2024, driving up production gains for a 10th successive month. Firms in the consumer and intermediate goods sectors led the output growth. However, the deterioration in external demand led to new export orders falling for the first time in eight months and at the fastest pace since November 2023. Elsewhere, in the Eurozone, the seasonally adjusted GDP increased by 0.2% QoQ in Q2:2024 in both the euro area and the EU, compared with the previous quarter, according to Eurostat (vs. 0.3% QoQ in EU and Euro Area). Compared with Q2:2023, seasonally adjusted GDP increased by 0.6% YoY in the euro area and by 0.8% YoY in the EU in Q2:2024, compared to +0.5% YoY in the euro area and +0.7% YoY in the EU in Q1:2024.
Domestic Economy
Earlier this week, Dangote Group announced that its 650,000 barrels-per-day refinery has completed testing and is now ready to roll out its first shipment of Premium Motor Spirit (PMS). This is a significant step for Nigeria, which has faced persistent fuel shortages and heavy reliance on imports. The refinery’s operations will kickstart local gasoline production, improve tracking of petrol consumption, and reduce the demand for foreign exchange. With a focus on delivering high-quality fuel that meets international standards, this development is expected to address supply challenges and strengthen Nigeria’s energy independence. Additionally, Nigeria will allow the Dangote Refinery to set its own gasoline prices starting in October 2024. This marks a shift from government-controlled pricing, enabling the refinery to sell at market rates to petroleum marketers. The move is expected to reduce the country’s reliance on imported fuel and alleviate foreign exchange pressure. Elsewhere, the Central Bank of Nigeria (CBN) and Stanbic IBTC both released PMI reports for August 2024, highlighting different aspects of Nigeria’s economic conditions. The CBN’s report indicated a positive shift with the PMI rising to 50.2 points, suggesting a return to economic expansion after 13 months of contraction. This reflects cautious optimism in various sectors. In contrast, the Stanbic IBTC report showed a more modest increase from 49.2 in July 2024 to 49.9 points. It noted that while business conditions remained relatively stable, the growth in new orders was minimal, and overall business activity experienced only slight improvements due to ongoing inflationary pressures.
Equities and stock recommendation
Sailing on the back of gains in BUAFOODS (+5.73% WoW to NGN394.90), OANDO (+60.71% WoW to NGN76.90) and FBNH (+10.57% WoW to NGN22.50), the Nigerian Equities market gained 0.63% WoW, as the NGX All Share Index (NGX ASI) edged up to 96,580.01 points. This pushed the market’s year-to-date (YtD) returns to 29.16%, up from last Friday’s 28.35% YtD. True to our expectations last week, positive sentiment in the Oil and Gas sector (+8.50% WoW) stemming from gains in OANDO (+60.71% WoW to NGN76.90) and TOTAL (+19.70% WoW to NGN673.90) helped to reduce losses incurred in the market this week, an offshoot of positive investors’ reaction to OANDO’s acquisition of Nigeria Agip Oil company, which was completed last week. Notably, all other sectors under our coverage closed positive as the Insurance (5.76% WoW), Consumer Goods (+3.48% WoW), Banking (+1.96% WoW) and Industrial Goods (+0.08% WoW) posted gains. Gains in these sectors was spurred by buying interest in CORNERSTONE (+16.38% WoW to NGN2.70), BUAFOODS (+5.73% WoW to NGN394.50), ETI (+6.60% WoW to NGN21.80) and LAFARGE (+1.35% WoW to NGN37.60) respectively. Top gainers this week were OANDO (+114.5% WoW to NGN76.90), RTBRISCOE (+108.8% WoW to NGN3.55) and DEAPCAP (+104.7% WoW to NGN0.88), while CUTIX (-37.8% WoW to NGN3.08), DANGCEM (-10.0% WoW to NGN532.00) and MTNN (-9.9% WoW to NGN180.00) led the laggards for the week. In the coming week, we expect that the positive sentiment from the Oil and Gas sector would be sustained and help keep the market in the positive zone. However, this could be countered by rising yields in the fixed income market.
Fixed Income
Earlier this week, the Central Bank of Nigeria (CBN) conducted a Nigerian Treasury bills (NT-bills) auction, offering NGN233.31bn across the 91-day (NGN19.61bn), 182-day (NGN10.55bn) and 364-day (NGN203.15bn) bills. The average bid-to-cover ratio surged by 234bps to 4.84x (vs. 2.51x at the previous auction). This was primarily driven by improved demand for the 364-day bill (+205bps to 5.27x) which increased to NGN1.07trn from NGN909.45bn at the last auction. Consequently, the average stop rate declined by 162bps to 17.81% compared to 19.43% at the previous auction. This is following a decline in stop rates across the tenors (91-day: -120cps to 17.00%, 182-day: -170bps to 17.50% and 364-day: -196bps to 18.94%). Despite the high demand (NGN1.13trn), the CBN sold the total amount offered, with more allotment notably on the longer tenor, reflecting investors preference for longer-term treasury bills.At the secondary market, the Nigerian fixed income market extended its positive trend for the fourth consecutive week. The NT-bills market witnessed bullish sentiment as the average yield declined by 154bps WoW to settle at 19.66%. This is following repricing across the tenors. Similarly, the FGN bond market closed positive with the average yield down by 26bps WoW to 18.69%. This was on the back of buying interest across the yield curve, particularly on the MAR-2025 (-168bps), 17-APR-2029 (-79bps) and APR-2037 (-95bps) instruments. As a result, the overall Naira fixed income market concluded the week on a bullish note, as the average yield fell by 90bps WoW to settle at 19.18%. In the coming week, we expect this positive trajectory to persist as investors take advantage of the secondary market to fulfill their unrealized bids at the primary market
Click here for full report
Click here for our Stock Recommendation
Weekly Commentary and Stock Recommendation: 2nd September – 6th September 2024
Global Economy
Earlier this week, according to a private sector survey, the Caixin/S&P Global manufacturing Purchasing Manager Index (PMI) rose to 50.4 points in August 2024 from 49.8 points the previous month, more positive than the recent official PMI survey showing manufacturing activity extended declines in August 2024. According to the survey, which mostly covers smaller, export-oriented firms, new orders increased after falling in July 2024, driving up production gains for a 10th successive month. Firms in the consumer and intermediate goods sectors led the output growth. However, the deterioration in external demand led to new export orders falling for the first time in eight months and at the fastest pace since November 2023. Elsewhere, in the Eurozone, the seasonally adjusted GDP increased by 0.2% QoQ in Q2:2024 in both the euro area and the EU, compared with the previous quarter, according to Eurostat (vs. 0.3% QoQ in EU and Euro Area). Compared with Q2:2023, seasonally adjusted GDP increased by 0.6% YoY in the euro area and by 0.8% YoY in the EU in Q2:2024, compared to +0.5% YoY in the euro area and +0.7% YoY in the EU in Q1:2024.
Domestic Economy
Earlier this week, Dangote Group announced that its 650,000 barrels-per-day refinery has completed testing and is now ready to roll out its first shipment of Premium Motor Spirit (PMS). This is a significant step for Nigeria, which has faced persistent fuel shortages and heavy reliance on imports. The refinery’s operations will kickstart local gasoline production, improve tracking of petrol consumption, and reduce the demand for foreign exchange. With a focus on delivering high-quality fuel that meets international standards, this development is expected to address supply challenges and strengthen Nigeria’s energy independence. Additionally, Nigeria will allow the Dangote Refinery to set its own gasoline prices starting in October 2024. This marks a shift from government-controlled pricing, enabling the refinery to sell at market rates to petroleum marketers. The move is expected to reduce the country’s reliance on imported fuel and alleviate foreign exchange pressure. Elsewhere, the Central Bank of Nigeria (CBN) and Stanbic IBTC both released PMI reports for August 2024, highlighting different aspects of Nigeria’s economic conditions. The CBN’s report indicated a positive shift with the PMI rising to 50.2 points, suggesting a return to economic expansion after 13 months of contraction. This reflects cautious optimism in various sectors. In contrast, the Stanbic IBTC report showed a more modest increase from 49.2 in July 2024 to 49.9 points. It noted that while business conditions remained relatively stable, the growth in new orders was minimal, and overall business activity experienced only slight improvements due to ongoing inflationary pressures.
Equities and stock recommendation
Sailing on the back of gains in BUAFOODS (+5.73% WoW to NGN394.90), OANDO (+60.71% WoW to NGN76.90) and FBNH (+10.57% WoW to NGN22.50), the Nigerian Equities market gained 0.63% WoW, as the NGX All Share Index (NGX ASI) edged up to 96,580.01 points. This pushed the market’s year-to-date (YtD) returns to 29.16%, up from last Friday’s 28.35% YtD. True to our expectations last week, positive sentiment in the Oil and Gas sector (+8.50% WoW) stemming from gains in OANDO (+60.71% WoW to NGN76.90) and TOTAL (+19.70% WoW to NGN673.90) helped to reduce losses incurred in the market this week, an offshoot of positive investors’ reaction to OANDO’s acquisition of Nigeria Agip Oil company, which was completed last week. Notably, all other sectors under our coverage closed positive as the Insurance (5.76% WoW), Consumer Goods (+3.48% WoW), Banking (+1.96% WoW) and Industrial Goods (+0.08% WoW) posted gains. Gains in these sectors was spurred by buying interest in CORNERSTONE (+16.38% WoW to NGN2.70), BUAFOODS (+5.73% WoW to NGN394.50), ETI (+6.60% WoW to NGN21.80) and LAFARGE (+1.35% WoW to NGN37.60) respectively. Top gainers this week were OANDO (+114.5% WoW to NGN76.90), RTBRISCOE (+108.8% WoW to NGN3.55) and DEAPCAP (+104.7% WoW to NGN0.88), while CUTIX (-37.8% WoW to NGN3.08), DANGCEM (-10.0% WoW to NGN532.00) and MTNN (-9.9% WoW to NGN180.00) led the laggards for the week. In the coming week, we expect that the positive sentiment from the Oil and Gas sector would be sustained and help keep the market in the positive zone. However, this could be countered by rising yields in the fixed income market.
Fixed Income
Earlier this week, the Central Bank of Nigeria (CBN) conducted a Nigerian Treasury bills (NT-bills) auction, offering NGN233.31bn across the 91-day (NGN19.61bn), 182-day (NGN10.55bn) and 364-day (NGN203.15bn) bills. The average bid-to-cover ratio surged by 234bps to 4.84x (vs. 2.51x at the previous auction). This was primarily driven by improved demand for the 364-day bill (+205bps to 5.27x) which increased to NGN1.07trn from NGN909.45bn at the last auction. Consequently, the average stop rate declined by 162bps to 17.81% compared to 19.43% at the previous auction. This is following a decline in stop rates across the tenors (91-day: -120cps to 17.00%, 182-day: -170bps to 17.50% and 364-day: -196bps to 18.94%). Despite the high demand (NGN1.13trn), the CBN sold the total amount offered, with more allotment notably on the longer tenor, reflecting investors preference for longer-term treasury bills.At the secondary market, the Nigerian fixed income market extended its positive trend for the fourth consecutive week. The NT-bills market witnessed bullish sentiment as the average yield declined by 154bps WoW to settle at 19.66%. This is following repricing across the tenors. Similarly, the FGN bond market closed positive with the average yield down by 26bps WoW to 18.69%. This was on the back of buying interest across the yield curve, particularly on the MAR-2025 (-168bps), 17-APR-2029 (-79bps) and APR-2037 (-95bps) instruments. As a result, the overall Naira fixed income market concluded the week on a bullish note, as the average yield fell by 90bps WoW to settle at 19.18%. In the coming week, we expect this positive trajectory to persist as investors take advantage of the secondary market to fulfill their unrealized bids at the primary market
Click here for full report
Click here for our Stock Recommendation
Latest News
Weekly Commentary and Stock Recommendation: 7th October – 11th October 2024
Daily Market Update|10-10-2024
Daily Market Update|09-10-2024
Daily Market Update|08-10-2024
Subscribe
Get a prompt weekly email from our professional team on market insights, investing strategy and valuable tips for your finances!