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Global Economy

The US Bureau of Labor Statistics (BLS) published US December 2023 CPI data earlier this week. The Headline Consumer Price Index (CPI) rose 0.3% MoM in December 2023, up from 0.1% MoM in November 2023. In December 2023, the Core Index—which excludes food and energy—rose by 0.3% MoM, remaining constant from November 2023. Several indexes saw increases, including those for housing, auto insurance, and healthcare. Among the indexes that saw a decline during the month were those related to personal care and home operations and furnishings. On a YoY basis, the headline index increased by 3.4% YoY in December 2023, compared to 3.1% YoY in November 2023. Also, the core index increased by 3.9% YoY, relative to a 4.0% YoY increase in November 2023. Finally, the food index grew 2.7% YoY and the energy index fell 2.0% YoY. Elsewhere, in China, the Chinese National Bureau of Statistics released December 2023 CPI data. The consumer price index (CPI) fell by 0.3% YoY in December 2023, and was up by 0.1% MoM (vs. 0.5% MoM and YoY in November 2023).

Domestic Economy

Earlier this week, the Central Bank of Nigeria (CBN) took significant supervisory action by dissolving the boards and management of Union Bank, Keystone Bank, and Polaris Bank. This decision is rooted in concerns about the banks’ adherence to regulations and corporate governance principles, with the CBN citing non-compliance with specific provisions of Section 12(c), (f), (g), and (h) of the Banks and Other Financial Institutions Act, 2020. These concerns encompass various issues, including regulatory non-compliance, disregard for the conditions of their licenses, and engagement in activities that could pose a risk to financial stability. Subsequently, the CBN appointed new executives to oversee the operations of the banks. Furthermore, the Nigerian Communications Commission (NCC) granted partial disconnection of Glo at the request of MTN, as Glo reportedly owes MTN interconnection fees.  From January 18th onward, Glo users in Nigeria won’t be able to call MTN numbers due to an alleged NGN6bn in outstanding fees.

Equities and stock recommendation

This week, the Nigerian Equities market continued to blow through records as for the first time in history on January 8th, 2024, the NGX All Share Index (ASI) crossed 80,000 points. Hence, the market closed the week with positive sentiment, gaining 424bps WoW to settle at 83,042.96 points and pushing the market’s year-to-date (YtD) returns up to 11.06% from last week’s 6.54% YtD. On a sectoral basis, we observed gains in the Consumer Goods (+9.60%), Insurance (+7.63% WoW), Banking (+5.10% WoW) and Industrial Goods (+4.80% WoW) sectors. However, the Oil and Gas sector (-1.61% WoW) posted losses. This week, CADBURY (+42.3% WoW to NGN24.05), JBERGER (+32.9% WoW to NGN56.50) and JAIZBANK (+31.3% WoW to NGN3.02) topped the gainers’ chart while DAARCOMM (-30.2% to NGN0.90), TOTAL (-10.0% to NGN346.50) and NEM (-9.4% WoW to NGN5.75) led the decliners’ chart. In the coming week, we foresee the market sustaining its bullish momentum as investors continue to position themselves in high dividend-paying tickers in anticipation of the release of 2023FY earnings results. 

Fixed Income

In the OMO auction held this week, the average stop rate surged by 508bps to 14.08% compared to 9.00% at the last auction. Conversely, we observed the decline in the average bid-to-cover ratio by 285bps to 1.38x (vs 4.23x at the previous auction).

At the primary NTB auction held this week, the average stop rate declined by 473bps to 5.02% (vs 9.75% at the previous auction). Consequently, the average bid-to-cover ratio surged 468bps to settle at 20.16x (vs 15.48x at the previous auction) indicating an increase in the demand for the instruments. The positive sentiment extended to the secondary market, with the average yield in the Treasury Bills market declining 267bps WoW to 3.28%. Similarly, the FGN Bond market closed positively as the average yield fell by 52bps WoW to close at 13.28%. This is on the back of buying interest across the curve.  Overall, the Naira Fixed Income market concluded the week bullish as the average yield dipped 160bps to settle at 8.28%. We expect the bullish sentiment to persist in the coming week, driven by the improved liquidity in the system.

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