Global Economy
The Bank of England left interest rates unchanged on Thursday for the first time in nearly (2) two years during a long-running battle against persistently high inflation. Consequently, policymakers at the central bank kept interest rates constant at 5.25%, the highest since early 2008, pausing after 14 consecutive rate increases. However, it was a tight decision; just five of the bank’s nine rate-setters voted to hold rates. Looking at the inflation trend, Consumer prices rose 6.70% in August YoY, down slightly from 6.80% recorded the previous month. The annual rate of core inflation, which strips out energy and food costs that tend to be more volatile and influenced by international markets, fell to 6.20% YoY in August 2023, from 6.90% the previous month. Elsewhere, the US Federal Reserve held rates constant at 5.25% to 5.5% (a 22 year high) on Wednesday but forecast it will raise interest rates one more time this year, according to the central bank’s projections released Wednesday. Projections released by the Fed showed the central bank would hike rates to a median 5.6% (i.e., one more 25bps hike) by the end of 2023, up from the current range between 5.25% and 5.5%. Twelve Fed officials at the meeting supported the additional hike, while seven opposed it.
Domestic Economy
During the week , the Central Bank of Nigeria (CBN) introduced a new online platform called the CBN Licensing, Approval and Other Requests Portal (CBN LARP) for the submission of microfinance bank (MFB) license applications. This online system is designed to replace the traditional manual application process, where prospective MFB applicants physically submit their applications to the CBN. The transition to this digital platform aims to bring several benefits, including simplifying the application process, saving time, improving communication, and enhancing security measures. Starting from September 25, 2023, MFB license applicants are required to submit both hardcopy and online applications simultaneously as part of a parallel run. The hardcopy application must reference the online submission to be considered. This parallel run will continue until December 31, 2023. After this date, the CBN will no longer accept manual submissions for MFB license applications. Furthermore, Dr. Olayemi Michael Cardoso has officially assumed the role of Acting Governor of the Central Bank of Nigeria (CBN) as of September 22, 2023. His appointment came following his nomination by President Bola Ahmed Tinubu and will be in an acting capacity until confirmed by the Senate. This transition follows the resignation of Mr. Godwin Emefiele as the previous Governor of the CBN. Simillarly, the Deputy-Governors-Designate have also taken up their duties in acting capacities. This comes after the formal resignation of Mr. Folashodun Shonubi, Mrs. Aishah Ahmad, Mr. Edward Lametek Adamu, and Dr. Kingsley Obiora, who previously held the positions of Deputy Governors at the CBN.
Equities and stock recommendation
The Nigerian Equities market ended the week on a bearish note as the NGX All Share Index (ASI) shed 11bps WoW to close at 67,324.59 points, leading to a fall in the market’s year-to-date (YtD) returns (from 31.50% YtD last week to 31.36% YtD this week). This is coming after only gaining in two (2) consecutive days at the beginning of the week, following the nomination of a new Central Bank Governor, Dr. Olayemi Michael Cardoso and new Deputy Governors. On a sectoral basis, we observed bearish sentiments in the Industrial Goods sector (-4.80% WoW), while the Insurance (+3.34% WoW), Consumer Goods (+2.98% WoW), Banking (+0.61% WoW) and Oil and Gas (+0.56% WoW) sectors witnessed a bullish run. The top gainers for the week include CHIPLC (+32.9% WoW to NGN1.05), ELLAHLAKES (+28.8% WoW to NGN4.25) and ETRANZACT (+28.6% WoW to NGN9.45), while TANTALIZER (-21.1% WoW to NGN0.30), GUINEANS (-20.7% WoW to NGN0.23) and NSLTECH (-10.3% WoW to NGN0.26) topped the losers’ chart. We anticipate mixed sentiments in the coming week as investors continue to engage in profit-taking activities, taking into cognizance the volatilities affecting the market.
Fixed Income
The Nigerian Treasury Bills market closed the week on a negative note as average yield surged by 59bps WoW to settle at 8.46%. Similarly, the secondary bond market ended the week bearish as average yield rose by 5bps WoW to settle at 14.47%. This is following sell offs in the MAR-2024 (+72bps) FEB-2028 (+12bps) and APR-2032 (+12bps) instruments. Overall, the Naira Fixed income market closed negative as average yield increased by 32bps WoW to settle at 11.47%.
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