Skip to main content

Global Economy

In February 2024, the headline S&P Global Flash US PMI Composite Output Index fell to 51.4 from 52.0 in January 2023, while staying in the expansion region. Nonetheless, the pace of expansion was the second-fastest since July 2023 as manufacturers and service providers recorded growth in output. US companies continued to report an expansion in activity during February, albeit at a slower pace. Output rose marginally as a softer uptick in services business activity weighed on overall growth. Manufacturing, meanwhile, saw a renewed increase in production amid an improvement in supply chains after adverse weather in January 2024. Consequently, in February 2024, the S&P Global Flash US Manufacturing PMI was up to 51.5 from 50.7 in January 2024. Elsewhere, in the UK, the headline S&P Global Flash UK PMI Composite Output Index was up to 53.3 in February 2024, from 52.9 in January 2024. Business activity across the UK private sector expanded for the fourth consecutive month and at the fastest pace since May 2023, supported by another strong upturn in the service economy. February data highlighted a solid improvement in customer demand, as signaled by the sharpest rise in new work for nine months. Hopes of a sustained rebound in domestic economic conditions led to the highest level of optimism regarding the year ahead business outlook since February 2022. The S&P Global Flash UK Manufacturing PMI contracted less at 47.1 in February 2024, from 47 in January 2024, albeit staying in the contraction zone.

Domestic Economy

During the week, the National Bureau of Statistics (NBS) released the Q4:2023 Gross Domestic Product (GDP) report, revealing that the Nigerian economy sustained its growth trend for the thirteenth (13th) consecutive quarter, despite facing macroeconomic challenges. In Q4:2023, the economy exhibited a 3.46% YoY growth, a notable increase from the 2.54% YoY growth in Q3:2023. This growth was propelled by positive performances in both the oil sector (+12.11% YoY) and the Non-Oil sector (+3.07% YoY). Overall, the Nigerian economy expanded by 2.74% YoY in 2023FY, a slight decrease from the 3.10% YoY in 2022FY. The Non-oil sector also saw a deceleration to 3.04% YoY in 2023FY compared to 4.84% YoY in 2022FY. Although the oil sector remained in negative territory in 2023FY (-2.22% YoY), there was improvement from the significant contraction of 19.22% in 2022FY. Furthermore, the Q3:2023 Labour Force Survey released by the NBS showed a dip in the labor force participation rate to 79.5% (compared to 80.4% in Q2:2023). Notably, the unemployment rate rose from 4.2% in Q2:2023 to 5.0% in Q3:2023. Earlier in 2023, the NBS revised its unemployment rate calculation method to adhere to International Labour Organization (ILO) guidelines, contributing to a significant drop in Nigeria’s unemployment rate from 33.3% in Q4:2020 to 5.3% in Q4:2022 and 4.1% in Q1:2023.

Equities and stock recommendation

The Nigerian equities market slipped back into the red zone, as the NGX All Share Index declined by 3.44% WoW to 102,088.10 points, following losses in three (3) out of the five (5) trading days of the week. Consequently, the market’s year-to-date (YtD) returns fell to 36.53%. Bearish sentiment permeated the Insurance (-8.91% WoW), Industrial Goods (-7.94% WoW) and Banking (-2.10% WoW) sectors while the bulls clung on to the Consumer Goods (+2.01% WoW) and Oil and Gas (+0.01% WoW) sectors. The top gainers for the week were SUNUASSUR (+17.4% WoW to NGN2.09), FBNH (+10.7% WoW to NGN31.00) and GEREGU (+9.3% WoW to NGN985.00). On the flipside, MORISON (-32.7% WoW to NGN1.67), STERLINGNG (-18.7% WoW to NGN4.35) and ABCTRANS (-16.7% WoW to NGN0.75) led the losers’ chart. In the coming week, we expect investors to sustain their profit-taking activities and look towards higher yields in the fixed income market.

Fixed Income

At the primary FGN Bond auction for February 2024, the Debt Management Office (DMO) offered a total of NGN2.5trn across the issuances of two new instruments (FEB-2031 and FEB-2034), respectively worth NGN1.25trn each. A total of NGN1.49trn worth of instruments was sold at the auction (FEB-2031: NGN873.53bn and FEB2034: NGN621.38bn). The average bid-to-cover ratio printed at 0.76x and the average stop rate at 18.75%. At the primary NTB auction held this week, the average stop rate dipped by 25bps to 17.83% compared to 18.08% at the previous auction. This decline was driven by lower stop rates in the 91-day bill (- 24bps to 17%) and the 182-day bill (-50bps to 17.5%), while the stop rate for the 364-day bill remained unchanged at 19%. However, the average bid-tocover ratio increased significantly to 8.43x, up from 1.98x at the last auction, reflecting higher demand for the instruments specifically in the 91-day (+822.34% to 30.77x) and 182-day (+928bps to 9.67x) bills. Furthermore, the Nigerian Treasury Bills market closed the week in the negative territory as the average yield increased by 120bps WoW to 16.67%. Similarly, the FGN Bond market witnessed bearish sentiment, as the average yield climbed 68bps WoW to close at 16.80%. This was driven by sell-offs across the yield curve, specifically in the MAR-2025 (+392bps), NOV-2028 (+115bps), APR-2029 (+131bps), MAY-2029 (+120bps) and MAR-2036 (+154bps) instruments. Overall, the Naira Fixed Income market ended the week on a bearish note, as the average yield surged by 94bps WoW to close at 16.73%. We expect yields to remain elevated at the short end of the curve in the coming week.


Click here for the full report.

Click here for our Stock Recommendation.

How useful was this post?

Click on a star to rate it!

Average rating 3 / 5. Vote count: 2

No votes so far! Be the first to rate this post.

Leave a Reply