Skip to main content
0
(0)

Global Economy

According to the US Bureau of Economic Analysis, US Real gross domestic product (GDP) increased by 1.40% YoY in Q1:2024, according to its “third” estimate (vs. 3.40% YoY in Q4:2023). The increase in real GDP primarily reflected increases in consumer spending, residential and nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports also increased. Compared to Q4:2023, the deceleration in real GDP primarily reflected decelerations in consumer spending, exports, and government spending. An increase in imports also led to lower GDP. These movements were partly offset by an acceleration in residential fixed investment. Moreso, nominal GDP increased by 4.50% YoY, or USD312.2bn, in Q1:2024 to USD28.27trn, an upward revision of USD13.2bn from the previous estimate. The personal consumption expenditures (PCE) price index also increased by 3.40% YoY, an upward revision of 0.10%. Excluding food and energy prices, the PCE price index increased by 3.70% YoY, an upward revision of 0.10%.

Domestic Economy

During the week, the Central Bank of Nigeria (CBN) released a circular to announce the discontinuation of its Price Verification System (PVS) portal, effective from July 1, 2024. This decision means that importers will no longer be required to use the PVS Portal to verify the prices of goods and services. Despite the discontinuation, importers are still responsible for ensuring that they are paying fair prices for their imports. The PVS Portal was initially launched on August 31, 2023, to enhance transparency, accountability, and standardization in trade operations within Nigeria. All Form M applications had to be accompanied by a valid price verification report generated from the portal. However, the system faced criticism from various stakeholders. We believe that by removing the PVS Portal, the CBN aims to simplify import procedures and reduce bureaucratic barriers, potentially improving the business environment in the country. Furthermore, the CBN has introduced a new measure to enhance diaspora remittances, allowing money transfer operators to sell foreign currency directly to the CBN or authorized banks. Transactions can now be settled on the same day if confirmed before noon, using transparent official exchange rates. We see this measure as an effort by the by the CBN to stabilize the exchange rate, prevent misuse, and increase remittance inflows to Nigeria

Equities and stock recommendation

This week, the Nigerian equities market gained in three (3) out of the five (5) trading days of the week, bringing the NGX All Share Index (NGX ASI) to a close of 100,057.49 points, 0.32% WoW higher than the previous Friday’s close (99,743.05 points). Consequently, the market’s year-to-date (YtD) returns increased to 33.81% (vs. last week: 33.69% YtD). This week, the Banking (+1.14% WoW), Oil and Gas (+5.71% WoW) and Insurance (+3.33% WoW) sectors closed positive on the back of gains in UBA (+2.05% WoW), SEPLAT (+10.00% WoW) and NEM (+7.59% WoW) respectively. On the other hand, DANGSUGAR (-8.51% WoW) and LAFARGE (-7.47% WoW) spurred selloffs in the Consumer Goods (-0.56% WoW) and Industrial Goods (-0.33% WoW) sectors, respectively. The top gainers this week were CWG (+44.5% WoW to NGN7.95), FTNCOCOA (+22.4% WoW to NGN1.64) and JOHNHOLT (+20.3% WoW to NGN3.14), while JAIZBANK (-11.4% WoW to NGN1.95), DAARCOMM (-10.5% WoW to NGN0.51) and CHAMPION (-10.5% Wow to NGN3.50) led the laggards’ chart. In the coming week, we expect investors to sustain bargain-hunting activities in anticipation of the release of the Q2:2024 earnings results.

Fixed Income

Today, the Central Bank of Nigeria (CBN) conducted an OMO auction offering NGN150bn worth of OMO bills across the short (NGN25bn), mid (NGN25bn) and long (NGN100bn) tenor bills. The average stop rate at the auction declined significantly by 643bps to 7.49% (vs. last auction: 13.93%), despite an increase in stop rate for the long tenor bill (+18bps to 20.48%). This is following no allocation for the short and mid-tenor bills. The average bid-to-cover ratio stood 1.97x the offer and the CBN sold NGN264.33bn worth of OMO bills. Earlier this week, the Debt Management Office (DMO) conducted a bond auction, offering NGN450bn worth of bonds across the reopening of APR-2029, FEB-31 and MAY-2033 at NGN150bn each. The average stop rate at the auction rose by 80bps to 20.44% compared to 19.64% at the May auction. This is on the back of increase in stop rates for the instruments APR-2029 (+35bps to 19.64%), FEB-2031 (+45bps to 20.19%) and MAY-2033 (+161bps to 21.50%). Despite the higher rates offered, investors’ demand declined with the average bid-to-cover ratio down by 55bps to 0.68x compared to 1.23x at the previous auction. The DMO sold NGN297.006bn worth of bonds. Furthermore, the Central Bank of Nigeria (CBN) held an NT-bills auction, offering NGN228.72bn worth of treasury bills across the 91-, 182- and 364-day bills. The average stop rate at the auction rose by 6bps to 18.14% from 18.08% at the previous auction. This rise is on the back of an increase in the stop rate offered for the 364-day bill which rose by 18bps to 20.68%. Investors’ demand at the auction was a significant 3.38x the offer amount. Notably, the CBN sold NGN284.26bn worth of bills, 1.24x more than the NGN228.72bn offered. At the secondary market, the NT-bills market closed on a bearish note as the average yield rose by 10bps WoW to settle at 22.07%. This is following selloffs on the long-tenor bills (+46bps). Conversely, the FGN bond market closed on a bullish note as the average yield fell by 2bps WoW to 18.75%. This is following buying interest in on all ends of the curve, specifically in the APR-2032 (-156bps) and JUN-2033 (-156bps) instruments. Overall, the Naira fixed income market concluded on a bearish note with the average yield up by 4bps WoW to 20.41%. Looking ahead, this bearish trend is expected to persist, particularly on the short end of the curve.

 

Click here for full report

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

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

Leave a Reply