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This is a brief summary of the economic events that occurred this week in the global and domestic space. This report also provides investment strategies for investors in the coming week.

Global Economy

Earlier this week, The US Bureau of Labor Statistics released its July 2023 Consumer Price Index (CPI) report. According to the report, the annual CPI rose 3.20% YoY in July 2023, versus 8.50% recorded in July 2022. On a MoM basis, US CPI rose by 0.20%, largely driven by the shelter costs. Despite the uptick in the annual CPI, core CPI, which excludes food and energy prices, eased. Core CPI increased by 0.20% MoM (vs. 0.20% MoM in June 2023) and 4.70% YoY (vs. 4.80% YoY in June 2023) in July 2023. The positive development is following the 11th consecutive interest rate hike undertaken by US Federal Reserve in July 2023.

Domestic Economy

Earlier this week, the Central Bank of Nigeria released its audited accounts for seven (7) years spanning from 2016-2022. The apex bank’s financial statements for the year ended December 2022, showed a  Profit After Tax (PAT) of NGN103.8bn (vs. NGN75.1bn in 2021). Notably, CBN reported a PAT every year despite economic headwinds such as currency depreciations and increased ways and means to the government. The sudden release of the financial statements reiterates the decision of the new administration to ensure transparency in the bank’s operations following the suspension of the CBN governor. Similarly, CBN reported that Foreign Exchange (FX) inflows increased to USD2.55bn since the implementation of the FX liberalization policy in June 2023. According to the bank’s report, total inflows into the Investors and Exporters (I&E) window surged to USD1.41bn in June 2023 from USD1.14bn in May 2023. This is following increased inflows from companies and exporters. However, capital inflows from foreign investors remained subdued within the period.

Equities and Stock Recommendation

This week, the Nigerian Equities Market extended its bullish run as the NGX All Share Index (ASI) increased by 41bps WoW to 65,325.37 points. Consequently, the year-to-date returns printed at 27.46% (vs. 27.21% YtD last week). All sectors under our coverage closed bearish except Consumer Goods (+1.33%) and Insurance (+6.65%) sectors. This week, SUNUASSUR (+117.0% to NGN1.15), SKYAVN (+73.8% to NGN28.15) and GUINEAINS (+62.5% to NGN0.39) ended the week as the top gainers. However, OMATEK (-33.3% to NGN0.34), ETERNA (-32.1% to NGN19.70) and CADBURY (-17.6% to NGN14.00) topped the losers’ chart. In the coming week, we expect mixed sentiments to permeate the market as investors observe events in the fixed income space.

Fixed Income

At the primary NTB auction held this week, the average stop rate declined by 182bps to 6.90% (vs 8.72% at the previous auction). While the average bid-to-cover ratio surged by 392bps to settle at 5.43% (vs 1.51% at the previous auction), indicating an increase in demand for the instruments. However, there was a decrease in demand for the 91-day bill, as its bid-to-cover ratio stood at 3.04x (vs 4.52x at the last auction). Meanwhile, the Secondary Nigeria Treasury Bills market closed the week on a bearish note as average yield surged 37bps WoW to settle at 7.33%. Similarly, the secondary bond market ended the week on a negative side as average yield increased 21bps WoW to settle at 13.52%. This is following selloffs in the FEB-2028(+56bps), NOV-2028 (+19bps), MAY-2029 (+4bps), JUL-2045 (+4bps), and APR-2049 (+9bps) instruments. Overall, the Naira Fixed income market closed the week bearish as average yield increased by 29bps WoW to settle at 10.42%.

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