Global Economy

Earlier this week, according to the Chinese National Bureau of Statistics, China’s Consumer Price Index (CPI) rose by 0.6% YoY in August 2024 after reporting a 0.5% YoY growth in July 2024. Food prices climbed by 2.8% YoY in August, with Pork prices surging by 16.1% YoY, and vegetable prices climbing by 21.8% YoY. Core CPI, which strips out food and energy prices, climbed by 0.3% YoY in August 2024, a slower rise for a second-straight month (vs. 0.4% YoY in July 2024). Moreso, Chinese monthly CPI came in at 0.4% MoM in August versus July’s 0.5% MoM acceleration. Elsewhere, in the US, the US Bureau of Labor Statistics released August 2024 CPI data, and the headline CPI increased by 0.2% MoM, the same increase as in July 2024. On a YoY basis, the headline index increased 2.5% YoY in August 2024 compared to 2.9% YoY recorded in July 2024. This is the smallest YoY increase since February 2021. Looking at the MoM breakdown, the index for shelter rose 0.5% MoM in August and was the main factor in the headline inflation increase. The food index increased 0.1% MoM in August 2024, after rising 0.2% MoM in July 2024. The index for food away from home rose 0.3% MoM in August 2024, while the index for food at home was unchanged. The energy index fell 0.8% MoM in August, after being unchanged the preceding month. The index for all items less food and energy rose 0.3% MoM in August, after rising 0.2% MoM the preceding month. Finally, in the EU, the ECB decided to lower the deposit facility rate – the rate through which it steers the monetary policy direction – by 25bps. This translates to its second rate cut in three months. The deposit facility rate will be decreased to 3.50%. The interest rates on the main refinancing operations and the marginal lending facility will also be decreased to 3.65% and 3.90%, respectively.

Domestic Economy

During the week, the National Bureau of Statistics (NBS) released Nigeria’s Foreign Trade in Goods data for Q2:2024, which showed a 33.63% QoQ increase in the country’s trade surplus to NGN6.95trn from NGN5.20trn in Q1:2024. This was driven by higher exports (+1.31% QoQ to NGN19.42trn) and lower imports (-10.71% QoQ to NGN12.47trn), as the weaker Naira and forex shortages made foreign goods more expensive. However, total trade value contracted by 3.76% QoQ to NGN31.89trn, reflecting ongoing macroeconomic challenges like inflation and weak consumer demand. We believe Nigeria’s trade surplus will remain strong, supported by stable exports and reduced imports due to forex shortages and a weaker Naira. However, high inflation and currency volatility may cap overall trade growth. Tackling forex liquidity issues and diversifying exports will be essential for long-term stability.

Equities and stock recommendation

Riding on gains from MTNN (+7.37% WoW to NGN192.20), FBNH (+31.52% WoW to NGN29.00) and OANDO (+9.40% WoW to NGN89.05), which offset losses in JBERGER (-17.89% WoW to NGN140.00), PZ (-17.63% WoW to NGN15.65) and STANBIC (-1.54% WoW to NGN57.50), the Nigerian Equities market closed on a bullish note. The NGX All Share Index (NGX ASI) gained 1.06% WoW to settle at 97,456.62 points, bringing the market’s year-to-date (YtD) returns up to 30.34% (vs: last Friday: 28.97% YtD). All sectors under our coverage closed positive, with the Banking sector (+5.12% WoW) leading the gains, followed by the Oil and Gas (+2.00% WoW), Insurance (+1.59% WoW), Consumer Goods (+1.47% WoW) and Industrial Goods (+0.17% WoW) sectors. Gains in these sectors were driven by positive sentiment in ETI (+8.45% WoW to NGN23.75), CONOIL (+9.09% WoW to NGN168.00), CORNERSTONE (+5.93% WoW to NGN2.50), NESTLE (+9.88% WoW to NGN890.00) and LAFARGE (+3.17% WoW to NGN37.45) respectively. Top gainers this week were CAVERTON (+59.7% WoW to NGN2.54), RTBRISCOE (+42.0% WoW to NGN3.65) and FBNH (+31.5% WoW to NGN29.00). On the flipside, LEARNAFRICA (-22.22% WoW to NGN3.62), JBERGER (-17.9% WoW to NGN140.00) and PZ (-17.6% WoW to NGN15.65) led the losers’ chart. In the coming week, we expect that investors would be cautious as they anticipate the rate decision from the September Monetary Policy Committee (MPC) meeting.

Fixed Income

This week, the Central Bank of Nigeria (CBN) held a Nigerian Treasury bills (NT-bills) auction, offering NGN161.88bn worth of treasury bills across the 91-day (NGN6.78bn), 182 (NGN4.92bn) and 364 (NGN150.18bn) tenors. The average bid-to-cover ratio printed at a significant 3.48x. This is following active investor’s demand for the bills (91-day (2.63x), 182-day (1.25x) and 364-day (3.59x)). As a result, the average stop rate at the auction declined by 41bps to 17.41% compared to 17.81% at the previous auction. Notably, CBN sold all the T-bills offered with sales skewed to the 364-day tenor. At the secondary fixed income market, average yields reversed its bullish run, with the average yield in the NT-bills market surging by 131bps WoW to 20.28%, following repricing in the market. Similarly, the FGN bond market closed on a negative note as the average yield climbed by 64bps WoW to settle at 18.84%. This was driven by selloffs across the yield curve, particularly on the MAR-2025 (+147bps), 17-APR-2029 (+55bps) and FEB-2031 (53bps). Overall, the Naira fixed income market concluded bearish with the average yield increased by 99bps WoW to 19.56%. In the coming week, we may likely see yields rise due to the uncertainty around the upcoming MPC meeting.

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