President Bola Tinubu’s assurance of a strategic plan to enhance Nigeria’s foreign exchange liquidity offers a beacon of hope for economic stability. Addressing market challenges at the 29th Nigerian Economic Summit, Tinubu outlined priorities including poverty alleviation and anti-corruption measures, emphasizing the need for a results-driven public service. Minister of Finance, Wale Edun, projected an influx of approximately $10 billion in the short term, aimed at tackling forex backlog and shoring up the naira. This anticipated infusion, coupled with forthcoming initiatives like student loan program and consumer credit schemes, signifies a concerted effort to reinvigorate the economy.
Despite these efforts, the forex market grapples with liquidity issues, resulting in further naira devaluation. Plans to broaden the official currency market to include bureaux de change and fintech firms indicate a recognition of the need for a more inclusive and agile system. The successful implementation of proposed reforms is eagerly anticipated, with a transparent and efficient forex market being pivotal in stabilizing the naira and attracting foreign investment. Collaborative efforts between public and private sectors, aligned with President Tinubu’s vision, will be key to Nigeria’s journey towards economic resilience. With a clear roadmap and united efforts, Nigeria is poised for a more vibrant financial future.
Money Market
During the past week, interbank market rates showed an upward trajectory, primarily driven by liquidity constraints resulting from CRR debits and the settlement of NTB auctions. Additionally, the recent policy change by the Central Bank of Nigeria, which removed the cap at the SDF window, continued to exert upward pressure on interbank rates. As a result of these factors, the Open Buy Back rate (OBB) saw a substantial week-over-week increase of 1,290 bps, reaching its peak at 14.40%. Simultaneously, the Overnight rate (O/N) experienced a significant rise of 1,255 bps, reaching 14.75%.
We anticipate a slight decrease in rates, contingent on the possibility of SRA being credited into the system.
Treasury Bills
Amid tight interbank liquidity conditions in the money market, the Treasury Bills market adopted a cautious approach at the beginning of the week. This cautious outlook was further intensified by the NTB auction conducted on Wednesday, where the DMO offered ₦108 billion across 91-day, 182-day, and 364-day maturities, ultimately allotting ₦370.33 billion, surpassing the total subscription of ₦638.14 billion. The auction’s stop rates settled at 5.90%, 9.00%, and 13.00%, marking a departure from the previous rates of 3.67%, 5.11%, and 9.25%.
Following this auction, investor interest predominantly gravitated towards the recently issued 1-year Treasury bill (24-Oct-24), resulting in most transactions closing in the 12.70% range by the week’s end, while other longer-dated securities were being bid around the 11.50% range. Consequently, the average benchmark yield experienced an increase of 34 bps throughout the week, culminating at 6.73%.
We expect a cautious approach in anticipation of SRA inflow.
FGN Bond Market
The FGN Bonds market traded on a bearish mode all week as offers were seen on the mid to long end of the curve with only a handful of demand on the short end of the curve. Thus, average benchmark yield inched higher by 41 bps, closing the week at 15.05%.
We foresee a continuation of this trend in the upcoming week.
Eurobond Market
The FGN Eurobonds kicked off the week on a positive note, buoyed by the Finance Minister’s announcement of an anticipated $10 billion injection into the economy, which sparked heightened buying interest. This bullish sentiment remained intact throughout the week, despite Federal Reserve Chair Powell’s guarded stance, the US posting better-than-expected Q3 GDP results at 4.90% (versus the projected 4.20% and the previous Q2 figure of 2.10%), and the US PCE figures aligning with market expectations at 3.70% (compared to the previous figure of 3.80%). The average benchmark yield concluded the week 81 bps lower at 11.85%.
As we look ahead, we foresee a prudent approach in the forthcoming session.
Currency Market
The value of the Naira to the dollar appreciated by 227 bps week-on-week to print at ₦789.94/$ this week at the Investors and Exporters FX Window.
Equities Market
The local stock market displayed a bullish trend in the past week, as indicated by the daily increase of 8 bps in the NGX All-Share Index (NGXASI) and a weekly gain of 33 bps, closing at 67,136.58 points. Consequently, year-to-date returns surged by 31.00%. Additionally, the overall market capitalization, which settled at ₦36.89 trillion, recorded a week-on-week uptick of ₦126 billion. Interestingly, the market breadth stood at 0.93x, signifying 42 stocks declining versus 39 advancing.
Upon analyzing the comprehensive trading statistics, the total trading volume expanded by 4.01%, reaching 214.15 million units, while the total traded value contracted by 18.84%, totaling ₦5.18 billion. On a week-on-week analysis, Access Corporation (169.82 million units), Fidelity Bank (144.21 million units), and United Bank for Africa (133.25 million units) were the stocks with the highest trading volumes, while GTCO (₦3.88 billion), ACCESSCORP (₦2.83 billion), and UBA (₦2.55 billion) were the top performers in terms of trading value.
Looking forward, we anticipate a continuation of similar market dynamics in the upcoming trading session.
