The Nigerian Senate has amended the 2023 Finance Act, increasing the windfall levy on banks’ foreign exchange revaluation gains from 50% to 70%, applicable from the start of the new forex policy until 2025. Banks that fail to comply by December 31, 2024, will face fines and interest. Additionally, the Senate approved a N6.2 trillion supplementary budget for 2024, including funding for a new minimum wage and infrastructure projects. President Bola Tinubu’s initial 50% levy proposal aimed to generate revenue from banks’ 2023 forex profits. The amendment has sparked controversy, with critics warning of legal challenges and potential negative impacts on investment, arguing it could unfairly burden bank customers.
Money Market
Market liquidity opened the day at ₦276.47 billion long. Week-on-week, the Open Buy Back (OBB) rate and the Overnight (OVN) rate slid by 526bps and 536bps to 26.13% and 26.66%, respectively.
We expect rates to remain around current levels.
Treasury Bills Market
The Treasury Bills market witnessed a quiet week with a bearish undertone with offers seen on the Jan & Feb bills at the 23% handle and June bills around the 24% handle. At the MPC meeting this week, the members voted to increase the MPR by 50bps to 26.75%. Also, the asymmetric corridor was adjusted from -300/+100 bps to -500/+100 bps while other parameters were kept constant. The PMA was also held with the DMO offering and allotting ₦277.96 billion across the standard tenors, with total subscriptions reaching ₦373.94 billion across the three standard maturities. The stop rates were 18.50%, 19.50%, and 22.10%, up from the previous rates of 16.30%, 17.44%, and 21.24%. Sequel to the auction we saw a rally on the newly issued 364-day bill which traded as low as 21.20% due to scarce offers. Week-on-week, the average benchmark yield rose 36bps to close at 24.91%.
We expect a similar session.
FGN Bond Market
The FGN local bond Market commenced the week with the Bond auction. At the auction, the DMO offered ₦300 billion across the 2029, 2031 and 2033 tenors with total subscription amounting to ₦279.67 billion and total allotment of ₦225.72 billion. Stop rates closed at 19.89%, 21.00%, and 21.98%, representing 25bps, 81bps, and 48bps increase on the 29s, 31s and 33s, respectively. We saw the 31s trade at 21.20% while the new 33s was quoted at 22.60/22.35. Week-on-week, the average benchmark yield rose 5bps to 19.14%.
We expect no change to market sentiments.
FGN Eurobond Market
The FGN Eurobond market kicked off on a bearish note as selling pressures persisted. The bearish trend persisted after the release of the U.S S&P Global Services PMI data which printed at 56.0 vs 54.9 estimated and 55.3 prior. In contrast, the U.S S&P Global Manufacturing PMI came in at 49.5 (estimated 51.6; previous 51.6). The market also saw the release of the GDP figures which printed at 2.80% compared to 2.0% expected while initial Jobless Claims came in at 235K versus the 237K anticipated. Week-on-week, the average benchmark yields gained 8bps, settling at 9.95%.
We expect the FED interest rate decision to impact market events.
Currency Market
The value of the Naira to the dollar depreciated by 0.77% to print at ₦1609.29/$ this week at the Nigerian Autonomous Foreign Exchange Market Window (NAFEM).
Equities Market
The local stock market displayed a bearish stance as the benchmark All-Share Index dipped by 195 bps day-on-day and 229 bps week-on-week, closing at 98,201.49 points. Consequently, the year-to-date return settled at 31.33%, while market capitalization dipped by ₦1.335 trillion to ₦55.605 trillion. In reflection of the negative bias, the weekly market breadth was 0.42x, with 43 stocks declining and 18 advancing.
On a week-over-week basis, overall trading volume increased by 82.71% to 1.10 billion units, and the total traded value rose by 135.65% to ₦21.59 billion. The most actively traded stocks by volume were FCMB (566.06 million units), ABBEYBDS (234.23 million units), and ELLAHLAKES (117.81 million units). In terms of value, the top traded stocks were TRANSPOWER (₦10.48 billion), GTCO (₦4.83 billion), and FCMB (₦4.30 billion).
