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The Nigerian federal government is in discussions with the World Bank for a $1.5 billion loan aimed at supporting the budget and providing liquidity in the foreign exchange market. Finance Minister Wale Edun, speaking at the World Economic Forum in Davos, emphasized that the loan is being sought to facilitate ongoing reforms, including the removal of fuel subsidies and the merger of the foreign exchange market. Edun expressed confidence in securing the support, citing the government’s commitment to reforms. The government’s strategy for stabilizing the naira involves tapping into domestic dollar savings and increasing liquidity in the foreign exchange market. Edun highlighted crude oil sales as a primary revenue source and emphasized the importance of leveraging Nigerian savings, both within and outside the formal market. Addressing the foreign exchange backlog, estimated at $5 billion, the Minister identified clearing this backlog as a priority for the Central Bank of Nigeria (CBN). He proposed utilizing available liquidity within the banking system to swiftly address the backlog, either through spot or forward-rate transactions. Looking ahead, Edun mentioned the possibility of Nigeria issuing Eurobonds later in the year, contingent on favorable interest rates. As part of its debt restructuring deal with official creditors, the Ghanaian government has obtained a moratorium until May 2026. Finance Minister Ken Ofori-Atta, speaking at the World Economic Forum, revealed that the $5.4 billion bilateral obligations will be repaid in two installments, with the first due in 16 years and the second in 17 years. Payments originally set for 2023 are rescheduled to 2039 and 2040, and those due in 2024 are shifted to 2040 and 2041. Bilateral lenders have agreed to waive debt-service payments on $2.8 billion of obligations from 2023 to 2026. The agreement, recognized as one of the fastest within the G20 Common Framework for Debt Treatment, is expected to pave the way for the release of $600 million from the IMF and approximately $550 million from the World Bank. Ghana is negotiating with its $13 billion Eurobond holders, aiming for an agreement by the end of March, and the terms will be influenced by the agreement with official creditors reached in January 2024. Money Market Interbank liquidity experienced a considerable contraction this week. On a week-on-week analysis, there was a significant 552 bps increase in the Open Buy Back (OBB) rate and a 545 bps increase in Overnight rate (O/N), causing the interbank rates to conclude the week at 22.10% and 23.25%, respectively. We expect the rates to remain at similar levels in the coming week. Treasury Bills Amidst a constrained interbank liquidity setting, the Treasury Bills market predominantly exhibited bearish sentiment for the most part of the week, despite notable buying interest, particularly observed on the long end of the curve. As anticipated, the average benchmark yield witnessed a 39 bps surge, concluding the week at 3.28%. We anticipate a similar sentiment in the upcoming week. FGN Bond Market The FGN Bonds market also displayed a bearish stance for most of the week despite the notable buying interest seen on the 53 papers. Consequently, the average benchmark yield concluded the week at 13.94%, marking a 14 bps increase on a week-over-week (WoW) basis. We anticipate a sustained continuation of this prevailing trend in the upcoming week. Eurobond Market The FGN Eurobonds exhibited cautious trading as the week commenced with a bearish tone, attributing the downturn to the anticipation of a US recession following the release of its Retail Sales data. This development led to a decrease in the likelihood of a rate cut in the US by March 2024. However, the bearish sentiment was mitigated after the release of the Michigan Consumer Sentiment on Friday, surpassing expectations at 78.80 compared to the previous level of 69.70 and an expected 70. Consequently, the average benchmark yield concluded the week with a 7 bps increase, settling at 9.90%. We foresee a similar trend in the upcoming week. Currency Market The value of the Naira to the dollar appreciated by 134 bps week-on-week to print at ₦902.45/$ this week at the Nigerian Autonomous Foreign Exchange Market (NAFEM). Equities Market At the end of the week, local equities experienced slight profit-taking after four consecutive days of active bargain hunting. Nonetheless, the NGXASI recorded a day-on-day increase of 287 basis points and a week-on-week surge of 1,384 basis points, settling at 94,538.12 points. This weekly uptrend was propelled by notable demand for DANGCEM (53.94%), BUACEMENT (45.80%), TRANSCORP (34.66%), WAPCO (17.50%), along with DANGSUGAR (10.40%), pushing the market to new highs. Consequently, the year-to-date growth stood at 26.43%, and market capitalization increased by ₦1.45 trillion, closing the week at ₦51.74 trillion. Assessing the overall weekly performance, market breadth ended at 5.06x, indicating that 81 advancers outpaced the 16 decliners. Examining the trading metrics, the total trading volume expanded by 40.60% WoW, reaching 844.49 million units, while the total traded value increased by 65.36% WoW, totaling ₦15.044 billion. TRANSCORP, JAIZBANK, and AIICO led the volumes board with closing values of 443.22 million units, 375.14 million units, and 274.20 million units, respectively. Conversely, TRANSCORP, ZENITHBANK, and NASCON topped the values chart with closing values of ₦7.79 billion, ₦6.30 billion, and ₦5.99 billion, respectively. We anticipate a sustained demand for fundamentally sound stocks. |
