In 2023, Nigeria’s Gross Domestic Product (GDP) grew by 2.74%, a slight slowdown from the previous year’s 3.10% growth, marking the slowest growth since the pandemic-induced contraction of -1.92% in 2020. In Q4 2023, the economy expanded by 3.46% year-on-year, driven primarily by the Services sector, which contributed 56.55% to the total GDP and grew by 3.98%. The agriculture sector also saw growth, reaching 2.10%, while the industry sector rebounded significantly with a growth rate of 3.86%, recovering from a decline in the same period of 2022.The oil sector experienced a notable recovery, showing a year-on-year real growth of 12.11% in Q4 2023, a significant improvement from the decline observed in the same quarter of the previous year. However, it contracted quarter-on-quarter by -3.81%. Conversely, the non-oil sector’s growth in 2023 was 3.04%, lower than the previous year’s 4.84%, with a Q4 2023 growth rate of 3.07%, slightly down from the corresponding quarter of 2022 but higher than Q3 2023.
Money Market
This week was characterized by system illiquidity, following the Bond and Treasury bills auction settlement. As expected, this spurred an uptrend in interbank rates. Opening the day, system liquidity stood at ₦964.76 billion short. WoW, the Open Buy Back (OBB) rate and the Overnight (OVN) rate rose 866bps and 882bps to print at 24.91% and 25.75%, consecutively.
We expect a moderation in interbank rates in expectation of the FAAC inflow.
Treasury Bills
The Treasury Bills Market traded on a mildly active note with a bearish undertone. Activity was largely skewed to the Feb bills. At the auction this week, a total of ₦265.50 billion was floated across the standard maturities. The total subscription stood at ₦2.26 trillion, while ₦1.58 trillion was sold. Stop rates printed at 17.00% and 17.50% on the 91-day and 182-day bills, representing a decline of 24bps and 50bps from previous auction levels while rate remained unchanged on the 364-day bill at 19.00%. Sequel to the auction, we saw the newly issued 364-day bill trade 18.45/18.20. Week-on-week analysis indicates a 111bps gain in the average benchmark yield, closing at 16.84%.
We expect a calm session as the system illiquidity persists.
FGN Bond Market
The FGN local bond Market was characterized by a quiet stance this week. Nonetheless, we saw some trades pass through the FEB 2034, 2038, and 2053 bonds at 18.90%, 18.20% and 18.10%, respectively. We also witnessed some demand at the short end of the curve, particularly for the 26s and 27s but limited supply to match. The bond auction was also held this week where the DMO offered the new 7-year and 10-year bonds. WoW, the average benchmark yields increased by 64bps, settling at 16.82%.
We expect a calm session as investors await the outcome of the MPC meeting.
Eurobond Market
The FGN Eurobond market commenced the week on a bearish note as investors indulged in profit-taking activities. However, there was a reversal of this trend notwithstanding the revelation in the FOMC minutes that policymakers suggested no imminent rate cuts until they were more confident in inflation easing. In the end, the bears reigned as the average benchmark yield rose 21bps week-on-week, settling at 9.79%.
We expect the U.S Q4 GDP data to shape market events.
Currency Market
The value of the Naira to the dollar depreciated by 829bps to print at ₦1665.50/$ this week at the Nigerian Autonomous Foreign Exchange Market Window.
Equities Market
The local stock market wrapped up the week with a somber tone, experiencing four negative sessions out of five. The ASI took a hit, shedding 344bps week-on-week and 72bps day-on-day to settle at 102,088.30 points. Major market drivers in today’s session were GTCO (-1.14%), ZENITHBANK (-1.26%) and ACCESSCORP (-0.48%), shaking off the gains in FBNH (+6.90%) and BUAFOODS (+6.27%). Additionally, the year-to-date return improved by 36.53% while market capitalization settled at ₦55.87 trillion (vs. ₦55.47 trillion the previous day). However, market breadth remained weak at 0.21x, with 66 decliners surpassing 14 gainers.
Further buttressing the bearish performance of the market, volume and value traded down 15.04% and 25.23% week-on-week to close at 291.01 million units and ₦6.02 billion. GTCO held the top spot as the most traded stock by volume for the week with 122.42 million units, succeeded by FBNH with 112.32 million units and TRANSCORP with 108.85 million units. For the top valued equities of the week, GTCO dominated the board, with GEREGU and FBNH in tow.
