The IMF warns Nigeria that maintaining fuel and electricity subsidies could cost the country N2.33 trillion or three percent of its GDP in 2024, according to the Staff Article IV Consultations report. The IMF advises implementing social safety nets like the cash-transfer program before addressing these subsidies. Despite economic growth of 2.8 percent in 2023, challenges including high inflation and weak currency may hinder Nigeria’s projected GDP growth of 3.2 percent in 2024. Addressing food insecurity is a top priority, with measures like releasing grains and introducing dry-season farming being welcomed. Improved revenue collection and oil production are positive, but Nigeria’s low revenue mobilization remains a constraint on its ability to respond to shocks and promote development.
Money Market
System liquidity remained in the negative to conclude the week, settling at ₦2.22 trillion short. This was largely due to increased activities at the SLF window and the NTB auction settlement. WoW, the Open Buy Back (OBB) rate and the Overnight (OVN) rate rose 266bps and 281bps to print at 29.82% and 31.00%, consecutively.
We expect a mild moderation in interbank rates due to the 2024 maturity inflow and coupon payments.
Treasury Bills
The Treasury Bills market traded on a calm note this week with minimal demand skewed to the 20-Feb-25 bill bid at 20.25% and the newly issued 6-Mar-25 bill which we saw bid at 20.65% and offered at 20.45%. At the auction, the DMO offered ₦337.89 billion. However, a total of ₦1.32 trillion was sold against a subscription of ₦1.66 trillion. Stop rates on the 91-day, 182-day and 364-day bill rose by 24bps, 50bps and 249bps to close at 17.24%, 18.00% and 21.49%. In addition, we saw some demand for the 182-day bill but limited offers. Week-on-week, the average benchmark yield gained 113bps to 18.98%.
We expect a calm session as the system illiquidity persists.
FGN Bond Market
The FGN local bond Market traded on a subdued note this week. However, we witnessed improved offers on the 2033 and FEB 2034 bonds at 17.50% and 19.05%. We also saw demand on the 2053 bond, bid at 18.30% while offers remained scarce. We also witnessed offers on the short end of the curve but little-to-no bids to match. Week-on-week, the average benchmark yield gained 113bps to 18.98%. Week-on-week, the average benchmark yield rose 111bps to 18.39%.
We expect the calm trend to persist.
Eurobond Market
The FGN Eurobond market was characterized by mixed sentiments. We saw a bullish momentum as risk off sentiments persisted. We had several data come out this week such as the ISM services PMI which printed at 52.6 against the expectation of 53. Jerome Powell stated during his testimony this week that though inflation has eased without any significant spikes in unemployment, it remains above the 2% target. Also, we saw the initial jobless claims stay unchanged at 217K versus the consensus of 215K. The Nonfarm Payroll data showed that 275K jobs were added against the 200k estimate while unemployment rate rose 3.9% vs 3.70% consensus. Furthermore, average hourly earnings rose 0.1% MoM vs est. 0.2%. Ultimately, the bulls dominated as the average benchmark yield dipped 14bps week-on-week, settling at 9.62%.
We expect the bullish trend to persist.
Currency Market
The value of the Naira to the dollar depreciated by 511bps to print at ₦1627.40/$ this week at the Nigerian Autonomous Foreign Exchange Market Window.
Equities Market
The local stock market concluded the week on a positive note, as the ASI surged by 99 basis points day-on-day and 261 basis points week-on-week, closing at 101,330.85 points. Key drivers of today’s session included MTN Nigeria Communications PLC (+9.99%) and banking stocks, offsetting the decline in Transnational Corporation of Nigeria (-0.58%). Moreover, the year-to-date return saw a 35.52% improvement, while market capitalization settled at ₦57.30 trillion compared to ₦56.74 trillion the previous day. However, market breadth remained weak at 0.34x, with 56 decliners outnumbering 19 gainers.
Trade metrics analysis revealed a disparity between volume and value. Volume traded decreased by 2.58% week-on-week to 358.12 million units, while value surged by 193.09% to ₦19.88 billion. In today’s session, TRANSCORP led in volume with 92.87 million units, followed by TRANSPOWER with 30.51 million units and UBA with 26.19 million units. Regarding the top-valued equities of the day, TRANSPOWER took precedence, with TRANSCORP and MTNN following suit.
