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| The Federal Government of Nigeria borrowed an additional N3.8 trillion from the Central Bank of Nigeria (CBN) in the last six months of 2023, according to provisional data published in the CBN’s latest Statistics bulletin for the fourth quarter of 2023. This brings the cumulative Ways and Means balances due by the government to N8.2 trillion as of December 2023. Despite earlier statements suggesting otherwise, this borrowing has occurred, serving as a mechanism for the government to secure short-term or emergency financing from the CBN to address cash flow gaps. The breakdown of the data reveals a steady increase in balances from June 2023, reaching N8.21 trillion by December 2023, indicating an 88% increase in six months. This borrowing trend has implications for the country’s debt profile and raises concerns about debt service obligations. Under the Ways and Means Act, the CBN is authorized to grant temporary advances to the Federal Government to address temporary revenue shortfalls. However, recent amendments to the Act have raised the limit on Ways and Means Advances, potentially leading to increased borrowing and debt service burdens for the country. Efforts have been made to address this situation, including the securitization of outstanding balances and amendments to the CBN Act. However, the scale of borrowing remains a significant concern for Nigeria’s fiscal health and economic stability. Money Market As the system illiquidity (₦606.76 billion short) persisted despite the bond coupon inflows, interbank rates witnessed an uptrend this week. WoW, the Open Buy Back (OBB) rate and the Overnight (OVN) rate jumped 86bps and 100bps to print at 30.25% and 31.25%, consecutively. We expect a mild moderation due to the upcoming coupon payment on the 2032 bond. Treasury Bills Market The Treasury Bills market traded on an active note this week with demand skewed to the April bills. At the PMA, the DMO offered ₦142.57 billion across the standard maturities. However, ₦362.45 billion was sold while total subscription stood at ₦757.86 billion. Stop rates remained unchanged across all tenors at 16.24%, 17.00%, and 20.70%, respectively. As the week progressed, we saw trades executed on the 10-Apr-2025 and newly issued 24-Apr-2025 bill at 20.10%. Week-on-week analysis indicates a 298bps decline in the average benchmark yield, printing at 22.10%. We expect a similar trading pattern. FGN Bond Market The FGN local bond Market traded on calm sentiments at the start of the week with trades passing through the Feb 2034 bond at 19.97%. Furthermore, we saw the 2031s quoted at 19.85/19.50 and the 19.94% 2027 bond at 19.50/19.40. However, we saw a bullish momentum on the FEB 34s as buy pressure drove yields as low as 19.55% on the bid. This was short lived as yields retraced upwards closing at 19.65/19.60. WoW, the average benchmark yields dipped 12bps, settling at 18.84%. We expect the upward trend in yields to persist, albeit minimal. FGN Eurobond Market The FGN Eurobond market witnessed buying activities initially as the Israel-Iran war tensions eased and investors considered current levels as attractive. Despite the S&P Global Manufacturing and Services PMI printing at 49.9 and 50.9, respectively, below expectations of 52, bearish sentiments trickled into the FGN Eurobond market. The bearish trend was sustained in the FGN Eurobond market as market participants implored a cautious ahead of the due macroeconomic data. The Core PCE index QoQ printed at 3.7% above expectations of 3.4% and a previous of 2%. In addition, the United States economy’s growth slowed sharply last quarter to 1.6%, reflecting the pressure of high rates while the PCE index excluding food and energy increased 2.8%, above the 2.7% estimate from the Dow Jones consensus. Furthermore, the average benchmark yields rose 3bps week-on-week, settling at 9.80%. We expect buying activities in the next session. Currency Market The value of the Naira to the dollar lost 14.47% to print at ₦1339.23/$ this week at the Nigerian Autonomous Foreign Exchange Market Window. Equities Market Amidst the backdrop of the Nigerian financial landscape, the Nigerian stock market recorded a dismal performance for the week as the benchmark All-Share index registered a 139bps dip WoW and a marginal 2bps decline day-on-day, concluding at 98,152.91 points. Taking a more granular view, market cap declined by ₦0.01 trillion to ₦55.52 trillion while the year-to-date return settled at 31.27%. This negative trajectory was largely influenced by the price declines in ZENITHBANK (-0.91%), GTCO (-1.25%) and NESTLE (-3.01%) diluting gains in UBA (+0.88%) and ACCESSCORP (+3.75%). The market’s unfavorable disposition was further underscored by the market breadth, printing at 0.64x which shows that 42 decliners outnumbered 27 advancers. Trade metrics showed mixed activity, with volume traded up 2.80% to 265.07 million units and value down 6.97% to ₦5.02 billion. Notably, UBA, ACCESSCORP, and TRANSCORP were ranked among the top three most traded stocks by volume for the week, with trading volumes of 204.13 million units, 190.27 million units, and 187.63 million units, respectively. Additionally, the most valued equities for the week were GTCO, ZENITHBANK, and UBA, with valuations of ₦5.76 billion, ₦5.61 billion, and ₦4.69 billion, respectively. We expect a positive start to the next session. |
