Government expenditure surged by 33.5% in February, exceeding January’s spending but falling short of the target by 13.8%, as reported by Bamidele Amoo, a member of Nigeria’s Central Bank Monetary Policy Committee. Despite President Tinubu’s directive for a 60% reduction in entourage size for domestic and international travel to curb excessive spending, government spending remained high. Austerity measures were implemented across ministries, yet spending persisted across various sectors including salaries, infrastructure, healthcare, education, and defense. The fiscal deficit expanded by 33.7% and 86.2% compared with the preceding month and target respectively, due to increased capital spending, while both oil and non-oil sector revenue receipts saw growth. Although there was a higher capital inflow of $1.24 billion by end-February 2024 relative to $0.33 billion in January 2024, challenges persist in ensuring banks effectively channel funds to productive sectors. Amoo emphasized the need for stricter regulations and sanctions to align banks’ profits with their contributions to economic development.
Money Market
Interbank market liquidity started the week negatively and stayed low until mid-week. However, statutory inflows, OMO repayments, and FX Swap maturity boosted liquidity levels, bringing it into positive territory at ₦19.611 billion after four consecutive days of repo balances. Consequently, WoW , the Open Buy Back rate (OBB) decreased by 400 bps to end at 26.25%, while the Overnight rate (O/N) saw a decline of 417 bps, concluding at 27.08%.
We anticipate that rates will remain at their current levels.
Treasury Bills Market
The Treasury Bills Market started the week on a bearish note, attributed to the depleted liquidity in the interbank market. However, as the week progressed, there was a notable uptick in buying interest driven by improved liquidity in the interbank market, especially evident in the mid-to-long end of the curve. Despite this increased activity, the average enchmark yield rose by 24 bps week over week, reaching a settlement of 22.37%.
We anticipate a calm start to the next trading session.
FGN Bond Market
For the most part of the week, the FGN Bonds market remained relatively calm, as participants cherrypicked preferred papers amidst limited liquidity. However, at the end of the week, the revision of the Q2 bond auction calendar sparked increased buying interest, particularly in the 34 papers. The updated calendar revealed the replacement of the 2034 paper with a new 2033 paper. Consequently, the average benchmark yield dipped by 9 bps WoW, ending the week at 18.75%.
We anticipate a continuation of this trend in the upcoming trading session.
FGN Eurobond Market
The FGN Eurobonds market kicked off the week with a bullish stance, driven by perceived attractiveness. This optimism was fueled by the FED’s decision to keep interest rates unchanged, quelling concerns about a potential rate hike. Despite minor selloffs prompted by US PMI data later in the week, the FGN Eurobonds market ended on a bullish note, propelled by US data indicating lower-than-expected NFP figures and a slightly higher unemployment rate, causing the average benchmark yield to decrease by 18 bps week over week, settling at 9.61%.
We anticipate this trend to persist.
Currency Market
The value of the Naira to the dollar weakened by 457 bps week-on-week to print at ₦1,400.40/$ this week at the Nigerian Autonomous Foreign Exchange Market Window (NAFEM).
Equities Market
This week, the local stock market primarily demonstrated a bullish trend, with the NGX All-Share Index increasing by 83-bps decrease day-on-day (DoD) and a 144-bps decline week-on-week (WoW), to settle at 99,587.25 points. Consequently, the year-to-date growth recorded a rise of 33.18%, while the market capitalization increased by ₦0.803 trillion WoW to reach ₦56.323 trillion. Upon closer examination, the weekly market breadth was at 1.14x, indicating 36 stocks on the decline compared to 41 advancing ones.
When analyzing trade data on a WoW basis, the overall trading volume increased by 61.08% to 446.57 million units, and the total traded value had a 39.69% uptick, ending at ₦7.10 billion. Week-to-date (WTD), the most actively traded stocks in terms of volume were ABBEYBDS, Guaranty Trust Holding Company, and Access Corporation with total trades amounting to 362.84 million units, 268.17 million units, and 267.92 million units respectively. In terms of value, the most traded stocks WTD were GTCO, ACCESSCORP, and UBA with total value amounting to ₦8.72 billion, ₦4.67 billion, and ₦2.49 billion, respectively.
We expect a calm start to the week.
