The Central Bank of Nigeria’s Monetary Policy Committee (MPC) raised its benchmark interest rate by 50 basis points to 27.25%, marking its fifth rate hike this year, in a move to combat persistent inflationary pressures despite a two-month slowdown in inflation. Governor Yemi Cardoso highlighted concerns over core inflation, which remains elevated due to rising energy prices and petrol scarcity, exacerbated by the recent hike in petrol prices by the NNPCL. This decision surprised analysts who had anticipated a pause in rate hikes, particularly after inflation decelerated to 32.2% in August. However, with inflation risks persisting from factors like floods and energy price hikes, the CBN’s tightening is aimed at stabilizing the naira and attracting foreign investment, even as the U.S. Federal Reserve cut its rates earlier this month.
Money Market
Market liquidity opened the day at ₦785.85 billion long. The Open Buy Back (OBB) rate and the Overnight (OVN) rate closed at 29.43% and 30.02%, respectively.
We expect rates to hover around current levels.
Treasury Bills Market
The FGN Treasury Bills Market experienced minimal activity throughout the week as investors focused on freeing up liquidity. The CBN floated an OMO bill with 500bn offered and sold 252bn. The stop rate was 24.36% on the 362-day paper with no subscription to any other tenor offered. Stop rates at the PMA rose, with the 91-day, 182-day, and 364-day tenors closing at 17.00%, 17.50%, and 20.00%, respectively. There was steady demand for select bills, including the 26 Dec bill and the newly issued one-year bill quoted at 20.00/19.50, with limited offers available. The CBN floated another OMO bill with 500bn offered and sold 2bn. The stop rate was 24.30% on the 361-day paper with no subscription to any other tenor offered. Week-on-week, the average benchmark yield appreciated by 114bps to close at 21.94%
We expect a bearish session as investors adjust to the new OMO rate and strive to create liquidity.
FGN Bond Market
The FGN Bonds Market traded quietly throughout the week, with investors focused on key events such as the bonds auction and MPC decision. Stop rates on the 29s, 31s, and 33s fell to 19.00%, 19.99%, and 20.05%, respectively, at the auction. Following the MPC decision to raise the MPR by 50bps to 27.25%, bond yields for the May 2033 issue fluctuated between 19.89% and 21.35%. Overall, market activity remained subdued as participants awaited the outcomes of auctions. Week-on-week, the average benchmark yield appreciated by 2bps to close at 18.47%
We expect no change in market sentiments.
FGN Eurobond Market
The FGN Eurobonds Market saw mixed performance during the week. The market started in a bearish mood due to weaker U.S. manufacturing data, but sentiment shifted as oil prices increased amid Middle East tensions. Consumer confidence also dropped significantly in the U.S., contributing to the volatility. Despite fluctuations in crude prices, the market remained bearish, influenced by China’s economic stimulus and potential supply-side factors impacting oil prices. Week-on-week, the average benchmark yield declined by 3bps to close at 9.39%
We expect market to trade cautiously in the next few days.
Currency Market
The value of the Naira to the dollar appreciated by 5bps compared to the previous week, printing at ₦1540.78/$ to close the week at the Nigerian Autonomous Foreign Exchange Market Window (NAFEM).
Equities Market
The local bourse ended the day with the benchmark NGX All-Share Index (ASI) declining 7bps to close at 98,458.7 Market capitalization also declined, closing at ₦56.7 trillion. Market breadth was positive at 1.02x, with 50 stocks advancing and 49 declining. This performance was driven by gains in BETAGLAS (+10.00%), MEYER (+9.93%), and DEAPCAP (+9.90%), and losses in CAVERTON (-9.76%), NNFM (-9.50%), and UPL (-8.85%).
Trading activity was mixed, with the volume of shares traded appreciated by 131.5% to 797.21 million units, while the value of shares traded increased by 0.72% to ₦6.65 billion. The most actively traded stocks by volume were JAPAULGOLD with 591.03 million units, UBA with 27.85 million units, and ZENITHBA with 37.70 million units. In terms of value, JAPAULGOLD led with ₦1.46 billion, followed by OANDO at ₦771.63 million, and UBA at ₦717.73 million
Reflecting the day’s mixed performance, the NGX All-Share Index reflected a 1-week gain of 0.46% and a 4-week gain of 2.02%, with an overall year-to-date gain of 31.68%. Other notable indices are the NGX Top 30 Index (-0.05%; +0.61% 1WK; +31.34% YTD), NGX Banking Index (-0.38%; +2.20% 1WK; 4.29% YTD), and NGX Oil & Gas Index (+0.34%; +3.71% 1WK; +90.87% YTD)
