President Bola Tinubu unveiled the budget estimates for the 2024 fiscal year, totaling N27.5 trillion. Non-debt recurrent expenditure is projected at N9.92 trillion, debt service at N8.25 trillion, and capital expenditure at N8.7 trillion. The projected debt service represents 45% of the expected total revenue. The government aims to increase the revenue-to-GDP ratio from 10.00% to 18.00%. The budget deficit is projected at N9.18 trillion (3.88% of GDP), lower than the N13.78 trillion deficit recorded in 2023 (6.11% of GDP). The deficit will be financed by new borrowings totaling N7.83 trillion, N298.49 billion from Privatization Proceeds, and N1.05 trillion drawn down on multilateral and bilateral loans secured for specific development projects. A detailed breakdown of the budget reveals allocations of N2.18 trillion (7.9% of Budget) for Education, N1.33 trillion (5% of Budget) for Health, N3.25 trillion (12% of Budget) for Defence and Security, N1.32 trillion (5% of Budget) for Infrastructure, and N534 billion (2% of Budget) for Social Development & Poverty Reduction Programmes.
Money Market
The interbank rate witnessed a substantial decrease this week, attributed to improved liquidity in the financial system resulting from FAAC inflow. When comparing week-on-week, there was a significant 800 bps drop in the Open Buy Back (OBB) rate, while the Overnight rate (O/N) saw an 826 bps decline, concluding the week at 15.75% and 16.32%, respectively.
We expect the rates to remain at similar levels in the coming week.
Treasury Bills
Despite a tight interbank liquidity environment, the Treasury Bills market showed a bullish trend throughout the week, driven by the absence of OMO auctions, further boosting buying sentiments. As expected, the average benchmark yield decreased by 41 bps, ending the week at 10.19%.
We anticipate a similar sentiment in the upcoming week despite the NTB Auction scheduled for Wednesday.
FGN Bond Market
The FGN Bonds market displayed a bullish stance for most of the week, with notable buying interest in the 26, 32, and 53 papers. Consequently, the average benchmark yield concluded the week at 15.89%, marking a 30 bps decline on a week-over-week (WoW) basis.
We anticipate a sustained continuation of this prevailing trend in the upcoming week.
Eurobond Market
The FGN Eurobonds closed the week on a bullish note, despite a mid-week selloff triggered by the US PCE data indicating an expected dip in inflation to 3.50% from the previous level of 3.70%. Increased demand, fueled by the US Q3 GDP figures at 5.20% (versus the previous level of 4.90%) and dovish remarks by some FED speakers anticipating a rate cut early next year, led to improved demand. Consequently, the average benchmark yield ended the week with a 20 bps decrease, settling at 10.52%.
We anticipate a sustained bullish momentum in the upcoming week.
Currency Market
The value of the Naira to the dollar depreciated by 1,664 bps week-on-week to print at ₦927.19/$ this week at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Equities Market
The local equities market followed a bullish trajectory this week, evident in the weekly uptick of 27 bps in the NGX All-Share Index (NGXASI), closing at 71,419.87 points. This resulted in a substantial year-to-date gain of 38.42%. However, the overall market capitalization, settling at ₦39.08 trillion, experienced a week-on-week decline of ₦0.09 trillion. Market breadth closed at 0.60x, with 53 decliners outperforming the 32 advancers.
Analyzing the comprehensive trading metrics, the total trading volume contracted by 38.03% WoW, reaching 361.12 million units, while the total traded value expanded by 139.43% WoW, amounting to ₦10.22 billion. UNIVINSURE, ACCESSCORP, and TRANSCORP led the volumes board, closing the day at 289.32 million units, 197.01 million units, and 174.07 million units. On the other hand, GTCO, DANGCEM, and ACCESSCORP led the values chart, closing the week at ₦5.63 billion, ₦5.53 billion, and ₦3.54 billion, respectively.
