Global Events
According to the Bank of Ghana’s September 2023 Summary of Economic and Financial Data, Ghana’s public debt increased by GH₵6.3 billion, reaching GH₵575.5 billion as of June 2023, up from GH₵569.2 billion in April 2023. This represents 71.9% of the national Gross Domestic Debt. The latest data shows that the external debt increased by GH₵7.3 billion compared to its April 2023 level of GH₵321.3 billion, while domestic debt decreased from GH₵247.9 billion to GH₵246.9 billion during the same period. The Bank of Ghana also noted that improved economic indicators, such as a favorable exchange rate and a decrease in inflation to 40.1% in August, suggest that the policy mix implemented under the three-year International Monetary Fund (IMF) Extended Credit Facility is producing positive outcomes. Ghana anticipates receiving the second installment of the IMF loan by the end of this year. Additionally, the Ministry of Finance announced that it had successfully raised GH₵3.9 billion through its reopened domestic debt exchange program (DDEP), with the application period closing on September 22, 2023. The settlement for the new tranches resulting from this exchange is expected to take place today, on September 29, 2023.
Due to a weakened Kenyan shilling and the prevailing high-interest rate environment in the domestic market, the draft 2023 Budget Review and Outlook Paper (BROP) from the Kenyan Treasury anticipates a significant increase in debt interest payments for the fiscal year ending in June 2024. This increase is projected to be substantial, reaching Sh918.9 billion, which represents a notable 33.7% uptick from the previous figure of Sh687.3 billion. The Kenyan shilling has experienced a depreciation of 19.3% against the U.S. dollar and 19.1% against the euro. Over the past decade, interest payments have surged eightfold from Sh121.3 billion, primarily due to extensive borrowing to fund large-scale projects like the standard gauge railway (SGR). The most dramatic escalation has been witnessed in foreign interest payments, which have surged by an astonishing 2,355% from Sh11.1 billion during the 2012/13 fiscal year. Furthermore, the net external borrowing for the ongoing fiscal year has been substantially revised upward, soaring by 241% to Sh448.7 billion from its previous level of Sh131.5 billion. It is important to note that a significant portion of these loans is expected to be concessional financing, with the primary objective of keeping interest rates for the private sector at manageable levels. Additionally, Kenya’s external obligations in the current fiscal year are projected to surge, notably due to an impending bullet payment of $2 billion for the 2024 Eurobond.
Back home, Ms. Patience Oniha, the Director General of the Debt Management Office (DMO), revealed during the 2023 Annual Business Summit of the Capital Market Solicitors Association (CMSA) that the agency has obtained budgetary approval for external debt borrowing amounting to N1.7 trillion. She also made it clear that there are no immediate plans to issue a Eurobond due to the prevailing high-interest rate environment. However, she emphasized that when the market conditions become favorable with competitive interest rates, they will consider accessing the market for such bonds. Additionally, she urged Nigerians, who are the primary stakeholders, to actively participate in the budget formulation process. In other news, it’s worth recalling that on August 16, 2023, the Nigerian National Petroleum Company (NNPC) announced that it had secured a $3 billion emergency loan for crude oil from Afrexim bank. This loan was obtained to facilitate the prepayment of taxes and royalties. The National Economic Council confirmed that this loan would be used to stabilize the value of the naira, which has experienced significant fluctuations, reaching as high as N1000/$ in the parallel market.
Money Market
The interbank rate exhibited a consistent stability over the week, owing to the relatively steady liquidity in the financial system, largely influenced by FAAC inflow. When compared on a week-to-week basis, there was a slight uptick of 12 basis points in the Open Buy Back (OBB) rate, and a 10 basis points increase in the Overnight rate (O/N), concluding the week at 2.70% and 3.40% respectively.
We expect to rate to remain around similar levels next week.
Treasury Bills
The Treasury bills market experienced a bullish trend this week due to strong system liquidity. However, there was a mild sell-off observed in some long-term papers. As a result, the average benchmark yield decreased by 58 basis points to reach 6.84%.
During the NTB auction held on Thursday, the Debt Management Office (DMO) floated and made available ₦177.12 billion in the 91, 182, and 364-day maturities. Despite this, the total subscription amounted to ₦786.78 billion. The stop rates for the respective maturities were set at 4.99%, 6.55%, and 11.37%.
We expect a calm session next week.
FGN Bond Market
This week, the FGN Bonds market displayed a varied sentiment. There was notable interest in purchasing shorter-term maturities, whereas some selling occurred in the middle section of the curve. The long end of the curve experienced relatively subdued activity throughout the week. Consequently, the average benchmark yield remained steady at 14.65%.
We expect to see some buying interest next week albeit on a less aggressive note.
Eurobond Market
Throughout the week, the FGN Eurobonds market experienced a predominantly bearish trend, characterized by widespread selling activities. As a result, the average benchmark yield increased by 38 basis points, ultimately settling at 11.71%.
We expect a similar pattern next week.
Currency Market
The value of the Naira to the dollar depreciated by 100bps to print at ₦755.27/$ this week at the Investors and Exporters FX Window.
Equities Market
At the end of today’s trading session, the NGX All-Share Index (NGXASI) saw a slight decrease of 10 basis points compared to yesterday’s closing of 66,448.63 points, ultimately settling at 66,382.14 points. However, it recorded a 1-week loss of 1.40%. The declines in OANDO (-33.76%), FTNCOCOA (-19.68%), and BUACEMENT (-11.08%) outweighed the buying interest in BETAGLAS (+30.41%), IKEJAHOTEL (+30.00%), and CWG (+23.57%) over the week. As a result, the market breadth ended negatively at 0.55x, indicating 47 decliners for every 26 advancers. Nevertheless, despite these challenges, the year-to-date return remained positive at 29.52%, and the market capitalization concluded at 36.34 trillion.
We anticipate the potential for upward momentum in the upcoming week, as stocks appear appealing for purchase.
