What to Expect from the Markets this Week –
Economy
Foreign Reserve Rises to $35.09bn in July 2024
Data from the Central Bank of Nigeria (CBN) revealed that Nigeria’s gross reserves rose to $35.18bn dollars as of July 10, 2024. This represents a growth of 6.35% from the $33.08 bn gross reserve balance as of June 10, 2024. Analysts say the growth may be unsustainable since the accretion is largely associated with foreign debt accumulation. This is expected to minimise the impact on the exchange rate, which will remain around N1400-N1500.
Local Governments Granted Autonomy
On Thursday, July 11, 2024, the Supreme Court judgement affirming financial autonomy for the local government system sparked a debate among Nigerians, with most respondents applauding the ruling. The apex court had yesterday directed that the financial allocations meant for running all 774 local government areas in the country be paid to them directly. This also means that state governors can no longer bar local government chairmen. The judgment has garnered kickbacks from state governors and other stakeholders, some of whom have sought further interpretations of the ruling, highlighted the implementation challenges, and issues of accountability by the leadership of local government. Analysts have associated the outlook with the cases of F.C.T., where all 6 local governments get direct allocation from the federal level yet still have a low level of development.
President Tinubu Creates Ministry of Livestock Development
President Bola Tinubu disclosed his approval for the creation of a new ministry, the Ministry of Livestock Development, on Tuesday, July 9, 2024, at the inauguration of the Renewed Hope Livestock Reform Committee. The creation follows the recommendation of the National Livestock Reform Committee on September 14, 2024, as a measure to harness the maximum benefits of the livestock value chain in Nigeria and stand as a solution to the farmer-herders clash. We expect a minimal contribution of the ministry as a solution to the livestock value chain challenge and farmer harders clash should political motives ultimately stand as a major driver for the creation of the ministry.
Ghana Inflation Moderates in June 2024
Ghana’s inflation rate fell to 22.8% in June 2024 from 23.1% in May 2024. Although the figure is the lowest in over two years, food inflation, which has consistently been a key challenge, especially during this seasonal period, inched up upwards to 24.0% from the May rate of 22.6%. We expect the Ghanaian Central Bank monetary policy committee to hold the rate on July 29, 2024, as inflation remains elevated and above its 8% target.
US Inflation Falls to 3.0% in June 2024
Data from the US Bureau of Economic Analysis (BEA) on Thursday, July 11, 2024, revealed that the US consumer prices rose by 3.0% in June 2024 from 3.3% in May 2024.
We expect increased bets on at least one rate cut in 2024 as yields on treasuries, which fell to a four-month low following the inflation report remain low.
The Week Ahead
| Nigeria CPI for June 2024 | July 15, 2024 |
| China GDP for Q2 2024 | July 15, 2024 |
| Rwanda Parliamentary Elections | July 15, 2024 |
| Canada CPI for June 2024 | July 16, 2024 |
| UK CPI and PPI for June 2024 | July 17, 2024 |
| ECB Monetary Policy Rate | July 18, 2024 |
| Angola Interest Rate | July 19, 2024 |
| Minimum Wage Negotiations Resume | To be Determined |
Source: Various Economic Calendars, FT, Proshare Research
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Commodity Market
Global Commodities
The global commodity market ended the week mostly on a bearish note. Brent and WTI crude futures dipped -2.30% and -1.49% respectively on weaker US consumer sentiment despite OPEC’s bullish outlook on oil demand. Silver price as with other commodities also dropped by -1.14%. However, Gold traded upward, gaining 1.19%, becoming the lone gainer for the week (See Table 1 below).
Table 1:
| Commodity | 12-Jul-24 | 5-Jul-24 | 29-Dec-23 | Weekly Chg | YTD Chg |
| Brent | 85.48 | 87.49 | 76.99 | -2.30% | 11.03% |
| WTI | 82.79 | 84.04 | 71.42 | -1.49% | 15.92% |
| Gold | 2,421.60 | 2,393.10 | 2,073.80 | 1.19% | 16.77% |
| Silver | 31.21 | 31.655 | 24.105 | -1.41% | 29.48% |
| Platinum | 1,013.50 | 1,048.30 | 1,006.70 | -3.32% | 0.68% |
| Palladium | 971.50 | 1,041.00 | 1,110.00 | -6.68% | -12.48% |
| CNBC, Proshare Research | |||||
*Data for July 12th, 2024, is as of 05:57 pm (Nigerian Time)
Local Commodities
AFEX commodity prices exhibited a mixed sentiment at the end of the week. While Sorghum, Cocoa and Soybean closed the week on a bearish note, Maize and Cashew closed positively. Maize saw an increase of 28.36%, a bounce back from the previous week, while Cashew rose 0.08% closing the week at 860.00. Ginger, Sesame, Paddy rice and Wheat ended the week unchanged (See Table 2 below).
Table 2:
| AFEX Commodity Prices | |||
| Commodities | 5-Jul-24 | 12-Jul-24 | % Chg |
| Maize | 670.00 | 860.00 | 28.36% |
| Cashew | 1329.00 | 1330.08 | 0.08% |
| Ginger | 990.00 | 990.00 | 0.00% |
| Sesame | 2000.00 | 2000.00 | 0.00% |
| Paddy rice | 680.00 | 680.00 | 0.00% |
| Wheat | 440.00 | 440.00 | 0.00% |
| Sorghum | 815.00 | 810.00 | -0.61% |
| Soybeans | 870.00 | 840.00 | -3.45% |
| Cocoa | 12250.00 | 9775.00 | -20.20% |
AFEX, Proshare Research *Data for July 12th, 2024, is as of 05:37 pm (Nigerian Time)
The LCFE commodity prices ended the week mixed. EKO gold price rose 0.34% to close at 87,850 per gram while Head Rice maintained its previous close, ending the week at 72,000.00 (See Table 3 below).
Table 3:
| LCFE Commodity Prices | |||
| Commodities | 12-Jul-24 | 5-Jul-24 | % Chg |
| Eko Gold | 87,850.00 | 87,550.00 | 0.34% |
| Head Rice | 72,000.00 | 72,000.00 | 0.00% |
LCFE, Proshare Research *Data for July 12th, 2024, is as of 05:37 pm (Nigerian Time)
We expect market prices to exhibit a mixed sentiment in the coming week, reacting to expectations about fed rate cuts and geopolitical tensions.
Fixed Income Markets
Currency Market
The naira depreciated against the dollar this week, losing 346bps week-on-week to settle at N1,563.80/US$1 on Friday from N1,509.67/US$1 last week (see Table 4 below).
Table 4: Naira/Dollar at NAFEM
| July 05, 2024 | July 12, 2024 | W-o-W% Change | |
| NAFEM | 1,509.67 | 1,563.80 | 3.46% |
Source: FMDQ, Proshare Research
Money Market
The NTB auction settlement debit mid-week worsened system liquidity, keeping the interbank elevated. However, the Open Repo Rate (OPR) and the Overnight rate (O/N) slightly declined by 140bps and 25bps to 31.61% and 32.45% respectively (see Table 5 below).
Table 5: Money Market
| July 05, 2024 | July 12, 2024 | W-o-W % Change | |
| OPR (%) | 32.06 | 31.61 | -1.40% |
| O/N (%) | 32.53 | 32.45 | -0.25% |
Source: FMDQ, Proshare Research
We expect rates to hover at current levels.
Nigerian Treasury Bill
The Treasury bill retained the subdued sentiment at the beginning of the week, but the NTB auction improved market activity on Thursday and Friday. Hence, the NTB market closed bearish as the average benchmark yield increased by 405bps (W-o-W) to 23.61%.
The OMO bills market witnessed slight demand this week as the average benchmark yield declined by 42bps week-on-week to 23.63% on Friday (see Table 6 below).
Table 6: Average Benchmark Yields of the Treasury Bills Market
| July 05, 2024 | July 12, 2024 | W-o-W % Change | |
| T. Bills (%) | 22.69 | 23.61 | 4.05% |
| OMO bills (%) | 23.73 | 23.63 | -0.42% |
Source: FMDQ, Proshare Research
We expect a mild demand next week as liquidity improves.
Nigerian Treasury Bill Auction.
At the mid-week NTB auction, the Debt Management Office offered N166.10bn and had a total subscription of N308.66bn. The oversubscription was across the three tenors, with the 364-day paper recording the highest at N269.31bn. Despite the oversubscription, the DMO sold N207.27bn, 24% higher than the offer but 33% lower than the total subscription. The stop rates for 91-day and 182-day stayed unchanged at 16.30% and 17.44%, respectively, while the 364-day increased by 56bps to 21.24% (see Table 7 below).
Table 7: Nigerian Treasury Bill Auction Result July 10, 2024
| Tenor | Amount offered (N’bn) | Total Subscription (N’bn) | Amount Sold (N’bn) | Stop Rate (%) | |
| 91-day | 27.11 | 29.71 | 28.47 | 16.30 | |
| 182-day | 1.49 | 9.64 | 9.16 | 17.44 | |
| 364-day | 137.50 | 269.31 | 169.64 | 21.24 |
Source: CBN, Proshare Research
FGN Bond Market
This week, the bond market experienced selloffs across the yield curve. The tight liquidity, higher inflation expectations, and debt sustainability concerns spurred investors to go short in the secondary market. Thus, the average benchmark yield rose by 278bps week-on-week to 19.20% from 18.68% last week (see Table 8 below).
Table 8: Average Benchmark Yields of the FGN Bonds
| July 05, 2024 | July 12, 2024 | W-o-W % Change | |
| Short Tenor | 18.91 | 20.21 | 6.87% |
| Mid Tenor | 19.15 | 19.35 | 1.04% |
| Long Tenor | 18.00 | 18.07 | 0.39% |
Source: FMDQ, Proshare Research
We expect the July inflation figures to spur further selloffs.
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Equity Market
- Despite the buying interest in some blue-chip stocks, the Nigerian bourse dipped in four of the five trading sessions to end the week in the red zone.
- The benchmark All-Share Index (ASI) declined -0.35% to close at 99,671.28 points, from 100,022.03 points the previous week (see chart 1 below).
Chart 1: Movement of NGXASI Index December 29, 2023 – July 12, 2024
Source: NGX, Proshare Research
- Investors lost N139.89bn as market capitalisation fell to N56.44trn from N56.58trn the previous week.
- The downtrend in the market was driven by sell pressure in SEPLAT (-1.71%), GTCO (-3.91%), UBA (-4.01%), TRANSCORP (-8.95%), and ZENITH (-1.20%) which offsetted demand for AIRTELAFRI (+0.14%), WAPCO (+0.83%) and DANGSUGAR (+2.72).
- Of the ten indices under our coverage for the week, three indices appreciated, led by the NGX Oil and Gas Index; six indices closed negatively, led by the NGX Banking Index, while one closed flat (see Table 9 below).
Table 9: Sectoral Index Performance as of July 12, 2024(%)
| INDEX | WTD | MTD | QTD | YTD |
| NGX Oil and Gas Index | 1.38 | 4.43 | 4.43 | 44.24 |
| Proshare Gote Index | 0.15 | -0.11 | -0.11 | 87.49 |
| NGX Industrial Goods Index | 0.05 | 0.27 | 0.27 | 73.61 |
| Proshare Samad Index | 0.00 | 0.00 | 0.00 | 68.52 |
| NGX Consumer Goods Index | -0.09 | -0.78 | -0.78 | 39.95 |
| NGX ASI Index | -0.35 | -0.39 | -0.39 | 33.30 |
| NGX Insurance Index | -0.36 | 1.89 | 1.89 | 23.72 |
| NGX 30 Index | -0.52 | -0.79 | -0.79 | 32.37 |
| Proshare Toni Index | -1.11 | -0.68 | -0.68 | 153.59 |
| NGX Banking Index | -2.08 | 1.70 | 1.70 | -5.88 |
NASD OTC EXCHANGE – Unlisted Equities
- The benchmark NASD Securities Index (NSI) fell -3.16% to close at 1,492.39 points from 1,541.03 points the previous week, while market capitalisation fell to N2.05trn.
- The negative performance was driven by losses in CSCS (-2.44%), ARADEL HOLDINGS (-4.90%), AFRILAND PROPERTIES (-6.44%), FC WAMCO (-7.43%) and NIPCO (-16.31%) which outweighed the gains made in FIRST TRUST MORTGAGE (+8.11%) and GEO-FLUIDS (+2.00%) (see table 10 below).
Table 10: NASD W-o-W Change
| Parameter | July 5, 2024 | July 12, 2024 | W-o-W Changes (%) | ||
| NASD NSI | 1,541.03 | 1,492.39 | -3.16% | ||
| MKT Capitalization (N’bn) | 2,112 | 2,045 | -3.16% | ||
| Volume Traded | 1,602,947 | 231,290,608 | 14,329.09% | ||
| Value Traded (000) | 1,200,056.89 | 5,466,827.18 | 355.55% | ||
| Deals Executed | 154 | 136 | -11.69% | ||
Source: NGX, Proshare Research
Proshare Indices
The Gote Index rose +0.13% w-o-w on gains registered in NASCON and DANGSUGAR while DANCEM closed flat (see Table 11 below).
Table 11: Gote Index W-o-W
| Company | July 5, 2024 | July 12, 2024 | W-o-W Changes (%) |
| DANGSUGAR | 40.50 | 41.60 | 2.72% |
| NASCON | 34.20 | 35.00 | 2.34% |
| DANGCEM | 656.70 | 656.70 | 0.00% |
| Total | 343.28 | 343.73 | 0.13% |
Source: NGX, Proshare Research
On the contrary, the Toni index dipped -1.59% on losses in TRANSCORP, AFRIPUD and UBA which offset the gains recorded in UCAP while TRANSCOHOT and TRANSPOWER closed flat (see Table 12 below).
Table 12: Toni Index W-o-W
| Company | July 5, 2024 | July 12. 2024 | W-o-W Changes (%) |
| UCAP | 28.10 | 28.40 | 1.07% |
| TRANSPOWER | 373.90 | 373.90 | 0.00% |
| TRANSCOHOT | 98.40 | 98.40 | 0.00% |
| UBA | 23.70 | 22.75 | -4.01% |
| TRANSCORP | 12.85 | 11.70 | -8.95% |
| AFRIPRUD | 9.00 | 7.40 | -17.78% |
| Total | 1298.10 | 1277.46 | -1.59% |
Source: NGX, Proshare Research
Samad Index
The Samad Index maintained its weekly flat close (see Table 13 below).
Table 13: Samad Index W-o-W
| Company | July 5, 2024 | July 12, 2024 | W-o-W Changes (%) |
| BUA CEMENT | 143.20 | 143.20 | 0.00% |
| BUA FOOD | 379.90 | 379.90 | 0.00% |
| Total | 364.34 | 364.34 | 0.00% |
Source: NGX, Proshare Research
We expect a largely bearish tilting in the coming week.
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