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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 2024July 15, 2024
China GDP for Q2 2024July 15, 2024
Rwanda Parliamentary ElectionsJuly 15, 2024
Canada CPI for June 2024July 16, 2024
UK CPI and PPI for June 2024July 17, 2024
ECB Monetary Policy RateJuly 18, 2024
Angola Interest Rate July 19, 2024
Minimum Wage Negotiations ResumeTo 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:

Commodity12-Jul-245-Jul-2429-Dec-23Weekly ChgYTD Chg
Brent85.4887.4976.99-2.30%11.03%
WTI82.7984.0471.42-1.49%15.92%
Gold2,421.602,393.102,073.801.19%16.77%
Silver31.2131.65524.105-1.41%29.48%
Platinum1,013.501,048.301,006.70-3.32%0.68%
Palladium971.501,041.001,110.00-6.68%-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
Commodities5-Jul-2412-Jul-24% Chg
Maize670.00860.0028.36%
Cashew1329.001330.080.08%
Ginger990.00990.000.00%
Sesame2000.002000.000.00%
Paddy rice680.00680.000.00%
Wheat440.00440.000.00%
Sorghum815.00810.00-0.61%
Soybeans870.00840.00-3.45%
Cocoa12250.009775.00-20.20%

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
Commodities12-Jul-245-Jul-24% Chg
Eko Gold 87,850.0087,550.000.34%
Head Rice 72,000.0072,000.000.00%

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, 2024July 12, 2024W-o-W% Change
NAFEM1,509.671,563.803.46%

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, 2024July 12, 2024W-o-W % Change
OPR (%)32.0631.61-1.40%
O/N (%)32.5332.45-0.25%

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, 2024July 12, 2024W-o-W % Change
T. Bills (%)22.6923.614.05%
OMO bills (%)23.7323.63-0.42%

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

 TenorAmount offered (N’bn)Total Subscription (N’bn) Amount Sold  (N’bn)Stop Rate (%)  
91-day27.1129.71 28.4716.30
182-day1.499.64 9.1617.44
364-day137.50269.31 169.6421.24

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, 2024July 12, 2024W-o-W % Change
Short Tenor           18.9120.216.87%
Mid Tenor           19.1519.351.04%
Long Tenor           18.00  18.070.39%

Source: FMDQ, Proshare Research 

We expect the July inflation figures to spur further selloffs. 

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Equity Market

NGX – Listed Equities

  • 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(%)

INDEXWTDMTDQTDYTD
NGX Oil and Gas Index1.384.434.4344.24
Proshare Gote Index0.15-0.11-0.1187.49
NGX Industrial Goods Index0.050.270.2773.61
Proshare Samad Index0.000.000.0068.52
NGX Consumer Goods Index-0.09-0.78-0.7839.95
NGX ASI Index-0.35-0.39-0.3933.30
NGX Insurance Index-0.361.891.8923.72
NGX 30 Index-0.52-0.79-0.7932.37
Proshare Toni Index-1.11-0.68-0.68153.59
NGX Banking Index-2.081.701.70-5.88

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

ParameterJuly 5, 2024July 12, 2024W-o-W Changes (%) 
NASD NSI1,541.031,492.39-3.16%
MKT Capitalization (N’bn)2,1122,045-3.16%
Volume Traded1,602,947231,290,60814,329.09%
Value Traded (000)1,200,056.895,466,827.18355.55%
Deals Executed154136-11.69%

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 

CompanyJuly 5, 2024July 12, 2024W-o-W  Changes (%)
DANGSUGAR40.5041.602.72%
NASCON34.2035.002.34%
DANGCEM656.70656.700.00%
Total343.28343.730.13%

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 12Toni Index W-o-W 

CompanyJuly 5, 2024July 12. 2024W-o-W  Changes (%)
UCAP28.1028.401.07%
TRANSPOWER373.90373.900.00%
TRANSCOHOT98.4098.400.00%
UBA23.7022.75-4.01%
TRANSCORP12.8511.70-8.95%
AFRIPRUD9.007.40-17.78%
Total1298.101277.46-1.59%

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 

CompanyJuly 5, 2024July 12, 2024W-o-W  Changes (%)
BUA CEMENT143.20143.200.00%
BUA FOOD379.90379.900.00%
Total364.34364.340.00%

Source: NGX, Proshare Research

We expect a largely bearish tilting in the coming week.

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