Economy
CBN MPC Raises MPR by 150bps to 26.25%
In its most recent meeting on May 21, 2024, the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) continued a hawkish stance by raising the monetary policy rate by 150 basis points to 26.25% from 24.75%. The decision follows recently released inflation data, which revealed that Nigeria’s inflation rose to 33.65% in April 2024 from 33.20% reported in March 2024. We expect the rate hike to stir activities in the fixed-income market and have a marginally positive effect on the naira; however, inflation will persist as key inflation drivers remain unchecked.
Minimum Wage Negotiations Still in a Gridlock
The Nigerian Labour Congress (NLC) had demanded a minimum wage of N615,000, noting that the country’s wage level currently falls behind the minimum desired living wage. The tripartite committee on wage negotiation resumed talks this week with the NLC reducing its request for a minimum wage from its initial N615,000 to N500,000 while the government increased its proposed wage from N48,000 to N58,000. We expect ongoing negotiations to stall for longer as the proposal by the government widely diverges from the demands of NLC.
BDCs to reapply for Licences
On Wednesday, May 22, 2024, the Central Bank of Nigeria (CBN) issued a circular directing all Bureau De Change (BDC) operators to re-apply for new licenses. The CBN has also directed the BDCs to meet the minimum capital requirement for the license category they wish to apply to within six months, effective the date of the circular guidelines issue. According to the apex bank, Tier-1 BDCs have a minimum capital base of N2bn, while Tier-2 BDCs must have a minimum capital base of N500mn. We expect this directive to increase transparency in the FX market and enhance data collection on all BDC operators in the country.
UK inflation Falls to 2.13% in April 2024
The UK Office of National Statistics (ONS) reported on Thursday, May 23, 2024, that the U.K. inflation rate slowed in April 2024 by 2.3% year-on-year from 3.2% recorded in March 2024. The UK officially reported a growth of 0.6% in Q1 2024, officially exiting from a technical recession in Q4 2023. Analysts believe the declined inflation further cements the Fed’s case for rate cuts in the second half of the year.
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Commodity Market
The commodity market closed the week on a bearish note as commodity prices traded lower contrary to expectations of price increases. Brent and WTI crude oil prices declined by -1.87% and -2.43%, respectively. Gold and Silver prices declined by -3.27% and -1.66%, respectively. The prices of Platinum and Palladium also declined by -4.98% and -4.21%, respectively, W-o-W (See Table 1 below).
Table 1: Commodity Prices
| Commodity | 24-May-24 | 17-May-24 | 29-Dec-23 | Weekly Chg | YTD Chg |
| Brent | 82.01 | 83.57 | 76.99 | -1.87% | 6.52% |
| WTI | 77.58 | 79.51 | 71.42 | -2.43% | 8.63% |
| Gold | 2,335.90 | 2,414.90 | 2,073.80 | -3.27% | 12.64% |
| Silver | 30.435 | 30.95 | 24.105 | -1.66% | 26.26% |
| Platinum | 1,034.30 | 1,088.50 | 1,006.70 | -4.98% | 2.74% |
| Palladium | 966.50 | 1,009.00 | 1,110.00 | -4.21% | -12.93% |
| CNBC, Proshare Research | |||||
*Data for May 24th, 2024, is as of 06:14 pm (Nigerian Time)
We expect a similar performance in the coming week as dollar remain straightened on faded possibility of Fed rate cuts.
Fixed Income Markets
Currency Market
After five consecutive weeks of depreciation, the naira gained 98bps/N14.52k week-on-week to settle at N1,482.81/US$1 on Friday. (see Table 2 below).
Table 2: Naira/Dollar at NAFEM
| May 17, 2024 | May 24, 2024 | W-o-W% Change | |
| NAFEM | 1,497.33 | 1,482.81 | 0.98% |
Source: FMDQ, Proshare Research
Money Market
Despite FAAC inflow, system liquidity remained tight, squeezed by the NTB auction settlement. Thus, the Open Repo Rate (OPR) and the Overnight rate (O/N) rose by 814bps and 756bps (W-o-W) to settle at 32.40% and 33.00%, respectively (see Table 3 below).
Table 3: Money Market
| May 17, 2024 | May 24, 2024 | W-o-W % Change | |
| OPR (%) | 29.96 | 32.40 | +8.14% |
| O/N (%) | 30.68 | 33.00 | +7.56% |
Source: FMDQ, Proshare Research
We expect rates to hover at current levels barring any significant inflows.
Nigerian Treasury Bill
The mid-week auction and MPC meeting made the Nigerian treasury market relatively quiet. However, the increased rate offered on the 91-day and 182-day tenors stirred modest demand at the secondary market on Thursday and Friday. Thus, the market closed bullish, dropping the average yield by 22bps to 22.32%.
Similarly, the OMO bills market reversed the previous week’s selloffs as the average benchmark yield declined by 78bps week-on-week to 21.59 from 21.76% last week (see Table 4 below)
Table 4: Average Benchmark Yields of the Treasury Bills Market
| May 17, 2024 | May 24, 2024 | W-o-W % Change | |
| T. Bills (%) | 22.37 | 22.32 | -0.22% |
| OMO bills (%) | 21.76 | 21.59 | -0.78% |
Source: FMDQ, Proshare Research
We expect demand to improve next week.
Nigerian Treasury Bill Auction.
At the mid-week NTB auction, the Debt Management Office offered N508.98bn and had a total subscription of N1.59trn. The oversubscription was across the three tenors but highly concentrated at the 364-day paper at N1.43trm versus N168.67bn offered. The DMO allotted N638.98bn, +26% higher than the amount offered. The allotment had a distribution of N60.69bn for 91-day, N28.45bn for 182-day, and N549.83bn for 364-day. The stop rates attached to the 91-day and 182-day rose by 26bps and 44bps to 16.50% and 17.45%, while the 364-day declined by 1bp to 20.69% (see Table 5 below).
Table 5: Nigerian Treasury Bill Auction Result April 24, 2024
| Tenor | Amount offered (N’bn) | Total Subscription (N’bn) | Amount Sold (N’bn) | Stop Rate (%) |
| 91-day | 331.01 | 124.92 | 60.69 | 16.50 |
| 182-day | 9.30 | 33.21 | 28.46 | 17.45 |
| 364-day | 168.67 | 1,432.97 | 549.83 | 20.69 |
Source: CBN, Proshare Research
FGN Bond Market
The FGN bond market stayed quiet for most of the week. Investors anticipated the outcomes of the MPC meeting and focused on the NTB auction held on Wednesday. Later in the week, the market witnessed light cherry-picking at the long tenors, nudging the average benchmark yield to 18.55% on Friday from 18.57% last week (see Table 6 below).
Table 6: Average Benchmark Yields of the FGN Bonds
| May 17, 2024 | May 24, 2024 | W-o-W % Change | |
| Short Tenor | 18.64 | 18.66 | +0.11% |
| Mid Tenor | 19.15 | 19.32 | +0.89% |
| Long Tenor | 18.00 | 17.78 | -1.22% |
Source: FMDQ, Proshare Research
We expect a less active market as investors remain cautious.
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Equity Market
- The Nigerian bourse closed the week in the negative territory, losing in three of the five trading sessions with the benchmark All-Share Index (ASI) down by -0.52% to close at 97,612.51 points from 98,125.73 points the previous week (see chart I below).
Chart 1: Movement of NGXASI Index December 29, 2023 – May 24, 2024
Source: NGX, Proshare Research
- Consequently, investors lost about N200bn as market capitalization fell to N55.22trn, while the year-to-date returns dropped to 30.54%.
- The financial services and Conglomerates Industries dominated activities in the market for the week. A total turnover of 1.98bn shares worth N40.72bn in 38,487 deals was traded against 1.65bn shares valued at N42.68bn traded in 38,123 deals the previous week.
- Of the twenty-three indices under our coverage for the week, five equities appreciated, led by the NGX MERI Value Index; sixteen depreciated, led by the NGX Sovereign Bond Index, and two other equities stayed flat (see Table 7 below).
Table 7: Sectoral Index Performance as of May 17, 2024(%)
| Index | WTD | MTD | QTD | YTD |
| NGX MERI Value Index | 1.74 | 3.44 | -3.95 | 14.12 |
| NGX Oil/Gas Index | 0.72 | -6.43 | -8.34 | 13.75 |
| NGX Lotus II | 0.44 | 1.44 | -1.63 | 34.96 |
| NGX Consumer Goods Index | 0.31 | -0.83 | -4.84 | 36.71 |
| NGX Industrial Goods Index | 0.19 | 0.29 | -2.91 | 73.31 |
| NGX ASeM Index | 0.00 | 0.00 | 0.00 | 135.25 |
| Proshare Samad Index | 0.00 | 0.00 | 0.00 | 72.74 |
| Proshare Gote Index | -0.15 | -0.41 | -5.75 | 87.15 |
| NGX Premium Index | -0.50 | 0.02 | -6.65 | 32.95 |
| NGX All-Share Index (ASI) | -0.52 | -0.62 | -6.65 | 30.54 |
| NGX Pension Board Index | -0.52 | -0.37 | -5.07 | 0.00 |
| NGX-Main Board Index | -0.54 | -0.80 | -4.33 | 32.29 |
| NGX 30 Index | -0.63 | -0.66 | -6.96 | 29.39 |
| NGX AFR Div Yield Index | -0.67 | 1.80 | -4.29 | 41.90 |
| NGX Growth Index | -1.02 | -1.61 | -2.06 | -11.33 |
| Proshare Toni Index | -2.71 | -6.24 | -10.13 | 146.79 |
| NGX Pension Index | -2.79 | -1.35 | -13.06 | 5.54 |
| NGX CG Index | -3.43 | -2.25 | -21.72 | -9.58 |
| NGX Insurance Index | -3.50 | -6.87 | -12.91 | 9.90 |
| NGX-AFR Bank Value Index | -6.54 | -1.86 | -28.08 | -21.07 |
| NGX MERI Growth Index | -6.65 | -6.89 | -19.98 | -13.28 |
| NGX Banking Index | -7.35 | -5.29 | -28.77 | -18.26 |
| NGX Sovereign Bond Index | -9.00 | -7.82 | -4.53 | -8.17 |
Source: NGX, Proshare Research
- The market decline was mainly propelled by selloffs in UBA (-12.1%), FBNH (-10.9%), ZENITHBANK (-8.54%), GTCO (-6.5%), and ACCESSCORP (-3.5%) netting off the gains in NESTLE (+9.76%), and LAFARGE AFRICA (+4.48%).
- Market breadth was negative, with 24 gainers (led by BERGER PAINT) against 53 losers (led by DEAPCAP), and 77 others were unchanged.
NASD OTC Exchange – Unlisted Equities
- The unlisted equity market maintained its favourable weekly trend, as investors remained bullish on ARADEL HOLDINGS and others.
- The benchmark NASD Securities Index (NSI) rose +5.25% to 1,321.95 points from 1,256.02 points the previous week. Consequently, investors gained N90bn, with market capitalization rising to N1.81trn, edging close to the N2trn mark.
- The strong performance of ARADEL HOLDINGS (+12.04%), AFRILAND PROP (+7.00%), IGI (+5.00%), 11 Plc (+3.40%), and CSCS (+2.72%) outweigh the price depreciation in FC WAMCO (-0.04%), GEO-FLUIDS (-7.32%), and NIPCO (-9.09%) (see Table 8 below).
Table 8: NASD W-o-W Change
| Parameter | May 17, 2024 | May 24, 2024 | W-o-W Changes (%) |
| NSI | 1,256.02 | 1,321.95 | 5.25 |
| Market Capitalisation (bn) | 1,720 | 1,811 | 5.25 |
| Volume Traded | 72,912,896 | 13,613,260 | -81.33 |
| Value Traded (000) | 1,992,018.39 | 928,078.47 | -53.41 |
| Deal Executed | 252 | 225 | -10.71 |
Source: NGX, Proshare Research
Proshare Indices
The Gote Index ended the week slightly lower by -0.15% on continuous selloffs in DANGSUGAR despite the notable gains in NASCON (see Table 9 below).
Table 9: Gote Index W-o-W
| Company | May 17, 2024 | May 24, 2024 | W-o-W Changes (%) |
| NASCON | 36.00 | 39.00 | 8.33 |
| DANGCEM | 656.70 | 656.70 | 0.00 |
| DANGSUGAR | 40.00 | 34.00 | -15.00 |
| Total | 343.25 | 342.74 | -0.15 |
Source: NGX, Proshare Research
Also, the Toni index recorded its third consecutive week of losses, driven by the large selloffs in UCAP, TRANSCORP, and UBA, which were strong enough to offset the buying interest in AFRIPRUD and TRANSCOHOT (see Table 10 below).
Table 10: Toni Index W-o-W
| Company | May 17, 2024 | May 24, 2024 | W-o-W Changes (%) |
| AFRIPRUD | 6.55 | 6.95 | 6.11% |
| TRANSCOHOT | 92.00 | 94.79 | 3.03% |
| TRANSPOWER | 373.90 | 373.90 | 0.00% |
| UCAP | 18.15 | 17.50 | -3.58% |
| TRANSCORP | 11.95 | 10.50 | -12.13% |
| UBA | 21.85 | 19.20 | -12.13% |
| Total | 1243.55 | 1209.91 | -2.71 |
Source: NGX, Proshare Research
Samad Index
The Samad Index posted its ninth-week flat position without major catalysts in BUA CEMENT and BUA FOOD (see Table 10 below).
Table 10: Samad Index W-o-W
| Company | May 17, 2024 | May 24, 2024 | W-o-W Changes (%) |
| BUA CEMENT | 143.20 | 143.20 | 0.00 |
| BUA FOOD | 379.90 | 379.9 | 0.00 |
| Total | 364.34 | 364.34 | 0.00 |
Source: NGX, Proshare Research
We expect investors to remain cautious and sensitive to policy actions as the administration marks one year in office.
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