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Economy

Nigeria's inflation rises to 31.7 in February 2024

Data released on Friday, February 2024, has revealed that Nigeria’s inflation rose to 31.70% in February 2024 from 29.90% recorded in January 2024 and 21.91% in February 2023. This inflation figure comes on the backdrop of the CBN's move that increased Nigeria’s policy rate to 22.75% on February 27th, 2024. The new inflation figure represents a 9.79% increase in inflation year-on-year (Y-o-Y) and a 1.80% increase month-on-month(M-o-M). According to the bureau, food, transport, housing, and energy are among the major drivers of February inflation. We expect inflationary pressures to persist due to the continuous rise in food prices, insecurity, and depreciating exchange rate and its pass-through effects. 

Nigeria's Oil Output Increases to 1.6mb/d

Data released by the National Upstream Petroleum Regulatory Commission (NUPRC) revealed that Nigeria’s total oil production, including crude oil production and condensates, rose by 5.85% month-on-month(M-o-M) to 1.64mb/d in January 2024 from 1.55 mb/d in December 2023. Oil production data from OPEC, which excludes condensates shows Nigeria’s average daily crude oil production dropped 7.36% to 1.32mb/d in February from 1.42mb/d recorded in January 2024. This suggests that the initial increase in crude oil production may be waning and calls for increased security and surveillance of the country’s oil infrastructure. 

Nigeria Records N1.4trn Trade Deficit in Q4 2023

Nigeria’s National Bureau of Statistics has revealed that Nigeria recorded a trade deficit of N1.414trn in the fourth quarter of 2023 (Q4 2023). According to the report, Nigeria’s total trade value in Q4 2023 stood at N26.80trn. A breakdown of the figure shows that the value of exports was N12.69trn, while imports amounted to N14.12trn, leading to a deficit of N1.41trn. However, the country avoided a deficit balance sheet annually, as total trade was N71.88trn, with imports amounting to N35.92trn and exports recorded at N35.96trn. We expect Nigeria’s trade balance to remain in deficit as oil exports weigh in on the rising non-oil exports.

President Tinubu Opens Land and Air Borders with the Republic of Niger, Lifts Other Sanctions

On Wednesday, March 13th, 2024, the President announced that Nigeria will open the land and air borders with the Republic of Niger, restores the supply of electricity and lifts other financial sanctions. Tinubu’s directive came just days after the ECOWAS Authority of Heads of State and Government lifted economic and travel sanctions on Niger, Mali, and Guinea. The president noted that the lift of sanctions was on humanitarian grounds.  In August 2023, ECOWAS, led by Nigeria’s President Tinubu, imposed sanctions on Niger following a coup that toppled the country’s President-elect, Mohamed Bazoum, in July 2023. Officers of the Niger Presidential Guard had, on July 26, 2023, arrested Bazoum and declared him deposed. In the bloc’s reaction, ECOWAS leaders demanded the full restoration of constitutional order in Niger and declared Bazoum’s arrest and detention illegal. We expect the opening of the border to restore commercial and financial activities as coup-held Niger goes through a transition government.

CBN Allocates N100bn Fertilizers to Tackle Food Inflation

The Central Bank of Nigeria (CBN) governor, Mr. Olayemi Cardoso, on Wednesday, March 13th, 2024, announced the allocation of 2.15mn bags of fertilizer, worth over N100bn, to the Federal Ministry of Agriculture and Food Security for disbursement to farmers to enhance agricultural production in the country. According to the governor, this aims to enhance the nation’s food production capacity and security, curbing inflation and ultimately ensuring price stability. We expect this to cushion the rising food price temporarily, and bring down the food inflation, which has risen to 37.92% in February 2024. 

US inflation rises to 302% in February 2024

Data released by the US Bureau of Labor Statistics has revealed that the US inflation has risen to 3.2% in February 2022024, from 3.1% in January 2024. Core inflation, on the other hand, declined to 3.8% in February 2024, from 3.9% in January 2024. The recent figures leave the US inflation above the 2% target for the third consecutive year. Analysts expect inflation to remain above 2% for longer darkening the hopes for early rate cuts.

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Commodity Market

The commodity market was largely bullish for the week as Brent and WTI prices rose +2.97% and +3.58%, respectively. Gold saw a slight decline of -0.45% but maintained a positive YTD return of +4.72%. Silver, on the other hand, surged by +3.59%. Platinum and palladium appreciated by +3.19% and +7.21%, respectively, W-o-W (See Table 1 below).

Table 1: Commodity Prices

*Data for March 15^th, 2024, is as of 05:09 pm (Nigerian Time)

We expect increased volatility in gold and silver prices on concerns the US Fed might prolong rate cuts beyond June, given the persistent inflationary pressures. 

Fixed Income Markets

Currency Market

The Naira reversed the previous week’s loss, gaining 154bps to settle at N1,602.75/US$ at the Nigerian Autonomous Foreign Exchange Market Window (see Table 2 below). 

Table 2: Naira/Dollar at NAFEM

Source: FMDQ, Proshare Research

Money Market

The negative position of the system liquidity sustained the interbank rates at elevated levels this week. Hence, the Open repo rate (OPR) and Overnight rate (O/N) increased by 158bps and 23bps week-on-week to 30.29% and 31.07% (see Table 3 below).

 Table 3: Money Market

Source: FMDQ, Proshare Research

We expect interbank rates to hover at current levels. 

Nigerian Treasury Bill

The attraction at the NTB auction pulled the secondary market to a quiet session for most of the week. The unmet demand during the auction filtered to the market on Thursday and Friday, inducing a 5bps decline in the average benchmark yield to 18.97%.   

The demand spreads to the OMO bills market as the average benchmark yield declined by 16bps week-on-week to 19.16% (see Table 4 below).

Table 4: Average Benchmark Yields of the Treasury Bills Market

Source: FMDQ, Proshare Research 

We expect yields to increase next week as investors react to the recently released inflation rate. 

Nigerian Treasury Bill Auction.

At the NTB auction this week, the Debt management office offered N161.49bn and had a total subscription of N1.49trn.  Compared to the previous auction, the stop rates dropped across all tenors to 16.24%, 17,00%, and 21.12% for 91-day, 182-day, and 364-day respectively. The oversubscription was across the three tenors, with the 364-day bill having the highest at N1.36trn (see Table 5 below).

Table 5: Nigerian Treasury Bill Auction Result March 13, 2024

Source: CBN, Proshare Research

FGN Bond Market

This week, the FGN bond remained in the calm mode with few offers seen on the long end of the curve and selloffs at the short-to-mid tenors. The increased sell pressure raised the average benchmark yield by to 22bps week-on-week to 18.43% (see Table 6 below). 

Table 6: Average Benchmark Yields of the FGN Bonds 

Source: FMDQ, Proshare Research 

We expect the increased inflation rate to trigger further selloff.  

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Equity Market

NGX – Listed Equities

• The local bourse saw the bull maintain its dominance, gaining in all the trading sessions of the week, as investors took positions ahead of earnings and corporate disclosure despite the increased activities in the fixed-income space.
• Investors gained N2.12trn as market capitalization rose to N59.42trn from N57.29trn in the previous week, while the year-to-date return rose to 40.54%.
• A total turnover of 1.77bn shares worth N52.87bn in 44,713 deals was traded in the week, from 2.16bn shares valued at N108.82bn traded in the previous week in 51,556 deals.
• The benchmark all-share index (ASI) rose +3.71% to 105,085.25 points from 101,330.65 points the previous week, maintaining a positive ride over the 100,000 points mark (see chart I below).

Chart 1: Movement of NGXASI Index December 29, 2023 – March 15, 2024

Source: NGX, Proshare Research

Table 7: Sectoral Index Performance as of March 15, 2024(%)

Source: NGX, Proshare Research

• The gains in MTN (+20.96%), TRANSPOWER (+8.17%), GTCO (+17.88%), JULIUS BERGER (+30.58%), ZENITH (+16.76%), and ETI (+16.50%) drove the market performance for the week, offsetting the losses in TRANSCOHOT (-3.07%), TRANSCORP (-8.82%), OANDO (-4.17%), SKYWAY (-10.00%), UACN (-9.68%), and VITAFOAM (-07.41%).  
• Fifty-five stocks gained (led by JULIUS BERGER), and 24 stocks recorded losses (led by INT’L ENERGY INSURANCE), while 75 others remained unchanged. 

NASD OTC Exchange - Unlisted Equities

• Continuous profit-taking in ARADEL HOLDINGS and the Pension index has further plunged the unlisted OTC Exchange into another week of loss.
• The NASD Securities Index (NSI) fell -4.45% from 1,083.85 points in the previous week to 1,035.65 points as investors lost N70bn, with market capitalization falling from N1.47trn the previous week to N1.40trn. 
• Losses in MIXTA RE (-0.61%), Food Concept (-0.89%), FC WAMCO (-2.64%), and ARADEL HOLDINGS (-19.00%) outweigh the gains in AFRILAND PROPERTIES (+26.55%), CSCS (+19.49%), and UBN PROPERTY (+5.17%) (see Table 8 below).

Table 8: NASD W-o-W Change

Source: NGX, Proshare Research

Gote And Toni Index

Investors took positions in DANGSUGAR and NASCON taking advantage of the previous week's losses. This pulled the Gote index into a positive close for the week, rising +0.63% w-o-w from 364.91 points in the previous week to 367.22 points (see Table 9 below). 

Table 9: Gote Index W-o-W 

Source: NGX, Proshare Research

Similarly, the Toni Index registered a third consecutive week of gains, rising 0.03% w-o-w from 600.37 points in the previous week to 600.54 points on gains recorded in UBA, UCAP, and AFRIPRUD which net out the losses in TRANSCORP and TRANSCOHOT (see Table 10 below).

Table 10: Toni Index W-o-W 

Source: NGX, Proshare Research

We expect investors to continue to take position ahead of earnings releases and disclosures in the coming week. 

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