February 10, 2022/InvestmentOne Update

Please click to view the January 2022 Macro & Markets Update

• In 2022, our expectation is that the global economy should continue to recover although at a slower pace compared to 2021, due to base effect. However, global equities market performances were largely negative during the first month of the year given concerns about central banks’ switch to hawkish stance.

• The World Bank has expressed its views on the growth prospects of the Nigerian economy in 2022. The Bank expects economic growth to register at 2.50%, as disclosed in its January 2022 Global Economic Prospects Report.

• Recently released inflation report by the National Bureau of Statistics for the month of December 2021 indicated that headline inflation halted the deceleration (largely based effect induced) we have witnessed for the past eight (8) consecutive months.

• Elsewhere, Federal Accounts Allocation Committee disbursements amongst the three tiers of government for the month of December 2021 were up by 3.54% month-on-month from N675.90billion in November 2021 to N699.82billion.

• Petroleum subsidy, the highly debated and controversial subject matter made the news in the previous month as the Federal government announced the extension of subsidy removal by 18 months.

• In its first meeting in 2022, the MPC voted unanimously to maintain Monetary Policy Rate (MPR) at 11.50%, in line with our expectation. The Cash Reserve Ratio (CRR) was also retained at 27.50%, the Liquidity Ratio (LR) at 30% and the asymmetric corridor of +100/-700 basis points around the MPR.

• Contrary to our expectations of rising stop rates as the government frontloads most of its borrowings at the early part of the year, we saw rates at the primary market trend downwards during the first month of 2022. At the DMO’s bond auction held during the month under review, the stop rates for the 10yr and 20yr (New Issue 20-year bond) benchmark bonds closed southwards. Furthermore, stop rates at the treasury bill auction dropped by 1bp and 15bps to close at 2.48% and 3.30% respectively while the 364-day bill increased by 50bps to settle at 5.39%. 

• In the previous month, we saw Brent crude sustain its rally as it touched highs of about $91.64 per barrel – its highest gain since 2014. Nonetheless, at the IEFX window, Naira appreciated against the USD, GBP and EUR by 4.52%, 2.73% and 0.56% to close at N415.33, N558.78 and N465.54. Elsewhere, pressure continued to mount in the parallel market space as Naira traded within the range of N580/$ – N585/$ as    demand outweighs supply.

• Following the mildly positive performance of 2021 (6.07% YTD), the Nigerian equities market began the year in the green territory as the All-Share Index closed up back-to-back for the first four weeks of the year. On a month-on month basis the NGX-ASI gained 9.15% to settle at 46,624.67pts as at end of January 2022. In the same vein, Market capitalization advanced from N22.03trillion to N25.12trillion.