August 5, 2022/InvestmentOne Report

Please click to view the July 2022 Macro & Markets Update

• In its July edition of World Economic Outlook (WEO) report titled “Gloomy and More Uncertain”, the International Monetary Fund (IMF) cut its global growth forecast for 2022 and 2023 to 3.20% y/y and 2.90% y/y respectively, lower than previous forecast of 3.60% y/y in April 2022.
  

• June report from the National Bureau of Statistics revealed that headline inflation maintained the upward trajectory witnessed in previous months.  This marked the fifth-month consecutive increase in the year and the largest gain since December 2016. In specifics, headline inflation accelerated to 18.70% y/y in June – 90bps higher than the 17.71% recorded in May 2022.
  

• In the past month, the Federal Ministry of Finance, Budget, and   National Planning held a public consultative forum on the 2023-2025 Medium Term Expenditure Framework/ Fiscal Strategy Paper.  This was done primarily to commence the annual budget process for the 2023 national budget, against the backdrop that the MTEF/FSP contains projections upon which the annual national budget is drawn. At the forum, the Minister reeled out damning figures on the 2022 budget performance for the first four months of the year as well as economic projections for the duration of the MTEF/FSP.
• At the 4th monetary policy meeting for the year, the committee unanimously voted to further increase the key policy rate by 100bps to 14.00%. This marked the 2nd consecutive hike by the apex bank to the highest level since June 2016.
  

• During the previous month, liquidity in the money market remained tight, as observed from bank’s activities at the financial window where average net transactions for the month of July remained elevated at N77.61 billion (c.1.94% lower than what was recorded for June). Reflective of the hike in policy rate, sentiment in the fixed income space turned bearish as investors sold off on most maturities.
  

• In the outgone month, the oil market was volatile as the market continued to grapple between recession fears and growing supply risks. Against that backdrop, brent crude posted its second monthly loss in July as it traded at an average price of $120.63 per barrel in the month under review – 7.16% lower than the amount recorded in June.
  

• Bearish performance persisted in the local equities market for the second consecutive month in July 2022 and marking the third monthly decline for the year.  As a result, the NGX-ASI declined by 2.79% m/m to close at 50,370.25 pts. Similarly, market capitalization moderated from N27.94trillion to N27.16trillion, while year-to-date return weakened to 17.92% from 21.31% in the prior month. In terms of activity levels, average daily volume and value declined by 27.44% and 28.61% to 206million units and N2.67billion respectively.