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September 9, 2022/InvestmentOne Report 

August 2022 Macro & Markets Update 

Please click to view the August 2022 Macro & Markets Update

 Recently released report by the National Bureau of Statistics on Gross Domestic Product (GDP) for Q2 2022 disclosed that the economy sustained the growth recorded in previous quarters. The expansion marked the seventh successive quarter of year-on-year growth since the pandemic-induced recession in 2020.

• In line with expectations, inflationary pressures in the Nigerian economy continued to soar to multi-year highs revealing the persistent passthrough effect of the protracted geo-political tensions, a major driver that has stoked a cost-of-living crisis across the globe. Specifically, headline inflation for the month of July 2022 printed at 19.64%y/y – higher than the 18.60% recorded in June.
• As the Federal Government continues to grapple with acute revenue shortfalls and a steep rise in debt service, talks of halting the burden of petrol subsidy payments have resurfaced amongst fiscal authorities. In the previous month, the Minister of Finance announced that the Federal Government had agreed to end petrol subsidy payments due to its unsustainable nature and the potential for future borrowing to accelerate. Elsewhere, for the third consecutive month, Federal Accounts Allocation Committee (FAAC) disbursements amongst the three tiers of government rose in August 2022 (revenue generated in July 2022) to N954.09 billion – 18.90% higher than previous month’s pay-out (N802.41 billion). 
• During the previous month, we saw an improvement in system liquidity, as average Open buy back and Overnight rates declined by 675bps and 633bps to 8.00% and 8.67% respectively. This may not be unconnected with the net OMO inflow of N94.21 billion in the month under review, compared to net OMO inflow of N10.00 billion in July. Elsewhere, the CBN adjusted the savings rate upwards to it pre-pandemic level of 30% of the Monetary Policy Rate (MPR) – from the 10.00% it reduced it to stimulate the economy in 2020.
• In the previous month, the oil market was volatile as sentiment continued to shift between the fundamentally undersupplied market and gloomy demand outlook. During the month, talks about the Iranian deal moved back into the limelight alongside the possibility of a production cut by OPEC. Elsewhere, data from FMDQ revealed that exporters accounted for about 40.17% of the total inflows into the IEFX window, amounting to $374.10 million while the CBN and FPI inflows accounted for 5.49% and 9.47% respectively.
• Trading activities at the local bourse ended on a negative note for the month of August as bears continued to dictate proceedings for the third consecutive month. This represented the fourth monthly decline of the year as the All-Share Index trotted southwards by 1.06% m/m and fell below the 50,000 psychological mark to settle at 49,836.51 points.