Nigerian Equities Market End Week Positive on Gains Recorded in Bellwether Stocks

Nigerian Stock Exchange Trading Floor. Image Credit: NGX

June 14, 2024/InvestmentOne Report

Please click to view/download the Weekly Report for the week ending Friday 14th June 2024

Global Economy

  • In the just concluded week, the Federal Open Market Committee (FOMC) held their 4th monetary policy meeting in 2024. At the meeting, the meeting participants decided on maintaining the target range of the federal funds rate at 5.25% – 5.50% amidst solid economic expansion, strong job gains, and high, but slightly easing inflation. This marks the seventh consecutive meeting where rates have remained steady and despite progress toward the 2.00% inflation target, the committee remains highly attentive to inflation risks, indicating that rate reductions will only be considered once there is greater confidence in a sustainable decline in inflation.

 

  • Elsewhere, the June 2024 labour market overview for the United Kingdom was released by the Office of National Statistics. The report revealed a complex landscape with mixed indicators of recovery. The employment rate for people aged 16 to 64 was estimated at 74.30% in February to April 2024, below the previous estimate of 74.50% between January and March 2024. The unemployment rate also increased to 4.40% YoY from 4.30% YoY, reflecting ongoing challenges post-pandemic. Economic inactivity decreased to 20.80%, indicating more people entering the labour force.

 

Nigerian Economy

  • The Federation Account Allocation Committee (FAAC) disbursed the sum of NGN1.14 trillion to the three tiers of government in May 2024 from the total revenue of NGN1.22 trillion generated in April 2024. When compared to the previous month, the distributable amount printed lower by 5.39%, driven by moderation across the sources comprising the total distributable revenue. Statutory revenue fell by 44.79% MoM to NGN157.18 billion, Value Added Tax (VAT) revenue declined by 7.49% MoM to NGN463.43 billion, Electronic Money Transfer Levy (EMTL) revenue decreased by 15.97% MoM to N15.15 billion, while Exchange Difference revenue stood at NGN507.46 billion.

 

  • Elsewhere, OPEC Monthly Oil Market Report for June, released in the week revealed a decline in Nigeria’s average daily oil output to 1.25 million barrels per day (Mbpd) in May, a 2.34% drop from 1.28 million bpd in April.  OPEC’s report indicated that Nigeria remains Africa’s largest oil producer, with Libya and Algeria following at 901,000 bpd and 264,000 bpd, respectively. The decline in Nigerian output occurred despite improvements in combating crude oil theft and pipeline vandalism by the Nigerian National Petroleum Company Limited (NNPCL).

Equities Market

 

  • The domestic equities market concluded the week on a positive note, as gains recorded in bell-whether stocks drove the market further into the green zone. Consequently, the NGX-ASI rose by 0.80% week-on-week to close at 99,925.88 points, following gains in three out of the four trading sessions of the week. Likewise, market capitalization increased from N56.13 trillion to NGN56.53 trillion when compared to the previous week. Furthermore, Year-to-Date (YTD) return advanced to 33.64% from 32.70% recorded in the preceding week.

Money Market

  • Money market rates decreased this week as Open Buy Back and Overnight rate fell by 432bps and 440bps to close at 25.63% and 26.25%, respectively. The ease in system liquidity can be majorly attributed to inflows from FAAC allocation of NGN1.14 trillion.

 

  • In the coming week, we expect interbank rates to hover at these levels in the absence of any significant outflow from the system.

 

Bond Market

  • The bond market traded on a mixed note as yields on most maturity closed in different direction across the benchmark curve. Consequently, the yields on the 5yr and 10yr benchmark bonds increased by 2bps and 12bps to close at 19.90% and 19.96%, respectively. Elsewhere, the yield on the 20yr benchmark bond closed flat at 17.00%.

 

  • In the near term, we expect liquidity conditions to drive the direction of yields.

 

Foreign Exchange Market

  • This week, FX reserves rose by 1.08% to close at $33.16 billion.

 

  • In the same vein, the Naira strengthened by 0.08% against the USD to close at NGN1,482.72/USD at the official window.

 

 The Week Ahead

United States

  • The Retail sales data for May will be released on June 18, 2024.

  • The Existing home sales data for May will be released on June 21, 2024.

 

United Kingdom

  • The CPI inflation data for May will be released on June 18, 2024.

  • The PPI inflation data for May will be released on June 18, 2024.

  • The Bank of England’s Monetary Policy Committee meeting will hold on June 20, 2024.

 

China

  • The Unemployment rate data for May will be released on the June 17, 2024.

 

  • The Retail sales data for May will be released on June 17, 2024.

  • The Industrial production data for May will be released on June 17, 2024.

 

Japan

  • The Inflation data for May will be released on June 21, 2024.

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