April 2, 2025/United Capital Research

Market Volatility Resurges as Tariff Concerns and Economic Data Weigh on Global Indices.
US markets experienced a much-needed stabilization last week, breaking a four-week losing streak as President Trump signalled potential “flexibility” in tariff policies. Over the previous weekend, reports suggested tariffs would target only the 15.00% of nations with significant trade imbalances with the US, fueling a sharp rally with major indices gaining ~2.00%. However, optimism was short-lived as President Trump announced auto tariffs and new sanctions on Venezuelan oil. Auto tariffs, set to impact major exporters like Mexico, Japan, and Germany, sent automakers and suppliers sharply lower, though parts retailers and used car dealers benefited.  The S&P 500 briefly reclaimed its 200-day moving average before slumping back, driven by a selloff in AI stocks following a bearish Microsoft report. Despite some initial gains, by weekend, indices closed over 2.00% w/w, erasing earlier gains, with the S&P 500, 400, and 600 all down ~ 1.5% w/w.

Global markets were primarily impacted by news of potential auto tariffs, with Canada, Mexico, Germany, Japan, and South Korea most exposed. The announcement sparked strong global market sell-offs on Wednesday, and further responses could materialize following the expected reciprocal tariff decision on 02-Apri. In Europe, major indices closed lower, with the STOXX 600 dropping by 1.30% w/w. Despite strong manufacturing data, overall economic sentiment was weaker than expected, driven by sluggish services and consumer readings. Germany’s DAX also retreated to its 50-day moving average, while the Ifo Business Climate index showed improvement.

Asian markets closed lower last week, driven by tariff concerns and ongoing weakness in tech stocks. Japan’s Nikkei dropped by 1.5% w/w, underperforming the S&P500 year-to-date, with autos and steel stocks leading losses. The Nikkei’s 50-day moving average fell below both its 100-day and 200-day averages. In China and Hong Kong, the Hang Seng declined by 1.10% w/w and Shanghai fell by 0.40% w/w, with tech stocks like Xiaomi and Alibaba posting losses.

This week is shaping up to be a pivotal one for global markets, with the unveiling of the reciprocal tariff framework on 02-April, coinciding with the close of Q1-2025. Key data releases include EU CPI, China’s PMI figures, and the US ISM surveys and employment report, which will provide fresh insights into global growth and inflation dynamics. Central bank activity will be significant, with Fed Chair Powell and other officials speaking throughout the week. Earnings reports, particularly from industrials and retail, will also offer clues on economic resilience amid ongoing geopolitical uncertainties. Investors will brace for volatility and market-moving events.
 
Macroeconomic Highlights
Nigeria’s external reserves have increased by almost 20.00% over the last 11 months, raising hope for a stronger naira. The CBN has initiated important reforms to stabilise the country’s forex market. The external reserves have increased by 19.40% in the last 11 months, rising to $38.33bn on 21-Mar-2025 from $32.11bn on 19-Apr-2024. This has given the apex bank the war chest to intervene in the forex market, bolstering supply to retail end users, reducing distortions in the market and maintaining effective foreign reserves management and accretions.

Data from the CBN showed that Nigeria’s money supply recorded its first decline in 2025, falling to N110.32tn in February from N110.94tn in January. The 0.56% month-on-month drop comes amid continued efforts by the apex bank to manage liquidity in the system, following earlier signals of monetary tightening and foreign exchange adjustments. 

The digital payments economy in Nigeria and other African countries is projected to hit $1.5tn by the end of this decade, driven by improved internet penetration and financial inclusion rate. According to the report, Africa’s digital transformation is underpinned by rapid advancements in internet penetration and financial inclusion, two of the fastest-growing enablers of digital payments across the continent. Internet penetration in Africa is projected to grow at a compound annual rate of 20.00%, while financial inclusion is set to expand at 6.00% per year.

Benin Republic and Togo owe Nigeria $8.84mn for the electricity consumed in Q4-2024. Additionally, the six international bilateral customers being supplied by Gencos in the Nigerian electricity supply industry “made a payment of $5.21mn against the cumulative invoice of $14.05mn issued by the Market Operator for services rendered in Q4-2024,” translating to a remittance performance of 37.08%. The international companies are Paras-SBEE in Benin Republic ($2.65mn); Paras-CEET also in Benin ($1.64mn); Transcorp-SBEE (Ughelli) in Benin paid $1.71mn out of $3.59mn; Transcorp-SBEE (Afam 3) paid $0.90mn out of its $1.2mn invoice; Odukpani-CEET in Togo owes $2.37mn.

The World Bank has expressed concern over Nigeria’s poor statistical performance, noting that the country is lagging behind its aspirational peers such as Mexico, Colombia, South Africa and Brazil. Also, the World Bank team led by their Country Director, Ndiame Diop, and Practice Manager for West and Central Africa, Mr. Johan Mistiaen, advised that an annual investment of between $10.00mn and $15.00mn in the country’s statistical infrastructure would significantly improve performance and align Nigeria with its peers.

This week, we expect the macroeconomic environment to be relatively quiet in the absence of any major economic data releases.

Domestic Equities: The Bulls Regained Momentum…NGX-ASI Up by 0.67% w/w
Last week, the domestic equities market closed on a positive note as the bears dominated the market. However, investors’ appetite in the market have been sustained by the mid-long-term opportunities present in the market. Notably, share price appreciation in GTCO (+18.21% w/w) lifted the main index higher. Also worthy of mention are gains in ZENITHBA (+3.07% w/w) and FIRSTHLD (+4.26% w/w). As a result, the benchmark NGX-ASI improved by 67bps to close at 105,660.64 points, bringing the YTD return to a steady 1.66% and strengthening market capitalization to N66.26tn. In terms of trading, market activity improved as the average value and volume of stocks traded climbed by 43.29% and 5.05% to print at N13.78bn and 609.66mn units, respectively. As measured by the market breadth, investors’ sentiments improved to 1.19x (previously, 0.67x) as 43 stocks appreciated while 36 depreciated.

Meanwhile, on a sectorial level, performance was bullish as four (4) out of five (5) sectors under our coverage closed in the green territory. The Banking sector (+5.61% w/w) led the gainers due to buy interests in ZENITHBA (+3.07% w/w) and FIDELITY (+6.15% w/w). Following was the Insurance sector (+1.89% w/w) on account of gains in SUNUASSU (+33.27% w/w) and MBENEFIT (+56.72% w/w). The Consumer Goods sector (+0.33% w/w) climbed on account of share price appreciation in NESTLE (+4.62% w/w) and NB (+2.87% w/w). The Industrial Goods sector (+0.01%) followed owing to share price appreciation in CUTIX (+3.31% w/w). On the flipside, the Oil and Gas sector (-1.65% w/w) was the sole laggard on the back of sell offs in ETERNA (-5.66% w/w).

On corporate actions, Fidelity Bank Plc has declared a final dividend of N1.25 with a qualification date of 15-Apr-2025 and a payment date of 29-Apr-2025.

Zenith Bank Plc has declared a final dividend of N4.00, with a qualification date of 15-Apr-2025 and a payment date of 29-Apr-2025.

United Bank for Africa has declared a final dividend of N3.00, with a qualification date of 11-Apr-2025 and a payment date of 25-Apr-2025.

Guaranty Trust Holding Company Plc has declared a final dividend of N7.03, with a qualification date of 15-Apr-2025 and a payment date of 24-Apr-2025.

Aradel Holdings Plc has declared a final dividend of N22.00, with a qualification date of 06-May-2025 and a payment date of 29-May-2025.

Looking forward, the equities market is expected to improve as investors position themselves for the FY-2024 earnings season and possible corporate action declarations. Nevertheless, given the elevated interest rate environment in the fixed-income market, we still expect bearish sentiments to linger in the background.

Money Market: Stop Rates on the 364-Day Bill at the Auction Declined
Last week, the financial system opened with a deficit balance of N923.56bn. During the week, system liquidity increased by N1.92tn, driven by coupon payments of N202.34bn, bond redemptions of N562.45bn, and NT-bill maturities of N1.16tn. Despite the two primary market auctions during the week, the financial system remained reflated. As a result, the financial system closed the week with a surplus balance of N511.53bn. Consequently, the average Open Repo Rate (OPR) and Overnight Rate (OVN) declined by 334bps and 327bps w/w from 32.42% and 32.88% to settle at 29.09% and 29.61%, respectively.

The Central Bank of Nigeria (CBN) conducted an NT-bill auction with an offer size of N700.00bn across the 91-day, 182-day, and 364-day bills. At the auction, investors’ demand was strong, as total subscription printed at N1.43tn, indicating an oversubscription rate of 2.04x. The bids were majorly skewed towards the longer-tenured instrument, “364-day bill”, which received total bids of N1.36tn. Notably, the Apex Bank oversold the auction, allotting a total of N808.73bn. That said, the stop rate on the 364-day bill declined by 31bps from 19.94% to settle at 19.63%. Meanwhile, the stop rates on the 91-day and 182-day bills remained unchanged at 18.00% and 18.50%.

In the secondary NT-bills market, bearish activities resumed across the curve following the recent uptick in stop rates at the primary market auction. As a result, the average yield on NT bills climbed by 16bps w/w to close at 19.44% (previously, 19.28%). Similarly, the average yield on OMO bills increased by 168bps w/w to settle at 24.20% (previously, 22.52%).

This week, we expect buy interests to return to the secondary market as investors look to fill unmet bids from the primary market. In terms of liquidity, we do not expect any form of inflow this week. However, we do not rule out the possibility of the CBN conducting an OMO auction to mop up the existing liquidity in the financial system. Thus, we expect rates to remain at current levels with a possibility of slightly ticking upwards if the CBN mops up the current liquidity in the financial system.

Bond Market: Bearish Sentiments Dominate the Market
The Debt Management Office (DMO) conducted the Mar-2025 bond auction with an offer size of N300.0bn across the reopened 2029 “5-YR” and 2033 “9-YR” bond papers. At the auction, investors’ demand was mildly strong, as total subscriptions printed at N530.31bn, indicating an oversubscription of 1.78x. The bulk of the bids were skewed towards the longer instrument, “2033”, which received total bids of N471.24bn. Notably, the DMO under-allotted the auction, selling just N271.23bn worth of bond papers. That said, the marginal rate on the 2029s declined by 20bps from19.20% to settle at 19.00%. Meanwhile, the stop rate on the 2033s settled at 19.99%.

The secondary bonds market traded was relatively quiet as investors’ attention were centered on the Primary Market Auction (PMA). Thus, the average bond yield climbed by 4bps w/w to close at 18.71% (previously 18.75%). Meanwhile, activities were bearish in the corporate bonds market, as the average yield on corporate bonds rose by 6bps to settle at 21.28% (previously, 21.22%).

In the Nigerian secondary Eurobonds, we observed bearish sentiments across the curve. Investors have maintained a cautious trading approach due to the uncertainties surrounding interest rate decisions and inflation progress in the US. Thus, the average yield in the market increased by 13bps w/w to settle at 9.64% (previously 9.51%).

Looking forward, we project that mixed sentiments will linger. However, we believe that the bearish undertone will continue as there is a chance that bond yields will likely remain around current levels for the rest of Q1-2025. Meanwhile, we expect mixed sentiments in the Nigerian Eurobonds market as investors look to create a balance between high-quality assets and high-premium-yielding assets.

Currency Market: Naira Depreciated at the Official Market
Last week, the Naira slipped by 1bp w/w at the official market to close at N1,536.89/$, from its previous close of N1,536.82$. Conversely, the Naira appreciated by 252bps w/w at the parallel market to settle at N1,550.00/$ from its previous close of N1,590.00/$. Lastly, Nigeria’s external reserves fell by 5bps to settle at $38.333bn (previously, $38.351bn).

This week, we expect the Naira to hover at current levels barring any substantial shock.  However, CBN’s intervention at the FX market might further strengthen the Naira in the FX market this week. Additionally, the recent improvement in FCY liquidity of financial institutions will look to preserve Naira’s strength around the current level. Nonetheless, the country needs to address legacy issues affecting the Naira, diversify its sources of USD earnings, encourage inflows of remittances and improve its crude oil production to improve the performance of the Naira at the FX market.