● The Minister of Finance, Budget, and National Planning disclosed on Thursday at
the presentation of the draft for the 2022-2024 Medium Term Expenditure
Framework and Fiscal Strategy Paper that the Federal Government had spent
92.7 % of the prorated budget, which amounts to N4.8tn. Of which, N1.8tn an
equivalent of 37.5%was released for debt servicing, while N1.5tn (31.25%) was
spent on personnel cost, and N973.13bn (20.2%) was spent on capital projects.
Also at the event, the minister disclosed that the government would spend up to
N900bn on petrol subsidy in 2022.
● The Revenue Mobilisation Allocation and Fiscal Commission have disclosed that
it would soon commence the review of the allocation formula applicable to the
revenue retained in the Federation Account. The review would begin with the
vertical sharing formula which shows the proportion of revenues allocated to the
three tiers of government. This will be followed by the horizontal formula which
addresses sharing among states and local governments. An official of the
commission concluded that whatsoever the commission fixes are final and cannot
● According to data obtained from the Central Bank of Nigeria (CBN), banks’ credit
to Nigeria’s private sector increased by +4% (N1.29 trillion) in Q1 2021 to reach
N31.44 trillion in Q1 2021. This is coming on the back of the bank’s continued
effort to encourage lending to the real sector to stimulate Nigeria’s economic
growth. Meanwhile, credit advanced to the public sector reduced by N410.7
billion in the review period. A further breakdown of the figures reveals that while
total credit to the economy rose by+2% (N880.65 billion) in Q1 2021, from
N42.55 trillion as of December 2020 to N43.44 trillion at the end of Q1 2021.
Meanwhile, credit allocation to the government declined by -3% (N410.62 billion)
from N12.4 trillion to N11.99 trillion.
● The federal government stated in the week that electricity subsidy has been
reduced by N20bn per month. This is following record-high tariff collections of
N65bn in the December 2020 cycle up from an average of N39bn). the Minister
of Power, however, stated that the Federal Government still paid over N50bn
monthly to subsidize electricity supply in the country. You would recall that the
International Monetary Fund had in its ‘Resilience through reform’ report
expressed concern over the subsidies in Nigeria.
● Group Managing Director of the Nigerian National Petroleum Corporation,
Mallam Mele Kyari, disclosed on Tuesday that the price of petrol should be more
than N280/liter which is the price of Automotive Gas Oil(diesel). PMS which
unlike diesel is subsidized by the government currently sells for N162/liter.
According to the NNPC Group Managing Director, AGO (diesel) should normally
sell for above the price of PMS.
● The National Pension Commission PenCom announced on Wednesday that the
Federal Government has approved payment of outstanding accrued pension
rights for verified and enrolled retirees of treasury-funded MDAs that retired but
are yet to be paid their retirement benefits, as well as the backlog of death
benefits claims due to beneficiaries of deceased employees of treasury funded
MDAs. In keeping with the Pensions Reform Act (2014) the Federal Governmentis required to contribute the payment of the 10% rate as an employer under a
pension contribution for its employees, while the employees contribute 8%)
● According to data released on Friday by the Bureau of Labor Statistics, the US
economy created 850,000 jobs in June, a figure which surpasses the earlier
forecast of 720,000 jobs. The current administration has therefore created over
3m jobs. However, the increase in payrolls notwithstanding the unemployment
rate inched up slightly to 5.9% from 5.8% month-on-month. A further
breakdown of the figures shows that the leisure and hospitality sector added
343,000 jobs in June. Other sectors which recorded new jobs include education
and services. Analysts are of the view that the positive jobs report lends credence
to the view that the Federal Reserve should begin to consider increasing rates to
curb the throbbing problem of inflation. US employment level however remains
below its pre-pandemic levels. More than 9m people are still unemployed,
compared to 5.7m in February 2020.
● The World Bank has stated that the Chinese economy may grow at
about +8.5% this year. This forecast follows an April report by the multi-lateral
organization, which stated that China and Vietnam were the only East Asian
economies to achieve a “v-shaped” recovery in 2020 since then consumption
levels are back above pre-outbreak levels. This expected growth has led to a
reduction in the expected growth of China in 2022 to a less optimistic 5.4%. The
positive sentiments are borne out of the 40% rate of Covid-19 vaccination already
achieved by the second-largest economy in the world. Although, there are
concerns about the new delta variant for which reason authorities have
re-imposed travel controls in some areas.
● According to India Ratings and Research (Ind-Ra), India’s FY22 GDP growth rate
is now expected at 9.6 %, lower than an earlier estimate of 10.1 %. Similarly,
the State Bank of India SBI also lowered the country’s FY22 growth forecast to
7.9% from its previous projection of 10.4 % growth.
● Mexico’s central bank expects that the Mexican economy will reach pre-pandemic
levels by Q3 2021, the country’s gross domestic product had contracted
by -8.5% last year due to pandemic-related factors. A preliminary estimate
published by national statistics agency INEGI on Thursday stated that Mexico’s
economy grew +24.8% in May compared with the same month last year.
Summary & Outlook
Fiscal authorities have, despite dwindling earnings, maintained an aggressive posture.
The government is making disbursements under the Special Public Works Programme
and has recently announced its plan to expend $1bn on the construction of 3 major
highways in the country, all to reflate the economy. With the unemployment rate at
33%, analysts are concerned about whether or not jobs would be growth elastic
especially as job creation is the medium through which growth impacts households andindividuals. Similarly, there are concerns about the discounting effect associated
inflation could have on purchasing power.
On the monetary side, the CBN in collaboration with RIFAN recently sought to reduce
the food price level by supplying 27,000metric tonnes of paddy rice to millers across the
country. There have been fears that food prices were, in the month, on the rise with
increases recorded in the prices of staples, spices, and condiments. The MPC would
consider the next inflation figures for June 2021 to determine whether MPR should be
raised when it meets in July.
In the external sector, we have continued to see net imports rise as well as a reduction in
government earnings amidst OPEC production cuts. This critically constrains CBN’s
capacity to defend the Naira against the Dollar in the long term.
On the global scene, stimulus packages have continued to boost recovery although the
Delta variant of the COVID-19 infection has now been reported in 85 countries. Full
economic recovery, therefore, depends on whether the positive sentiments and
improved consumer confidence earlier seen are sustained.
Weekly Review and Outlook
● On Monday, the landing cost of Premium Motor Spirit being imported into
Nigeria surged by more than 60 percent between December 2020 and mid-June
this year. From an average of N143.60 per liter in December, the landing cost of
petrol rose to N231.98 per liter on June 16 this year on the back of the rally in
global oil prices and the depreciation of the naira against the dollar.
● On Tuesday, the price of Automotive Gas Oil, also known as diesel, jumped to
N280 per liter amid the recent increase in global prices and naira devaluation.
● The Senate on Thursday passed the Petroleum Industry Bill and approved that
three percent of the profit made by oil firms should be shared to host
communities. The Senate also approved that 30 percent of profits accruing from
oil and gas operations by the Nigeria National Petroleum Corporation would be
set aside for exploration of oil in the frontier basin.
● Oil prices fell 2% to a one-week low on Monday after hitting their highest since
2018, as a spike in COVID-19 cases in Asia and Europe put a break on the rally
before OPEC+ Meeting.
● On Tuesday, OPEC’s chief and experts expect global oil demand will rebound
strongly in the second half of 2021 with oil inventories shrinking but warns that
coronavirus variants pose a risk to recovery.● Prices on Wednesday extended the previous day’s small gains after an industry
report showed U.S. crude stockpiles fell last week, overriding trader and investor
concerns about transportation curbs in some countries as COVID-19 cases surge.
● Oil prices rose roughly 2% on Thursday on indications that OPEC+ producers
could increase output more slowly than expected in the coming months while
rising global fuel demand causes supply to tighten.
● Prices inched lower on Friday after OPEC+ ministers delayed a meeting on
output policy as the United Arab Emirates balked at a plan to add back 2 million
barrels per day (BPD) in the second half of the year.
● Brent had a weekly growth of 0.04% (see Table 1).
Gold appreciated by 0.17% while Silver also inched up by 1.27% W-o-W (see Table 1).
● Earlier this week, the Central Bank of Nigeria approved the release of 50,000
metric tonnes of maize to 12 major producers from strategic maize reserve under
the Anchor Borrowers’ Programme. According to the CBN, the release of maize to
the companies, which is the third of such releases, will reduce the price of grain in
the market by checking the activities of middlemen who are hoarding the product
and causing artificial scarcity. The listed recipients of the grains include Premier
Flour Mills, Crown-Olam, Grand Cereals, Animal Care, Amobyn Hybrid Feeds,
Obasanjo Farms, Zartech, Wacot, Sayeed Farms, Pandagri Novum, and Premium
● Cocoa prices dived by -3.26% this week.
● Corn prices jumped by 10.90% W-o-W while Sugar appreciated by 6.23% (see
Table 1: Weekly Change in Commodity Prices
Commodity 02-Jul-21 25-Jun-21 31-Dec-20 Weekly Chg YTD Chg
Brent 75.82 75.79 51.8 0.04% 46.31%
Gold 1783.6 1780.59 1898.67 0.17% -6.06%
Silver 26.4 26.07 26.4011 1.27% 0.00%
Cocoa 2317 2395 2597 -3.26% -10.78%
Corn 582.25 525 484 10.90% 20.30%
Sugar 18.25 17.18 15.28 6.23% 19.44%
Source: Bloomberg, Proshare.ng
*Data for 2nd July 2021 is as of 4:27 pm (Nigerian Time)Outlook
● In the coming week, oil prices are expected to be mixed as OPEC+ seeks
agreement on oil output policy after initial talks end in disarray. The spread of
the Delta variant is likely to pare gains in the near term.
● Gold prices are expected to be mixed in the coming week, as the dollar
strengthens, and while the spread of the Delta variant is expected to support gold
as it can delay economic recovery.
● Cocoa prices to be bearish next week on weak global demand.
● Sugar prices are expected to be rise next week as U.S. and Brazil are expected to
constrain ethanol output in the coming months.
● Corn prices are expected to be bullish next week amid strong demand from
The currency market was bearish this week at the BDC market while it appreciated
slightly at the official window.
It depreciated against the US dollar by +1.01%, appreciated against the British Pound
by -0.56% while it remained flat against the Euro on a week-on-week (W-o-W) basis at
the BDC window.
At the I & E FX window, the Naira appreciated week-on-week by +0.10% and +0.14% at
the NAFEX window.
The Naira closed the week at $/N411.25 at the I&E FX window, at the NAFEX (spot
market) it closed at $/N410.42.
25-June-21 02-July-21 % Change
I & E FX Window ($/N) 411.67 411.25 -0.10%
NAFEX ($/N) 411 410.42 -0.14%
BDC ($/N) 495 500 +1.01%
Source: FMDQ, AbokiFX, Proshare.ng
Money market rates continued their double-digits trend this week, however, on a
W-o-W basis, both overnight rates and open buyback fell significantly.
At the close of the trading session this week, funding rates fell. Open Buyback (OBB)
closed at 12.00% while Overnight (O/N) rates closed at 12.50% indicating a W-o-W
decline of -45.45% for OBB and -45.65% for O/N rates.Money Market Rate
25-June-21 02-July-21 % Change
OBB (%) 22.00 12.00 -45.45%
O/N (%) 23.00 12.50 -45.65%
Source: FMDQ, Proshare.ng
Funding rates are expected to continue their double digits trend in the coming week in
the absence of any maturity.
Treasury Bills Market
The Treasury Bills Market started the week on a bullish note, with the average
benchmark falling by 38bps. Although the bullish sentiment was not maintained
throughout the week.
At the close of the market on Friday, average benchmark yields for T-bills fell
by -4.71% to 6.58% while OMO bills rose marginally by +1.87% W-o-W to close at
9.92%, CBN’s Special Bill fell by -2.46%.
Average Benchmark Yields
25-June-21 02-July-21 % Change
T. Bills (%) 6.90 6.58 -4.71%
(%) 9.74 9.92 +1.87%
SPEB 9.36 9.13 -2.46%
Source: FMDQ, Proshare.ng
We expect activity next week to be dictated by the market liquidity
The CBN sold N163.61 billion worth of notes against N81.72 billion offered at its NTB
auction this week. The 91-day, 182-day & 364-day notes were allotted at 2.50%, 3.50%,
& 9.15% respectively. Compared to the previous auction, rates on the 91-day & 182-day
were unchanged while the 364-day paper fell slightly by 25bps.
FGN Bond Market
The Bond market opened in a relatively bullish trend at the start of the week as demand
was seen across the board and continued for most of the trading session in the week.
At the close of the week, the overall market was bullish with buying interest seen across
The overall average benchmark yields closed at 9.62% for the week which fell W-o-W by
-2.17%.Average Benchmark Yields
25-June-21 02-July-21 % Change
Short Tenor (%) 7.60 7.51 -1.13%
Mid Tenor (%) 11.45 10.98 -4.10%
Long Tenor (%) 12.79 12.43 -2.84%
Source: FMDQ, Proshare.ng
FGN Eurobond Market
The relatively weak trend in the Eurobond market persisted this week, as renewed
covid-19 concerns coupled with the rising US inflation, continue to dampen demand
across the board.
We expect market sentiment to remain soft as inflation concerns continue
Nigerian Capital Market
● The Nigerian bourse closed the week on a positive note inching up
by +1.47%. The Nigerian Stock Exchange gained N292.39bn thus, year-to-date
return moderated to -5.11%.
● Sectoral performance across sectors tracked was significantly bullish this week as
the NSE Consumer Goods was the highest gainer for the week with +5.15% while
NSE-Oil and Gas recorded the highest decline with -1.05%. NSE-IND, NSE
Pension, NSE-30 and, NSE Banking closed the week positive
with +2.10%, +1.88%, +1.89%, and +1.34% respectively.
● In the coming week, we expect the possibility of sustained bargain hunting as
investors look to take advantage of good bargains, however, press releases from
listed companies and other macroeconomic developments are likely to impact
● In addition, we expect investors to monitor the movement of yields in the fixed