weekly review and outlook – First Ideas Limited

weekly review and outlook

Expectations from the Markets This Week – 230821

Global Economy

  • Data from the Office for National Statistics reveals that the UK’s GDP rose exponentially to 4.8% in Q2 2021 due to a hike in consumer spending following the gradual relaxation of COVID-19 measures in the country. The output growth is attributed to the significant rise in the services sector, particularly owing to the +87.8% surge in the accommodation and food services sector. However, experts predict that the recovery witnessed might stall in the long run due to severe supply chain pressures as demand resurges. Thus, the economy is estimated to grow at a reduced pace of 0.2-0.3% in Q3 2021.
  • China’s production slowed to 8.1% in July from 12.1% recorded in June 2021 on account of recent floods and resurgence of the coronavirus pandemic which has disrupted business productivity.  According to Iris Pang, the chief economist, the decline in industrial output can be attributed to shortfalls in the supply of semiconductor chips. Consequently, urban unemployment also appreciated to 5.1% in July.
  • Following Q1 2021’s dip, Japan’s economy beat experts’ forecasts in Q2 2021 as GDP expanded by 1.3% on an annualized basis supported by the ease of lockdown restrictions in the Asian country. However, ahead of Q3 2021, experts project that economic growth will taper on account of the state of emergency imposed in the last days of the Tokyo 2020 Olympics by the government due to the surge in the nation’s recorded infections. 
  • According to analysts, the U.S and China are trading places in the economic growth race as America’s GDP grew by 12.2% Y-o-Y in Q2 2021 with the latter’s GDP rising only by 7.9% in the same period. Analyst’s attribute this to the disparity in their coronavirus pandemic responses. China’s aggressive response contrasts America’s recovery response.

Nigeria Economy

  • According to NBS data released on Tuesday, Headline inflation dipped to 17.38% Y-o-Y in July from 17.75% in June 2021. On a month-on-month basis, the general CPI index rose by 0.93% in the month of July.  Available data also suggests that food inflation waned from 21.83% in June to 21.03% in July. Core CPI appreciated Y-o-Y by +13.72% which is 63 basis points higher than the +13.09% inflation figure recorded in June 2021.       
  • According to recent data from the Central Bank of Nigeria (CBN), the Federal Government borrowed N2.4tr from the CBN through the Ways and Means facility in H1 2021. Thus, the Federal Government’s total borrowing from the CBN increased by +2286% between 2015 and 2021 to reach N15.51 tr. According to Section 38 of the CBN Act, 2007, the total amount of such Ways and Means advances shall not at any time exceed 5% of the previous year’s actual revenue of the Federal Government. The current outstanding is more than 60% of FGN’s actual revenue in 2020 which violates the 5% provision. The Act also prevents the CBN from granting such loans if outstanding advances are yet to be paid. The N15.51tr loan excludes Nigeria’s N33.11 tr total stock of public debt reported by the DMO as of March 2021. 
  • The Nigerian Senate, following the recommendation of the Senate committee on public accounts which is currently reviewing the 2015 report from the Office of the auditor general of the Federation (OAuGF), ordered the Executive Chairman of the Federal Inland Revenue Service (FIRS) to recover and remit N17.69bn of tax evasion revenue owed by firms with untraceable addresses to the Consolidated Revenue Fund within 90 days. In addition, the FIRS boss was mandated to sanction all officials involved in an alleged contract overlapping and splitting between 2014 & 2015 and to remit a sum of N32.45m to the government within 90 days, with evidence of compliance submitted to the auditor general and the Committee on Public Accounts.  
  • At the Mid-year Economic Review and Outlook 2021, organized by the CIBN Centre for Financial Studies, the Director of the Monetary Policy Department of CBN, Hassan Mahmud noted that the Nigerian economy is on the right track despite uncertainties in the domestic and international economy. The CBN Director projects that if policy changes particularly relating to exchange rate and insecurity are effectively administered, GDP growth will reach 3% FY2021 while the inflation rate would moderate to 13% by the year end.
  • The Federal Government opened the bid for the concession of four international airport terminals in Lagos, Abuja, Port Harcourt, and Kano to firms or consortia with a track record in airport terminal management and a net worth of N30bn per bidder. Firms that meet the pre-qualification requirements shall execute a Non-disclosure Agreement before they can proceed to the Request for Proposal (RFP) stage. A memo from the permanent secretary of the Federal Ministry of Aviation itemizes the government’s plans to develop the surrounding communities into commercial hubs through a Private-Public partnership.
  • Available data from the Federal Accounts Allocation Committee (FAAC) suggests that Local government areas in Nigeria received an aggregate of N4.5tn out of the N4.86tn allocated to them between 2018 and 2020. This suggests that revenue allocated to this arm was pilfered by state political actors using ministries and agencies rendering the LGAs unable to carry out their functions.

Summary and Outlook

Inflation figures for the month of July turned out to be another bolt from the blue. Analysts had estimated a 17.5% Y-o-Y growth in the headline CPI, but the figures came in at 17.38% a figure which marks the sharpest dip in inflation since April when it began to drop. However, with core inflation rising, the long-term outlook for inflation is disturbing. Nigerians rue the burden of the inflationary tax which arises from the high domestic cost of production and the massive ways and means spending the government has continued to deploy in financing its deficits. The fact that the FG has continuously breached the CBN Act by borrowing more than five percent of the preceding years revenue from the CBN thereby incurring a debt of 2.4tr in H1 2021 and 15.5tr in the last five years is a source of concern. Economists have noted that with the inflationary tax, the proposed removal of subsidy and the new toll levies soon to be introduced poor Nigerian households are set to suffer a further depreciation in their real income. The World bank as well as Analysts have recommended the halt of the CBN finance of the budget deficit and the adoption of a fairly more progressive tax system which would see the wealthy pay more through luxury and sin taxes.

Commodities Market

Weekly Review and Outlook



  • President Muhammadu Buhari on Monday Signed the Petroleum Industry Bill 2021 into law, breathing life into a bill that has stalemated for almost 2 decades in the National Assembly. The president later Wednesday commenced the implementation of the newly signed Petroleum Industry Act (PIA) by approving a steering committee headed by the Honorable Minister of State, Petroleum Resources, Timipre Sylva, to oversee the implementation process.
  • Oil marketers under the aegis of Independent Petroleum Marketers Association of Nigeria (IPMAN) have called out the Department of Petroleum Resources (DPR) over new charges for renewal or acquisition of licenses for petroleum products storage and sale outlets in the country.
  • The Nigeria Customs Service on Monday decried the smuggling of subsidized Premium Motor Spirit (petrol) out of Nigeria in large quantities. The Service attributed the smuggling to the approval given by the DPR for the establishment of filling stations along the land borders and the supply of refined oil to those stations by the NNPC.
  • According to the Minister of Finance, Budget, and National Planning, Zainab Ahmed, oil prices in the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper was put at $57 per barrel for 2022 and 2023 and $55 per barrel for 2024 while oil production was put at 1.88 million barrels per day (mb/d) for 2022, 2.23 mb/d for 2023 and 2.22 mb/d for 2024.
  • An Energy Vanguard survey found that the price of Liquefied Petroleum Gas (otherwise called cooking gas) rose by 33% month-on-month from N360/kg in July to N480/kg in August while the price of 12.5kg cylinder is now selling for N6,000 in different parts of Lagos. The increase was attributed to the re-imposition of VAT on imported LPG.
  • The NNPC, China Machinery Engineering Company (CMEC) and General Electric (GE) on Wednesday signed a contract for the engineering, procurement, and construction of the 50MW Maiduguri Emergency Power Project.
  • According to an NBS data released on Thursday, the average price of petrol increased by 15.51% Y-o-Y and increased M-o-M by 0.18% to N165.91 in July 2021 from N165.61 in June 2021 while the average price for refilling a 12.5kg cylinder for LPG (Cooking Gas) increased by 3.11% M-o-M and by 7.16% Y-o-Y to N4,422.32 in July 2021 from N4,289.05 in June 2021.


  • Oil prices were down by more than 1% on Monday, dropping for a straight third session as official data showed that refining throughput and economic activity taper down in China amidst fresh COVID-19 outbreaks.
  • Indian Strategic Petroleum Reserves Ltd, a company that manages India’s oil inventories, said it has begun selling oil from its Strategic Petroleum Reserve to state-run refiners as it implements a new policy to commercialize its federal storage by leasing out space.
  • Oil prices fell for a seventh straight session on Friday towards three-month lows as investors became less bullish about fuel demand due to a surge in cases of the COVID-19 Delta variant that is hitting travel.
  • Brent had a weekly decline of -7.02% (see Table 1).


Gold appreciated by 0.44% while Silver dipped by -2.52% W-o-W (see Table 1).


  • Cocoa prices declined by -1.76% this week.
  • Corn prices depreciated by -5.74% W-o-W while Sugar dipped by -1.41% (see Table 1).

Table 1Weekly Change in Commodity Prices

Commodity20-Aug-2113-Aug-2131-Dec-20Weekly ChgYTD Chg

Source: CNBC

*Data for 20th August 2021 is as of 5:17pm (Nigerian Time)


  • In the coming week, oil prices are expected to dip further on COVID surge, worries about more supply.
  • Gold prices are expected to be mixed in the coming week, pressured by the Federal Reserve’s Tapering policy and COVID-19 concerns in the market.
  • Cocoa prices to be choppy as the return of COVID around the world is expected to hurt demand.
  • Sugar prices are expected to continue its rally next week as the prospect of lower production in Centre-South Brazil is likely to shift the global market into deficit.
  • Corn prices are expected to be mixed next week as spreading virus fuels demand concerns.

Fixed Income and Money Market 

Currency Market

The Naira continued its bearish run this week, at the BDC market and I & E FX window majorly attributed to the scarcity of FX.

At the I & E FX window, the domestic currency depreciated by +0.21% on a week-on-week (W-o-W) basis to close at N411.67/US$ at the close of trading on Friday.

Against the US dollar at the BDC it closed at US$/N517 depreciating by +0.78%, against the British pound it also fell by +1.48% to close at £/N708, and against the Euro by 1.00% to close at €/N606.

 The Naira closed the week at $/N411.67 at the I&E FX window, at the NAFEX (spot market) it closed at $/N411.20

Average Benchmark Yields
13-Aug-202120-Aug-2021% Change
I & E FX Window410.80411.67+0.21%
NAFEX ($/N)411.13411.20+0.02%
BDC ($/N)513517+0.78%

Source: FMDQ, AbokiFX

Money Market

Interbank rates were elevated this week, as liquidity levels remained depressed causing rates to continue in its double digits trend.

At the close of the session on Friday, funding rates rose significantly. Open Buyback (OBB) closed at 23.33% while Overnight (O/N) rates closed at 23.83% indicating a W-o-W rise of +39.28% for OBB and +38.14% for O/N rates.

Money Market Rate
 13-Aug-202120-Aug-2021% Change
OBB (%)16.7523.33+39.28%
O/N (%)17.2523.83+38.14%

Source: FMDQ

Funding rates are expected to trade in double digits trend in the coming week in the absence of any maturity.

Treasury Bills Market

The bills market was mixed this week, with the yield in treasury bills edging upward while average benchmark yields for OMO bills fell at the close of trading this week.

At the close of the market this week, average benchmark yields for T-bills rose by +0.33% to 4.69%, OMO bills declined by -22.24% W-o-W to close at 5.95%, CBN’s Special Bill was flat to close at 5.66%.

Average Benchmark Yields
13-Aug-202120-Aug-2021% Change
T. Bills (%)4.674.69+0.33%
OMO Bills (%)7.655.95-22.24%

Source: FMDQ

We expect activity next week to be dictated by the market liquidity situation. 

FGN Bond Market

The FGN bond market this week was also mixed as we saw buying interest at the mid and long end of the curve while sell interest was seen for short tenor notes.

The overall average benchmark yields closed at 8.55% for the week which fell W-o-W by -0.28%.

Average Benchmark Yields
13-Aug-202120-Aug-2021% Change
Short Tenor (%)5.605.70+1.70%
Mid Tenor (%)10.129.85-2.69%
Long Tenor (%)12.3712.15-1.81%

Source: FMDQ

At today’s bond auction, the DMO offered N150.00 billion worth of FGN FEB 2028, FGN MAR 2036 and FGN MAR 2050, with stop rates of 11.60%, 12.75% and 12.80%, respectively. The subscription stood at N360.02 billion, while N260.09 was allotted. The auction was oversubscribed by +140.01%. 

FGN Eurobond Market

Selling was seen in the Eurobond market this week, as the global risk-off sentiment dampened activity in the market.

Nigerian Capital Market

  • The Nigerian bourse closed the week on a negative note with some with selling interest in stocks like MEYER. The NGXASI closed the week with a decline of -0.10%. The Nigerian Stock Exchange lost N20.45bn, year-to-date return moderated to -1.96%, while the market capitalization settled at N20.57 trillion.
  • The volume of stocks traded on the exchange this week rose by +6.88% and the value declined by -1.06% respectively.
  • Sectoral performance across sectors tracked was bearish this week as the NGX Premium was the highest gainer for the week with +2.28% while NGX Mainboard and NGX Consumer Goods closed negative with -1.48% and -6.31% respectively.
  • Market breadth for the week was positive with 36 gainers led by HONYFLOUR and PHARMDEKO as against 33 losers led by MEYER and SCOA

Chart 1: Movement of NSEASI Index Points 13 Aug. 2021 – 20 Aug. 2021

Proshare Nigeria Pvt. Ltd.

Source: NSE


The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a negative movement. The NSI and Market capitalization closed the week at 743.07 points and N639.77 with a decline of -1.25% and -1.25% respectively.

Dangote and Toni Index   

Dangote Index closed the week positive with 131.46 basis points from 127.36 basis points recorded the previous week, representing a growth of +3.22%.

NASCON  closed flat W-o-W. DANGCEM and DANGSUGAR recorded a growth of +3.31% and +2.00% respectively.

Table 1: Dangote Index W-o-W Change

Company13-Aug-2120-Aug-21WoW Chg
Source: NGX,  

Furthermore, the Toni Index closed negative with 97.48 basis points from 97.82 basis points recorded the previous week, a W-o-W decline of -0.35%. 

AFRIPRUD and TRANSCOHOT closed flat, UBA and UBCAP and closed the week negative with -0.66%, -1.01% respectively while TRANSCORP and closed positive at +2.11% W-o-W.

Table 2: Toni Index W-o-W Change

Company13-Aug-2120-Aug-21WoW Change
Source: NGX


 In the coming week, we expect the market to be choppy with some slight profit taking and bargain hunting as the half year earnings season fades off. However, other macroeconomic developments are likely to impact investors’ decisions.

In addition, we expect investors to monitor the movement of yields in the fixed income market.

About the Author


First Ideas Limited is an investment and financial advisory company established in 1994 to provide advisory services to high net worth individuals, trust funds, financial institutions and medium sized companies in growth sectors.

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