Expectations from the Markets This Week – 011121 – First Ideas Limited

Expectations from the Markets This Week – 011121

Expectations from the Markets This Week – 011121

Global Economy

  • Despite Bank of England Governor, Andrew Bailey warning in recent weeks that inflationary pressures could warrant a rapid response by the central bank, Bank of England policymaker Silvana Tenreyro said it was unclear whether a rise in the cost of borrowing before Christmas would control the escalating price of imported goods. With the economy already slowing and consumer confidence falling, she predicted a spike in prices over the next few months was likely to prove short-lived
  • US budget deficit totaled $2.77 trillion for the fiscal that ended on September 30, 2021. This is the second highest on record but an improvement from the all-time high 2020 figure of $3.13 trillion. The deficits in both years reflect trillions of dollars in government spending to tackle the devastating effects of the COVID-19 pandemic. Before the deficits of the past two pandemic-hit fiscals, the biggest deficit the US government recorded was a shortfall of $1.4 trillion in 2009 during President Barack Obama’s administration as the government spent heavily to lift the country out of a severe recession following the 2008 financial crisis
  • Last month inflation dropped to 3.1% from 3.2% in August, economists warn that the fall would be quickly reversed, and by the end of the year, it may be heading back towards 5%. A steep increase in oil and gas prices and shortages of computer chips were blamed for pushing inflation towards its highest rate of growth for a decade. Food import costs have also increased and some industries have blamed paying higher wages to attract staff as another cost forcing them to put up prices.
  • The UK’s national living wage is set to go up to 9.50 Pounds an hour from next April, meaning a pay rise for millions of low-paid workers. Ministers have accepted the Low Pay Commission’s recommendation for a 6.6% increase from 8.91  Pounds, which applies to workers aged 23 and over. For those aged 21 to 22, the minimum will increase from 8.36 to 9.18  Pounds. The government says the rise represents an increase of about £1,000 a year for a full-time worker, arguing this goes some way towards compensating the low-paid who are losing out from the £1,000 a year cut in universal credit, and the effect of inflation on household budgets.
  • According to credit rating agency S&P Global Ratings, US Inflation is expected to remain strong and last longer than initial estimates. In its report titled Lasting Effects of Temporary Inflation: Higher Prices, Lower Purchasing Power the agency noted that the level of consumer prices will be permanently higher at almost 4%, to the extent that this higher price level is not offset by higher wages, purchasing power will be permanently lower and consumer confidence will likely decline. The consumer price index (CPI) in September was up 5.4% from the same period last year, while the producer price index (PPI) increased 8.6% annually, according to the latest figures of the US Department of Labour.
  • India’s infrastructure industries grew at a seven-month low as growth in most industries eased, official data released on Friday confirmed the fears of economists who had been expecting semiconductor shortages to impact industrial growth. Core sector rose 4.4% in September as against 11.5% in August and 0.6% in the year ago period. It contracted 5% month-on-month against a decline of 1% in August.

Nigeria Economy

  • Minister of Works and Housing, Babatunde Fashola announced that the NNPC will construct 21 federal roads covering 1804.6km with N621bn in three years. The minister explained that the arrangement comes under the government’s Tax Credit Scheme. According to the Minister, nine of the selected projects are in the North-Central, three in the North-East, two in the North-West, two in the South-East, three in the South-South, and two in the South-West.
  • The Central Bank of Nigeria (CBN) launched ‘the 100 for 100 PPP initiative’- a new financial instrument that is meant to enhance local productivity and reduce importation which has been responsible for Nigeria’s foreign exchange crisis. The 100 for 100 PPP initiative will begin from 01 November 2021 empower 100 companies in 100 days, and subsequently hundreds more in the months. Beneficiaries would receive between N5 million and N25 million and have their names published in National Dailies for Nigerians to verify and confirm
  • The Federal Government, yesterday, closed bidding for four major airports with a plan to announce new concessionaires soon. Announcing the closure of the bid which is also referred to as the Request for Qualifications (RFQ) phase, the Minister of Aviation stated that the bid phase(RFQ) recorded a large expression of interest from reputable organisations worldwide. The RFQ stage will be followed with a Request For Proposal (RFP), which shall be published and sent directly to qualified bidders for their response. When it is awarded the concession will run for 20 to 30 years under a Build, Operate and Transfer (BOT) model.
  • According to the World Bank Nigeria is on track to spending N2.9tn on PMS subsidy this year. The Multilateral organization noted that this amount is more than the amount the country spends on health. Meanwhile,  the Minister of Finance also speaking at the event disclosed that subsidy would be provided for in the first half of the year; as the government is looking to complete deregulation of the sector in the second half of the year.
  • At the just-concluded 27th Nigerian Economic Summit (NES#27) World Bank’s Country Director for Nigeria, Shubham Chaudhuri, stated that Nigeria’s per capita income has remained static in 40 years. He urged the economy managers to quickly assemble potent strategies to harness the robust potential of the country. In 1981, according to World Bank data, Nigeria’s PCI was $2,180.2 and $2,097 in 2020, meaning there has been no appreciable change in four decades. 

Summary and Outlook

In the week, the IMF country representative noted that Nigeria’s per capita income remained the same in 40 years and this has generated comments, apart from inherent structural and policy challenges that have stalled the country’s economic progress, the country’s high population growth rate witnessed in the period was high. According to the IMF, Nigeria’s population in 1981(40 years ago) was 75.441m, today the country’s population is estimated at 211m over 179% growth. This sends a clear signal about what the future holds for  Nigerians.  A situation where economic growth  rate lags population growth considerably, the welfare of the common man suffers.

Commodities Market

Weekly Review and Outlook



  • The World Bank Country Director for Nigeria, Shubham Chaudhuri, has decried the continuous spending of the Federal Government of Nigeria on petrol subsidies. He said the subsidy, which is on track to gobble about N2.9tn this year, can be channeled to primary healthcare, basic education, and rural roads.
  • The latest audited report of the Nigeria Extractive Industries Transparency Initiative (NEITI) revealed that gas flaring payments made by oil companies in Nigeria increased from $15.5 million to $307.4 million between 2018 and 2019.
  • The GMD of NNPC Limited, Mele Kyari, noted that the corporation requires between $1.6 billion and $2.7 billion to improve the supply and distribution of petroleum products, revamp Liquefied Petroleum Gas (LPG) infrastructure, and build Compressed Natural Gas (CNG) plants in the country. He added that Nigeria would need a refining capacity of about 1.52 million bs/d to meet its petrol requirement which is expected to grow from 15.1m MT in 2020 to 17.3 m MT by 2025.
  • A former Governor of the Central Bank of Nigeria, Lamido Sanusi, on Tuesday noted that the figures for petrol importations into Nigeria were inflated when oil prices went up during the administration of Goodluck Jonathan and Muhammadu Buhari.
  • A report released by the African Energy Chamber revealed that the lack of funds, technology, and experience on the part of most of Africa’s national oil companies (NOCs) and local independent producers would limit their capacity to pick up the exploration and production activities left by the International Oil Companies (IOCs) in Africa.
  • The NNPC through its subsidiary, the Petroleum Products Marketing Company, has said the annual subsidy on Premium Motor Spirit (petrol) will rise to N3tn if the current market realities persist.


  • Oil prices climbed on Monday, extending pre-weekend gains to hit multi-year highs as global supply remained tight amid solid fuel demand in the United States and elsewhere in the world as economies pick up from coronavirus pandemic-induced slumps.
  • Some climate economists have argued that setting the global average price of carbon per tonne significantly higher at $100 or more may be necessary to incentivize net zero emissions by 2050.
  • The leaders of the 27 European Union states, despite deep division, have opted for moderate approaches such as those contained in the “toolbox” to address the current energy crisis in Europe.  The toolbox presented in the “Commission Communication on tackling rising energy prices” contains useful measures for both the short and the longer term.
  • The United Nations on Wednesday called on G20 economies to ensure that the net-zero commitments of financial institutions are robust, backed by science, and ended financing for new fossil fuel projects.
  • China’s thermal coal futures on Wednesday fell to their lowest in more than a month, marking a sixth consecutive day of declines after the state planner said it would conduct “clean up and rectification” work on coal storage sites.
  • The New Prime Minister of Norway, Jonas Gahr Store, said the stoppage of oil and gas production in Norway would jeopardise the European energy transition and put an end to the industrial transition needed to achieve net zero-emission.
  • Top U.S. oil firms Chevron Corp, Exxon Mobil Corp, and ConocoPhillips have rejected a direct role in wind and solar, putting less of their finance into energy transition plans compared with the Europeans. Most US fund managers also said they prefer oil firms to generate returns from their existing portfolio and give shareholders cash to make their own renewable bets.
  • The Secretary-General of OPEC, Mohammad Sanusi Barkindo, on Thursday, warned that the global tight supply of gas could worsen given the limited investment in the industry.
  • Oil prices edged up on Friday but were headed for their first weekly losses in at least eight weeks after U.S. oil stocks rose more than expected and Iran flagged it was resuming talks with Western powers which could lead to an end to sanctions
  • Brent had a weekly decline of -0.92% (see Table 1).


Gold depreciated by -1.06% while Silver also dipped by -2.18% W-o-W (see Table 1).


  • Cocoa prices depreciated by -0.58% this week.
  • Corn prices gained by 5.83% W-o-W while Sugar gained by 1.05% (see Table 1).

Table 1Weekly Change in Commodity Prices

Commodity29-Oct-2122-Oct-2131-Dec-20Weekly ChgYTD Chg

Source: CNBC

*Data for 29th October 2021 is as of 5:54pm (Nigerian Time)


  • In the coming week, oil prices are expected to rise on support by expectations that the petroleum exporting countries, Russia and their allies, would maintain production cuts.
  • Gold prices are expected to be bearish in the coming week, as dollar rises on inflation data.
  • Cocoa prices to rise in the coming week as recent dry, sunny weather is expected to improve the outlook for production in Ivory Coast.
  • Sugar prices are expected to appreciate next week recent as strength of energy prices is expected to provide some support, potentially leading to more use of cane to produce biofuel ethanol in Brazil rather than sugar.
  • Corn prices are expected to be bullish next week amid strong demand from Mexic

Fixed Income and Money Market 

Currency Market

The Naira depreciated slightly at the I & E FX window for most of the trading session this week. At the close of trading on Friday, it closed at N415.10/US$ indicating a week-on-week (W-on-W) fall of +0.01% while at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window it fell more significantly by +1.24%.

Average Benchmark Yields
22-Oct-202129-Oct-2021% Change
I & E FX Window415.07415.10+0.01%
NAFEX ($/N)413.48418.6+1.24%

Source: FMDQ

Money market rates were elevated this week despite several liquidity inflows.

At the close of the trading on Friday, open buy-back (OBB) and overnight rates (O/N) was 18.00% and 18.5% respectively indicating a W-o-W fall of -5.26% and -3.90% for OBB and O/N.

Money Market Rate
 22-Oct-202129-Oct-2021% Change
OBB (%)19.0018.00-5.26%
O/N (%)19.2518.50-3.90%

Source: FMDQ

We expect rates to hover around current levels barring any inflows from the Apex bank.

Treasury Bills Market

The treasury bills market was mostly quiet this week, with a marginal fall in yields. At the close of trading on Friday, average benchmark yield for T. Bills rose by +1.86%, yields on OMO bills fell by -1.09% while yields on CBN’s special bills was up by +1.34%

The DMO sold N235.05bn worth of notes against N150.05bn offered at its NTB auction this week. The 91-day, 182-day and 364-day notes were allotted at 2.50%, 3.50% and 6.99% respectively.

Average Benchmark Yields
22-Oct-202129-Oct-2021% Change
T. Bills (%)5.385.48+1.86%
OMO Bills (%)6.446.37-1.09%

Source: FMDQ

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

FGN Bond Market

The bond market was bullish this week as the bulls dominated most of the trading session. At the close of trading on Friday, the trend was sustained, with selling pressure across the board.

The overall average benchmark yields closed at 8.32% at the close of trading indicating a W-on-W rise of -0.93%.

Average Benchmark Yields
22-Oct-202129-Oct-2021% Change
Short Tenor (%)5.645.50-2.57%
Mid Tenor (%)8.778.74-0.36%
Long Tenor (%)12.2212.11-0.91%

Source: FMDQ

FGN Eurobond Market

The Eurobond market was relatively bearish today, with selloffs seen across several maturities.  Average benchmark yield rose by 1bps to 6.52%. 

Nigerian Capital Market

  • The equity market witnessed a bullish trend this week, supported by gains in large to mid-cap stocks and renewed buying interest. Investors gained N144.04bn W-o-W as NGXASI Inched up by +0.66%, to Close the Week Positive. Year-to-date return moderated to +4.39%, while the market capitalization settled at N21.94 trillion.
  • The volume and values of shares traded on the exchange this week advanced by +91.80% and +87.62% respectively.
  • Sectoral performance across sectors tracked was positive this week as the NGX Insurance was the highest gainer for the week with +5.28%. NGX Oil and Gas, NGX Banking, NGX Consumer Goods and NGX-IND closed positive with +4.04%, +2.43%, +1.52% and +0.49% respectively.
  • Market breadth for the week closed positive with 47 gainers led by UPL and AIICO as against 25 losers led by GLAXOSMITH and UNIVINSURE

Chart 1
: Movement of NSEASI Index Points 22 Oct. 2021 – 29 Oct. 2021

Proshare Nigeria Pvt. Ltd.

Source: NSE


The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a negative movement in Market capitalization and NSI. The NSI closed the week negative with 746.86 points representing a downtick of -0.09% while the Market capitalization closed the week negative with a downtick of -0.09% to N617.04bn.

Dangote and Toni Index   

Dangote Index closed the week negative with 146.28 basis points from 146.63 basis points recorded the previous week, representing a decline of -0.24%.

DANGSUGAR recorded a decline of -5.56% while DANGCEM and NASCON remained flat W-o-W.

Table 1: Dangote Index W-o-W Change

Company22-Oct-2129-Oct-21WoW Chg
Source: NGX

Furthermore, the Elumelu Index closed positive with 114.26 basis points from 113.37 basis points recorded the previous week, a W-o-W growth of +0.79%.

AFRIPRUD, TRANSCOHOT closed the week negative with -6.62%, -9.88% while TRANSCORP and UBA grew by +4.90% and +2.38% W-o-W respectively. UBCAP remained flat W-o-W.

Table 2:Elumelu Index W-o-W Change

Company22-Oct-2129-Oct-21WoW Change
Source: NGX


In the coming week, we expect savvy investors to take positions in stocks with attractive pricing as they monitor the recent earnings announcements. Other macroeconomic developments are also 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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