Expectations from the Markets This Week – 151121
Global Economy
- According to the Bureau of Economic Analysis (BEA) estimates, US Real GDP grew by only 2% in the third quarter (Q3 2021). This is much lower than the 6.7% growth recorded in Q2 2021, and the 6.3% growth registered in Q1. The slow economic growth was attributed to a slowdown in consumer spending; white house had ended the jobless benefit in September because it served as a disincentive to work. Consumer spending growth was 1.6% annualized rate in Q3 2021. In Q2, it was 12% and in Q1, it was 11.4%.
- According to official sources, UK’s real GDP growth for Q3 2021 was 1.3% down from 5.5% in the previous quarter. After recovering from its worst decline in 300 years, the country’s economy slowed over the summer on account of supply chain breakdowns and energy shortages. All the major economies have recovered more quickly than the UK economy, which remains 2.1% below its pre-pandemic peak. Germany and Italy are 1.5% and 1.4% below their pre-pandemic best while the US has jumped ahead to be in positive territory by 1.4%. The country’s closest neighbor’s, France, is only 0.1% below where it was before lockdowns were imposed last year.
- Data from the US Bureau of Labour Statistics suggests that the US consumer price index surged by 6.2% from a year ago, the most since December 1990. That compared with the 5.9% Dow Jones estimate. Month-on-month, the CPI increased 0.9% against the 0.6% estimate. Meanwhile, the US producer price index (PPI) which is a measure of wholesale prices, climbed 8.6% year-on-year, matching the all-time high PPI set in September 2021.
- The US Senate approved on Tuesday the $1 trillion infrastructure bill meant for the rebuilding of the nation’s deteriorating roads and bridges and funding new climate resilience and broadband initiatives, delivering a key component of President Biden’s agenda. The vote, 69 to 30, was uncommonly bipartisan. Meanwhile, the Democrats still have much work to do on the second pillar of Biden’s domestic program: ‘Build Back Better’ a sweeping expansion of the social safety net and programs to fight climate change prepared at a price tag of $1.75 trillion, the biggest expansion of the U.S. safety net since 1960.
- Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed announced that the FEC has approved the 2021-2025 National Development Plan which projects N348.7tn worth of investments. The National Development Plan, which is a successor program to the Economic Recovery and Growth Plan which expired in December 2015. The NDP which has an investment size of N348.7tn, will be funded by both the government and the private sector. The public sector would contribute N49.7tn while the private sector would supply N298.3tn.
- Recent data from the CBN shows that farmers enrolled in the CBN Anchor Borrowers’ Programme owed the CBN a total of N463bn as of the end of March 2021. The ABP which was launched in November 2015, to reverse the reduce the country’s food import bill, had disbursed the sum of N615.4bn to 3.04 million farmers. Meanwhile, only N152.3bn had been repaid by the beneficiaries while N463bn remained outstanding. The situation with insecurity was identified as the cause of the high default rate.
- Data released by the National Bureau of Statistics on internally Generated Revenue generated by the 36 states for the half-year 2021 showed that Lagos State ranked highest generating N267.23bn IGR, followed by the Federal Capital Territory with N69.07bn and Rivers State with N57.32bn. Yobe states generated the least N4.03bn. In the first quarter of 2021, all 36 states, generated an IGR of N398.26bn while in the second quarter they earned N450.86bn. The IGR report was categorized under five categories, namely: Pay As You Earn, direct assessment, road taxes, other taxes, and revenue from Ministries, Departments, and Agencies. Among the IGR categories, PAYE contributed the highest which amounted to N488.12bn; this was followed by revenue from the MDAs which amounted to N173.56bn.
- During the media unveiling of the Nigeria-Bulgaria Business Exchange Platform. The Minister of Industry, Trade, and Investment, Otunba Adeniyi Adebayo noted that Nigeria is encouraging both domestic and international investment, through strengthening and coordination of investment policies. According to the Bulgarian Ambassador who was present at the unveiling, the platform is meant to improve bilateral cooperation between Nigeria and Bulgaria. Foreign trade statistics show that Nigeria’s largest trade with Bulgaria is in inorganic chemicals and precious metal compounds.
- The Chartered Institute of Taxation of Nigeria (CITN) has noted that tax credit schemes have helped to bridge the gap in road infrastructure in Nigeria. In a statement signed by the institute’s Registrar, the institute lauded the approval given by the Federal Executive Council (FEC) to the Nigerian National Petroleum Corporation (NNPC) for the construction and rehabilitation of 21 roads under the road infrastructure tax credit scheme. The body encouraged parties involved in the implementation of the project to keep to the terms and conditions associated with the MoUs.
- At the budget defence session in Abuja on Thursday, the House of Representatives Committee on Tourism and Culture decided to withhold the budget for the National Arts Theatre until details of the Memorandum of Understanding signed by the Federal Government, and the Bankers’ Committee are presented. The lawmakers questioned why the Federal Government would be spending huge sums of money on the facility when it has been privatized. The MOU which was signed in February was expected to see the Bankers’ Committee commit up to N21.8bn to the project while managing the facility for 21 years under a new board.
Summary and Outlook
With Nigeria’s Q3 2021 GDP data billed for release at the end of November, analysts express modest optimism about growth on the back of improved oil production (in comparison with 2020) as well large public sector spending. However, the Manufacturing sector has had to contend with rising energy prices while output in the Agricultural sector has continued to be affected by the state of insecurity in many food-producing areas.
Meanwhile, the risk of imported inflation heightened on account of US inflation data which rose to (6.2%) – a 31-year high. With major economies like the US (2%) and the UK (1.3%) recording lower than projected Q3 2021 growth figures, the 5.9% global growth outlook appears doubtful.
Commodities Market
Weekly Review and Outlook
Energy
Domestic
- The Executive Secretary of Nigerian Association of LPG Marketers, Bassey Essien, on Monday noted that the reintroduction of customs duty and VAT on imported LPG has halted the importation of the product by some importers. This could further increase the price of the cooking gas in the country.
- According to OPEC’s November 2021 Oil Market Monthly Report, Nigeria’s oil output dropped by -19% from 1.25mb/d in September to 1.23m b/d in October 2021 based on direct source. From secondary sources, Nigeria’s crude oil output dipped by -45% from 1.40mb/d in September to 1.35m b/d in October 2021. Nigeria’s rig count also declined from 11 to 9.
- Analysts have observed that petrol subsidy and underproduction of crude oil continue to drain the country’s treasury and unless the government summons the courage to resolve both, the country’s finances will get worse.
- Analysts at PricewaterhouseCoopers (PwC) found that African countries need an estimated $2.8tn investment to transit from their current energy base and achieve the global net-zero emission target by 2050.
- The Minister of State for Petroleum Resources, Mr. Timipre Sylva, on Tuesday, noted that the Federal Government has set aside N250bn for willing investors in autogas assembly plants, as part of efforts to ensure that the autogas conversion of vehicles yielded the desired results.
- OPEC’s Secretary-General, HE Mohammad Sanusi Barkindo, on Tuesday, noted that about $450bn worth of new refinery projects and expansion of existing units would be invested in Nigeria and other developing nations between 2021 and 2045.
- The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has said that it would become compulsory for oil and gas companies operating in the country to disclose their owners under the Beneficial Ownership (BO) Reporting system. The NURPC disclosed that the Nigerian Oil and Gas Asset Beneficial Ownership Register (NOGABOR) portal has been developed and is onboard.
- The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed that the Federal Government is planning to replace fuel subsidy with transport subsidy to pacify the effect of subsidy removal on the masses for a short period.
Foreign
- Crude oil prices rose on Monday on the back of positive signs for global economic growth, supporting energy demand, while Saudi Arabia’s state-owned producer Aramco raised the official selling price for its crude.
- Although Japan has cut its target for coal use and raised those for renewables, it declined to sign the COP26 coal pledge of 40 countries to phase out coal.
- The Bank of America reported that Brent crude prices could rise to as high as $120 per barrel in the first half of 2022 due to the global gas crisis, booming air travel with international flights returning, and a comeback of Asian demand.
- The United Kingdom (UK), host of the COP26 climate summit, declined to join the Beyond Oil & Gas Alliance (BOGA). An alliance that intends to pledge a fixed date for countries to phase out oil and gas production. The UK argued that ending domestic oil and gas production will leave a gap in the country’s energy supply.
- South Africa’s Energy Minister, Gwede Mantashe, said coal-fired power generation would continue to be part of South Africa’s energy mix, noting that he would go to court if necessary to keep coal power plants alive.
- A group of countries, companies, and cities on Wednesday committed to phasing out fossil-fuel vehicles by 2040, as part of efforts to cut carbon emissions and curb global warming. While Ford, General Motors, and India have signed the agreement, Toyota, Volkswagen, US, China, and Germany rebuff the agreement.
- The latest OPEC’s report revealed that the global oil demand is now estimated at 96.4mb/d for 2021 and 100.6mb/d for 2022. The downward review for 2021 demand was predicated on slower than anticipated demand from China and India in 3Q 2021.
- Oil prices slipped on Friday, wiping out gains from the previous session, as the dollar continued to rise on bets the U.S. central bank will bring forward plans to raise rates to tame inflation.
- Brent had a weekly decline of -0.36% (see Table 1).
Metals
Gold appreciated by 2.83% while Silver also gained by 5% W-o-W (see Table 1).
Agriculture
- Cocoa prices appreciated by 2.90% this week.
- Corn prices inched up by 3.20% W-o-W while Sugar gained by 1.71% (see Table 1).
Table 1: Weekly Change in Commodity Prices
| Commodity | 12-Nov-21 | 05-Nov-21 | 31-Dec-20 | Weekly Chg | YTD Chg |
| Brent | 82.3 | 82.6 | 51.8 | -0.36% | 58.88% |
| Gold | 1864.3 | 1813 | 1898.67 | 2.83% | -1.81% |
| Silver | 25.31 | 24.105 | 26.4011 | 5.00% | -4.13% |
| Cocoa | 2522 | 2451 | 2597 | 2.90% | -2.89% |
| Corn | 572.75 | 555 | 484 | 3.20% | 18.34% |
| Sugar | 19.88 | 19.6 | 15.28 | 1.43% | 30.10% |
Source: CNBC
*Data for 12th November 2021 is as of 5:40pm (Nigerian Time)
Outlook
- In the coming week, oil prices are expected to hold steady as the dollar continues to firm on expectations that the U.S. central bank will bring forward an increase to interest rates to tame inflation.
- Gold prices are expected to continue its upward trend in the coming week, as inflation fears grow.
- Cocoa prices are expected to be mixed in the coming week as growing expectations for a second bumper harvest in main growers Ivory Coast and Ghana will likely weigh on prices.
- Sugar prices are expected to appreciate next week on tight global supply.
- Corn prices are expected to be dip marginally next week as U.S. Department of Agriculture raises corn yield.
Fixed Income and Money Market
Currency Market
The Naira started the week on a bearish tone, however, on Wednesday 8 November 2021, the Naira appreciated by 0.08% at the I & E FX window which was maintained throughout the week.
The Naira closed at N415.10/US$ on Friday, indicating a week-on-week (W-on-W) depreciation of the Naira. At the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window it also depreciated by +0.05%.
| Average Benchmark Yields | |||
| 05-Nov-2021 | 12-Nov-2021 | % Change | |
| I & E FX Window | 414.3 | 415.10 | +0.19% |
| NAFEX ($/N) | 413.57 | 413.79 | +0.05% |
Source: FMDQ
Money Market
Money market rates fell to record lows this week supported by significant liquidity inflows. However, the single digits rates did not last till the end of the week.
At the close of the trading on Friday, open buy-back (OBB) and overnight rates (O/N) settled at 14.50% and 15.25% respectively indicating a W-o-W rise of +20.83% and +23.18% for OBB and O/N.
| Money Market Rate | |||
| 05-Nov-2021 | 12-Nov-2021 | % Change | |
| OBB (%) | 12.00 | 14.50 | +20.83% |
| O/N (%) | 12.38 | 15.25 | +23.18% |
Source: FMDQ
We expect rates to hover around current levels barring any inflows from the Apex bank.
Treasury Bills Market
The Bills market started the week on quiet sentiments, closing the week on a bullish note.
At the close of trading on Friday, the market was bullish with selling interest seen across all maturities. Average benchmark yield for T. Bills fell by -2.72%, yields on OMO bills fell by -7.70% while yields on CBN’s special bills dipped by -11.01%
| Average Benchmark Yields | |||
| 05-Nov-2021 | 12-Nov-2021 | % Change | |
| T. Bills (%) | 5.33 | 5.19 | -2.72% |
| OMO Bills (%) | 6.09 | 5.62 | -7.70% |
| SPEB | 5.51 | 4.90 | -11.01% |
Source: FMDQ
We expect activity next week to be dictated by the market liquidity situation.
The DMO sold N196.17 billion worth of notes against N150.82 billion offered at its NTB auction this week. The 91-day, 182-day & 364-day notes were allotted at 2.50%, 3.50%, and 6.50%, respectively. Compared to the previous auction, rates on the 91-day & 182-day were unchanged while the 364-day paper fell by 49bps.
FGN Bond Market
The bond market was relatively quiet this with a bearish bias. At the close of trading on Friday, the market closed on a mixed note. Overall average benchmark yields closed at 8.31%.
| Average Benchmark Yields | |||
| 05-Nov-2021 | 12-Nov-2021 | % Change | |
| Short Tenor (%) | 5.33 | 5.27 | -1.18% |
| Mid Tenor (%) | 8.85 | 8.88 | +0.29% |
| Long Tenor (%) | 12.14 | 12.16 | +0.20% |
Source: FMDQ
FGN Eurobond Market
The Eurobond market was largely bearish this week which was influenced by the US data which was released in the week. At the close of trading on Friday, average benchmark yields settled at 6.60% indicating a W-on-W increase of +0.32%.
Nigerian Capital Market
- Activity on the local bourse this week was positive supported by renewed interests in large cap stocks like AIRTELAFRI and MTNN, however the activity of profit-takers was seen across some stocks. The NGXASI advanced by +2.95%. Investors gained N646.33bn, year-to-date return moderated to +7.41%, while the market capitalization settled at N22.57trillion.
- The volume and values of shares traded on the exchange this week advanced by +3.03% and +69.25% respectively.
- Sectoral performance across sectors tracked was mixed this week as the NGX Consumer Goods was the highest gainer for the week with +0.63% while NGX-IND, NGX Oil & Gas, NGX Banking and NGX Insurance, closed negative with -0.01%, -0.69%, -1.31% and, -2.25%, respectively.
- Market breadth for the week closed negative with 23 gainers led by REGALINS and MULTIVERSE as against 43 losers led by PHARMDEKO and CONOIL.
Chart 1: Movement of NSEASI Index Points 05 Nov. 2021- 12 Nov. 2021
Source: NSE
NASD OTC
The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a positive movement in Market capitalization and NSI. The NSI closed the week positive with 757.16 points representing an uptick of +1.57% while the Market capitalization closed the week positive with an uptick of +1.57% to N625.55bn.
Dangote and Elumelu Index
Dangote Index closed the week positive with 146.27 basis points from 146.17 basis points recorded the previous week, representing a growth of +0.07%.
DANGSUGAR a growth of +2.40%, NASCON recorded a decline of -3.41%, while DANGCEM remained flat W-o-W.
Table 1: Dangote Index W-o-W Change
| Company | 05-Oct-21 | 11-Oct-21 | WoW Chg |
| DANGCEM | 280.00 | 280.00 | 0.00% |
| DANGSUGAR | 16.70 | 17.10 | 2.40% |
| NASCON | 14.65 | 14.15 | -3.40% |
| Source: NGX, |
Furthermore, the Elumelu Index closed positive with 112.63 basis points from 114.26 basis points recorded the previous week, a W-o-W growth of +0.25%.
AFRIPRUD, TRANSCOHOT and UBA remained flat W-o-W. TRANSCORP declined by -3.85% and UBCAP recorded a growth of +4.89% W-o-W to close the week negative.
Table 2: Toni Index W-o-W Change
| Company | 05-Oct-21 | 11-Oct-21 | WoW Change |
| AFRIPRUD | 6.35 | 6.35 | 0.00% |
| TRANSCOHOT | 5.38 | 5.38 | 0.00% |
| TRANSCORP | 1.04 | 1.00 | -3.85% |
| UBA | 8.45 | 8.45 | 0.00% |
| UBCAP | 9.20 | 9.65 | 4.89% |
| Source: NGX |
Outlook
In the coming week, we expect the activities of profit takers to collude with bargain hunters on the bourse. 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.
