- Jerome Powell has been nominated for second term as chair of US Federal Reserve. Despite speculations that the Donald Trump’s appointee may be sacked, Joe Biden decided to re-nominate him, citing the “decisive action” taken by Powell during the early stages of the crisis as a reason. Meanwhile, Lael Brainard is white house’s choice for vice- chair. The Fed is beginning a Monetary Policy Normalization which is expected to control spiraling inflation which hit a 31-year high in October.
- The new German government formed by a coalition of the Social Democrat party, the Greens and business-friendly Free Democrats would implement a wide range of economic reforms which would see -Minimum wages rise to 12Euros (10 pounds) an hour as well as the construction of 400,000 new apartments to tackle Germany’s housing crisis. The coalition would bring back the debt brake which is enshrined in the constitution.
- US economic growth was revised to an annual rate of 2.1% for the third quarter, according to the Commerce Department’s advance estimate of a second reading of data on Wednesday. The first reading made last month had put the figure at 2%. The market expectation for the second reading was 2.2%. The US’ real gross domestic product (GDP) increased 6.7% in the second quarter.
- According to the US Labor Department, Initial jobless claims fell by 71,000 to 199,000 in the week to 20 November – the lowest level since 1969 52 year low. This was much better than the 260,000 expected by economists. This is the lowest level since November 1969 when it was 197,000. The previous week’s jobless claims level was revised up slightly, by 2,000 to 270,000.
- The CBN governor announced after the 282nd MPC meeting that the committee has decided to hold all policy parameters. He also noted that the committee took note of the normalization policy which is beginning to be adopted by some developed and emerging economies. The committee commended the effort of the Bank’s management in making growth stimulating interventions in critical sectors of the economy.
- According to a recent Standard Chartered Bank survey, Nigeria’s export volume is expected to rise at a 9.7 per cent yearly growth rate to reach $112 billion by 2030, the highest volume for Africa. The report also projects global exports to double, from $17.4tn to $29.7tn over the next decade. Of the over 500 C-suite and senior leaders surveyed, 90% agreed that global trade will be shaped by five key trends namely: the wider adoption of sustainable and fair-trade practices; a push for more inclusive participation; greater risk diversification; more digitization and a rebalancing towards high-growth emerging markets.
- The Minister of Aviation while speaking to State House Correspondents after the (FEC) meeting on Wednesday, disclosed that Nigeria’s National Airliner- Nigeria Air, is expected to take off by April 2022. The national carrier will be run by a company in which the Nigerian government will hold a 5% stake, Nigerian entrepreneurs holding 46%, while the remaining 49% will be reserved for yet to be assigned strategic equity partners, including foreign investors. According to the Minister,
- The Central Bank of Nigeria (CBN) has said it would soon publish the names of loan defaulters under its Agricultural Credit Guarantee Scheme. This is according to a document titled: “Guidelines for the Agricultural Credit Guarantee Scheme” recently released by the CBN. The CBN also warned that borrowers who divert the funds provided under the Agricultural Credit Guarantee Scheme Fund (ACGSF) might earn a five-year jail term. According to CBN data, as of March 31, 2021, the sum of N615.4bn had been disbursed to 3.04 million farmers since 2015 to under the ABP Scheme.
- In line with its commitment to improve infrastructure in Nigeria, the African Development Bank is providing a $563 million fund which would be spent on developing rural roads, transport infrastructure, water, sanitation, and agricultural productivity in Nigeria. Meanwhile, according to the AfDB President, Akinwumi Adesina, Kano State is set to get $110 million of the earmarked amount for the bank’s special agricultural industrial processing zone. Adesina noted that the fund would be an opportunity for the state to boost its job creation index.
- The Minister of Finance, Budget and National Planning, Zainab Ahmed, informed the National Economic Council on Thursday, that a Bridge Facility is now being processed by the Central Bank of Nigeria for the 36 states. According to the Minister, the approved Bridge Facility of N656.11bn will be disbursed in six tranches over six months to the states. Each state is expected to receive a total loan amount of N18.2bn, with a 30-year tenor, and a2-year moratorium at an interest rate of 9 per cent.
Summary and Outlook
The decision of the MPC to hold policy parameters in its last meeting for the year, was anticipated. Amidst high but steadily declining inflation, the MPR has been retained at 11.5% since September 2020. However, as the US and other developed countries prepare for monetary policy normalization, the fear is that of higher cost of public borrowing as well as the possibility of capital reversal by investors in search of higher yields. The CBN governor expressed confidence that the Nigerian economy is not exposed to such a risk. While conducting a regression analysis it was found that foreign Portfolio Investment does not seem to be responsive to changes in domestic and foreign yields. Instead, FPI has been responsive to changes in the Parallel premium in the foreign exchange market.
Although still at a nascent stage, the newly discovered strain of covid-19 appears to be distorting projections for global growth especially as governments are beginning to impose lockdown -a development which has already taken a toll on global crude oil prices.
Weekly Review and Outlook
- The Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote, has said the 100,000 b/d Duport Modular Refinery is on track to be completed before the end of December 2021.
- The GMD of NNPC Limited, Mele Kyari, has said by the end of February 2022, the PIA provides that Nigeria should be out of the fuel subsidy regime.
- The Minister of State for Petroleum Resources, Timipre Sylva, has said that prices of gas are determined by the global markets where the Federal Government of Nigeria has no control over. He stressed that efforts are ongoing to reduce the gas price to a bearable level for Nigerians before the Yuletide season.
- The CEO of the Midstream and Downstream Petroleum Regulatory Authority, Mr. Faruk Ahmed, has said payment for logistics (such as shipping, payment for NPH, port charges, and NIMASA charges) in US$ was responsible for fuel queues in some parts of the country. The NNPC excess capacity charter to all marketing companies was also being paid in US$. Faruk Ahmed noted that NNPC has conceded to receiving the payment in naira.
- The CEO of Nigeria Upstream Petroleum Regulatory Commission, Gbenga Komolafe, has said that the full implementation of the PIA had commenced, and the commission intends to use its six-point agenda to transform and add value to the Nigeria upstream activities.
- President Muhammadu Buhari, on Tuesday, directed the immediate suspension of the inauguration of the newly constituted board of the NNPC Limited. He gave no reason for the suspension but stated that a new date will be announced soon.
- Senate Committee, Trade Union Congress, Nigeria Labour Congress, and oil industry experts, on Wednesday, opposed the Federal Government’s plan to replace fuel subsidy with the N5,000 monthly transport grant to 40 million Nigerians next year, stating that it is unacceptable and could cause a revolt.
- The Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), on Thursday, extended its 14-day ultimatum earlier given to the Federal Government by seven days.
- Shell Petroleum Development Company of Nigeria (SPDC) has lifted its force majeure on crude exports from Bonny Light terminal following repairs to a leaking pipeline. While Shell’s 150,000 b/d Nembe Creek Trunk Line (NCTL) pipeline is now operational, the sister pipeline- Santa Barbara in the same Nembe LG has been ordered by the Federal Government to suspend operations due to oil spillage.
- Oil prices came off seven-week lows on Monday but remained under pressure after Japan said it was weighing releasing oil reserves and as the COVID-19 situation in Europe worsened, raising concerns about both oversupply and weak demand.
- The International Energy Agency (IEA) on Monday said OPEC+ has been producing less oil than its agreed output targets. The IEA said OPEC+ production was below its target in both September and October by more than 700,000 b/d and analysts expect this to continue going forward.
- The US, on Tuesday, announced the release of 50 million barrels of oil from the US SPR, backed up by a series of agreements with key Asian crude importers who would also release strategic inventories to tame outright crude prices. India has stated that it would release 5 million barrels while South Korea and Japan are yet to come up with their numbers.
- France’s Total Energies SE and Italy’s Eni SpA have stated their plans to invest $2 billion into Libya’s Waha oil project, which they said would boost Libya’s production by about 100,000 b/d.
- Oil prices slid more than 2% on Friday on concerns that a global supply surplus could swell in the first quarter following a U.S.-led coordinated release of crude reserves among major consumers and as a new COVID-19 variant spooked investors.
- Brent had a weekly decline of -5.42% (see Table 1).
Gold depreciated by -4.00% while Silver also dipped by -7.45%W-o-W (see Table 1).
- Cocoa prices depreciated by -7.09% this week.
- Corn prices appreciated by 1.58%W-o-W while Sugar dipped by -5.26% (see Table 1).
Table 1: Weekly Change in Commodity Prices
|Commodity||26-Nov-21||19-Nov-21||31-Dec-20||Weekly Chg||YTD Chg|
*Data for 26th November 2021 is as of 6:16pm (Nigerian Time)
- In the coming week, oil prices are expected to be bearish on the resurgent pandemic in Europe.
- Gold prices are expected to appreciate in the coming week, as the new Covid-19 variant scares markets, seen as a safety net.
- Cocoa prices are expected to be bearish in the coming week as major producers such as Ivory Coast, Ecuador, and Nigeria are in the middle of their harvest season which will likely weigh on prices.
- Sugar prices are expected to appreciate next week as global supply chain pressure continues.
- Corn prices are expected to continue its price surge as inflation fears, caused by diverse factors would affect the supply of corn in the coming week.
Fixed Income and Money Market
The Naira started the week on a negative note, closing lower against the US dollar for most of the trading session at the I & E FX window.
The Naira closed at N415.07/US$ 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 0.07%.
|Average Benchmark Yields|
|I & E FX Window||414.4||415.07||0.16%|
Interbank rates opened the week low due to a N169.97bn short lending facility inflow which boosted system liquidity leaving open buy-back (OBB) and overnight rates (O/N) depressed during the week.
At the close of the trading on Friday, open buy-back (OBB) and overnight rates (O/N) settled at 15.00% and 15.67% respectively indicating a W-o-W downtick of -21.05% and -21.65%.
|Money Market Rate|
We expect rates to hover around current levels barring any significant outflows from the Apex bank.
Treasury Bills Market
The treasury bills market started the week on a quiet note with minimal volumes traded across board, but activity picked up later into the mid-week as investors focused on the Primary Market Auction.
At the close of trading on Friday, the market was bullish with selling interest seen across OMO Bills and Special Bills. Average benchmark yield for T. Bills fell by -5.09%, yields on OMO bills advanced by +0.36% while yields on CBN’s special bills grew by +18.56%.
|Average Benchmark Yields|
|T. Bills (%)||5.11||4.85||-5.09|
|OMO Bills (%)||5.48||5.5||0.36|
We expect activity next week to be dictated by the market liquidity situation.
FGN Bond Market
The local bond market sustained a mixed sentiment this week, with most of the selling concentrated at the short to mid end of the curve.
At the close of trading on Friday, the market closed on a mixed note with sell pressure at the mid to long end of the curve. Overall average benchmark yields closed at 8.16% indicating a W-on-W decline of -3.32%.
|Average Benchmark Yields|
|Short Tenor (%)||5.37||4.69||-12.66|
|Mid Tenor (%)||8.85||8.68||-1.92|
|Long Tenor (%)||12.24||12.37||1.06|
FGN Eurobond Market
The Eurobond market started the week on a sustained a bearish trend driven by the discovery of the new COVID-19 variant in South Africa and fall in oil prices.
Nigerian Capital Market
- NGXASI advanced by +0.25% as investors gained N54.02bn this week as the year-to-date return moderated to +7.54%, while the market capitalization settled at N22.59trillion. Despite the bullish return on the index this week, market sentiment was negative with profit-taking seen across mid t0 large cap stocks.
- Flour Mills of Nigeria Plc notified the Nigerian Exchange Group of its plan to acquire a controlling stake in Honeywell Flour Mills Plc. The company disclosed that it plans to acquire Honeywell Group’s 71.69% stake in HFM and FBN Holdings’ 5.06% stake in HFM. On completion, FMN’s controlling stake in HFM will reach 76.75%.
- The volume and value of shares traded on the exchange this week advanced by +146.72% and 10.86% respectively.
- Sectorial performance across sectors tracked was broadly bearish this week as all sectors closed negative except the NGX Insurance with a growth of +3.56%. NGX-IND, NGX Banking, NGX Oil & Gas and NGX Consumer Goods, closed negative with -0.03%, -0.29%, -0.87% and, -2.00% respectively.
- Market breadth for the week closed negative with 29 gainers led by UPL and IKEJAHOTEL as against 36 losers led by UPDC and CUTIX.
Chart 1: Movement of NSEASI Index Points 19 Nov. 2021- 26 Nov. 2021
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 positive with 744.90 points representing a downtick of -0.10% while the Market capitalization closed the week positive with a downtick of -0.10% to N615.42bn.
Dangote and Elumelu Index
Dangote Index closed the week negative with 146.05 basis points from 146.17 basis points recorded the previous week, representing a decline of -0.08%. DANGSUGAR recorded a decline of -2.08%, while DANGCEM and NASCON remained flat W-o-W.
Table 1: Dangote Index W-o-W Change
Furthermore, the Elumelu Index closed negative with 109.66 basis points from 110.30 basis points recorded the previous week, a W-o-W decline of -0.58%. UBA declined by -1.22% and UBCAP closed positive with +1.55% while AFRIPRUD, TRANSCOHOT and TRANSCORP remained flat W-o-W.
Table 2: Elumelu Index W-o-W Change
In the coming week, we expect the activities of profit takers to collude with bargain hunters. 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.