Expectations from the Markets this week – First Ideas Limited

Expectations from the Markets this week

Expectations from the Markets this Week – 150822

Global Economy


UK Economy registers a -0.1% contraction, Analysts liken the UK to an emerging market economy 

Data from UK’s Office for National Statistics show that the UK economy shrank in the second quarter on the back of lower household spending and a major reduction of government spending on health, following the winding down of the vaccine programs. Gross domestic product fell -0.1% after an 0.8% gain in the first quarter, making a +0.35% as of H1 2022. Meanwhile, Analysts have likened the UK economy to emerging economies, following what analysts consider worrisome political instability, trade disruption, as well as a cost-of-living crisis that threatens to send inflation to +13% by October when the energy price cap is removed.


U.S. consumers’ inflation drops to 8.5%, Analysts expect less aggressive rate hikes.

US CPI data for the month of July came in at 8.5%, below the 8.7% median forecast given by analysts. The recent drop in inflation, which is the first since September 2020, was supported by a major decline in the price of gasoline.   Analysts now see the Fed pivoting to a less aggressive rate hike in its next policy committee meeting. The Fed has raised its policy rate by 225 basis points since March as it seeks to return inflation to its 2% goal.


Analysts anticipate Q2 GDP data from the Eurozone and Japan to take cues on the state of the global economy

Eurostat is expected to release the updated Q2 GDP data for the Eurozone next week. This would be coming days after the UK (-0.1%) and US(-0.9%) registered negative real GDP growth prints, worsening fears of an inflation-induced global recession.  While the Eurozone is forecast to rise by +0.7% Q-o-Q, higher private sector spending is expected to support the Japanese economy to record  a +2.5% growth after the -0.5% contraction it recorded  in Q1 2022.


US releases new African policy to counter China, Russia, Analysts unimpressed.

Following the visit of the US Secretary of State, Anthony Blinken to South Africa, Rwanda and the Democratic Republic of Congo, the US on Monday released a new African policy to promote greater openness, and a just energy transition. Analysts however believe the policy which is in part a rebranding of the Partnership for Global Infrastructure and Investment (PGII) of the G7 does not bode much for African countries. Analysts believe that the policy was motivated by the US’s bid to counter China and Russia’s presence in Africa. Despite fears of neo-colonialism, China has until recently increased its annual infrastructure loans to African countries under its Belt and Road Initiative


Inflation surges to 31.7% in Ghana, Analysts expect Ghana to increase its IMF Funding target

Ghana’s Inflation worries further worsened in July 2022, after the all-item index surged 191bp from 29.8% in June to 31.7% in July. The surge in inflation is attributed to global energy prices which have weighed on the domestic price of gasoline and transportation cost. The West African country has been confronted with the rising cost of imports and a severe balance of payment problem having increased its debt pile to 78.3% of gross domestic product at the end of June from 62.5% five years ago. Analysts therefore believe that the country would increase its IMF funding target from US$1.5 to US$3bn.


Nigerian Economy


Analysts unimpressed with Government’s plans to float a National Carrier

Following a recent announcement by the Minister of Aviation that the country’s National carrier would be commencing operations soon with three aircraft, analysts have raised questions about the operational model of the intended airline. According to the Minister, the airline would operate based on a wet lease which implies that the Government would be responsible for maintaining the crew and the aircraft. Note that this would impose more financial burden on the government than it can bear.


IMF’s Report Shows that Nigeria’s Fertility Rate Poses Existential Concerns, Analyst Observe

In a recent report titled: ‘The New Economics of Fertility’ the IMF identified the fact that the fertility rate in Nigeria and some low-income countries defies the normal fertility patterns which should see a negative relationship between childbearing and income levels. Meanwhile, Also, note that Nigeria’s population growth rate (2.6%) has until last year exceeded the country’s economic growth rate reflecting the country’s budding population crisis


Analysts call for impact assessment of BOI’s concessionary lending 

Data from the Bank of Industry (BOI) shows that it has extended a total of N315bn to MSMEs over the period 2015 – 2021.  Analysts note that while MSMEs account for 45% of employment in Nigeria and 33% of the country’s GDP, the impact of the two recessions in 2016 and 2020, the legacy FX scarcity, multiple taxation, infrastructural deficit, and other challenges have forced the closure of many small businesses. Analysts have therefore called for an impact assessment of the concessionary lending by the Bank of Industry (BoI) to determine the size of the bang the country gets from every buck loaned.


With Buckling Revenue, Analysts forecast a higher budget deficit 

Based on expectations of the persistence of oil underproduction in the second half of the year and an equally large subsidy spending by the Federal Government Analysts forecast that the federal government would record a budget deficit to GDP ratio of -5.0% in 2022. Also note that if the forecast holds true, it will exceed both the Fiscal Responsibility Act (FRA) threshold and the WAMZ primary convergence criterion of 3.0% of GDP. Meanwhile, the recently published MTEF 2023 -2025 document shows that the Federal Government’s budget deficit for 2022 hit N3.09trn in April.


Economists Project 19.3% inflation for July, Reflecting the decline in Naira

The National Bureau of Statistics (NBS) is expected to release the CPI report for the Month of July next week, it is projected that headline inflation will rise to 19.3% inflation in July reflecting the substantial depreciation recorded in the Naira at the end of last month. Analysts note that the Naira depreciated by close to 15% at the parallel window last month following a major liquidity challenge that hit the Fx market.  Analysts believe that apart from higher import costs, the rise in cost of fertilizers and other agricultural inputs also likely counteracted the impact of the slight reduction in the global food index and crude oil prices.



Oil and Gas Sector




Analysts Look at PIA Governance Flaws

Following the rejection of the ministerial consent by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), The President and Minister of Petroleum Resources, Muhammadu Buhari, canceled his approval of the acquisition of the entire shares of Mobil Producing Nigeria Unlimited (MPNU) by Seplat Energy. Analysts asked who was wrong or right for governance clarity and learning moments. The fault was neither the Commission’s nor the Petroleum Ministry but the Petroleum Industry Act (PIA) 2021. We believe there are governance and power devolution gaps in the PIA that needs fixing with either legislative amendments or other regulatory policies and guidelines by the Ministry.


Nigeria’s Unmet Gas Flaring Deadlines Raises Analysts’ Heckles

Nigeria has the largest proven gas reserves in Africa with an estimated proven reserve of 208.62trillion cubic feet and produced about 1.7trillion cubic feet of natural gas annually. Gas flaring, which represents the loss of associated gas during oil extraction, has remained a major challenge in Nigeria. Nigeria is the seventh-largest gas-flaring country globally behind Russia, Iraq, Iran, and the US, among others, and continues to miss its gas flaring deadlines with huge revenue loss, valued at US$1.04bn in H1 2022. It should be recognized that the country has made some progress in curbing gas flaring through the Natural Gas Flare Elimination and Monetization Plan as the country recorded its lowest gas flare in most recent months. However, the analysts believe a more viable solution would be to increase the penalties on gas flared so significantly that it serves as a deterrent. Currently, firms producing over 10,000b/d of oil pay $2 per 1000scf of gas flared, and others producing below 10,000b/d pay $0.5 per 1000scf of gas flared.


Midweek saw Bears Stomping Oil Market, but Analysts remain Bullish 

Crude oil prices dipped in the midweek trading session as news of significant 2.2million barrels and 5.5million barrels built in U.S crude inventories were reported by the American Petroleum Institute and the U.S. Energy Information Administration, respectively against analysts’ forecast of 100,000 barrels rise in crude inventories. The price drop was supported by the likelihood that both Whitehouse and Tehran, which are currently on national consultation, will assent to the EU-brokered final draft to revive the 2015 Iranian nuclear deal, a situation that will lead to an integration of about 1-1.5mb/d of Iranian oil export to the mainstream oil market.


Some analysts have argued that bringing Iranian oil to the market will ease the tightness, and oil prices could fall to $80 per barrel. However, for the time being, the halting of Russian oil supplies flowing through the Southern route of the Druzhba pipeline to parts of Central Europe by Ukraine had placed a floor on oil prices drop. We remain bullish about oil prices, expecting the tightness of the oil and gas supply to persist. In contrast, demand will remain resilient, a situation that will keep oil prices at an average of $105 per barrel for the rest of 2022.


Nigeria’s Oil Company Performance

Six leading oil and gas companies listed on the Nigerian Exchange Limited (NGX) recorded average revenue growth of +36% Year-on-Year (Y-o-Y) in the first half of the year (H1) 2022. The performance was driven by a combination of internal and external occurrences such as movement in the foreign exchange rate, rising crude oil prices, the war in Ukraine, and OPEC decisions, among others (see table 1 below).


Table 1: Revenue Performance of Selected Oil Companies in Nigeria

  Jun-22 Jun-21 % Change
   Revenue (N’bn) Revenue (N’bn)  
Seplat 219.20 120.44 82.00%
Eterna 57.22 37.99 50.62%
Ardova 126.65 86.77 45.96%
Total 209.01 151.33 38.12%
MRS 42.66 36.75 16.08%
Conoil 56.25 67.64 -16.84%
Average revenue growth rate 35.99%

Source: NGX


Analysts Concerned about Nigeria’s Crude Oil Stagnation

On the back of OPEC’s Monthly Oil Market Report (MOMR) for July 2022 released yesterday, We expect Nigeria’s oil production volume to remain around 1 million barrels per day (mb/d) in the short run as the country’s rig count flattened for months. Nigeria’s crude oil output averaged 1.084 mb/d in July 2022 compared with the 1.799 mb/d quotas for the country under OPEC July 2022 required production. The MOMR showed that Nigeria’s oil production fell by -6.4% M-0-M from 1.158 mb/d in June to 1.084 mb/d in July 2022, based on direct communication. Still, production increased by 6 kb/d to 1.183 mb/d, based on secondary sources.


Regulators, operators, and analysts have identified crude oil theft along the oil value chain as the primary cause of the country’s low oil output and inability to meet the OPEC monthly oil production quota. An integrated and forward-looking plan with private sector-led management will ease many legacy challenges of the industry and further attract private investment.

Brent had a weekly growth of +2.29% (see Table 1).





Gold inched up by +1.28% while Silver also inched up by +3.64% W-o-W (see Table 1).



Cocoa prices inched up by +2.39% W-o-W.

Corn prices inched up by +2.37% W-o-W while Sugar prices inched up by +3.97% (see table 2).


Table 2: Commodity Prices

Commodity 12-Aug-22 05-Aug-22 31-Dec-21 Weekly Chg YTD Chg
Brent 97.81 95.62 78.54 2.29% 24.54%
Gold 1813.2 1790.3 1827.1 1.28% -0.76%
Silver 20.525 19.805 23.27 3.64% -11.80%
Cocoa 2398 2342 2546 2.39% -5.81%
Corn 625.25 610.75 595.5 2.37% 5.00%
Sugar 18.58 17.87 18.83 3.97% -1.33%
Source: CNBC

*Data for the 12th of August 2022 is as of 05: 31 pm (Nigerian Time)


Analysts Scan Nigeria’s Agricultural Problems as Ogun State Takes Steps to Improve Cocoa Production

In a bid to improve agricultural production in the state, the Ogun State government gave out 10,000 cocoa seeds to 3,000 farmers approximately 3 seedlings to a farmer. These genetically modified seeds are said to have a lower maturity time of about 18 months compared to the previous variety which takes between 3 to 5 years to mature. This means that compared to the planting cycle of the old crop, this newer variety should promote a higher yield in the same period as the old variety’s maturing period.


While this is a good initiative, Nigeria must battle with keeping farmers on their farms in northern Nigeria as bandits have taken on a new guise of acting as farmers going to farms and then attacking and kidnapping the real farmers. The consequence has been a culture of fear with farmers terrified of approaching their farmlands. Analysts believe that the growing fear could result in low crop production in some northern states which would affect the farm output and raise food prices.


Higher Food Prices Pricks Analysts’ Interest as Global Supply Chain Disruptions Ease

Food prices have hit record levels this year as economic activities increased, causing an increased demand for food from rice to wheat and other commodities. As supply chain disruptions came to the fore, it became notable that supply could not meet up with demand, becoming a major driver for food price rise globally. While this was a global problem, Nigeria had other problems contributing to the food price rise.


The Minister of Agriculture and Rural Development, Mahmood Abubakar, claimed the country still suffered from the after-effects of the COVID-19 pandemic which had arrested production, but we note the role of insecurity as a significant disruptor and an escalator of risk pricing of farmgate produce.


Farmers have been driven from farmlands and have had to choose between living and farming. The existential concerns of smallholder farmers are many times more severe than large holder farmers who are better favoured to protect their farms. With the relatively low food production in Nigeria before the COVID-19 pandemic in 2020, the country remains import-dependent. The high import levies on grain commodities like wheat, explains the high domestic cost of imported grain-based food staples like bread.


Analysts Take a Sweep of the Global Wheat Market

Following good harvests and export in large countries, food prices generally dropped in July. The United States, a major wheat exporter, recorded a significant harvest and began exporting the grain. While this pushed down the price of the grain in the global market for some time, the price of bread and pasta has started climbing across countries as different circumstances have put pressure on supply.


As Europe battles with a heatwave that has affected the harvest of some food items, the United States has also had to contend with a heatwave that has dried up some of their crops. According to the U.S. drought monitor, as of August 2, about 43.16% of the United States is in drought, which has affected projections on the food crop total harvest and export. Reduced production from the world’s largest exporter, Russia, on the back of a late start due to cold spring, rain, and lack of spare parts for farm implement repair also give a bearish outlook for wheat exports as Russia has reduced its wheat export estimate. Wheat prices rose in the last trading session, having a YTD of +0.2%.


Analysts Look at Effect of Global Market Disruptions on India’s Domestic Market

Global food prices dropped in July due to good harvests in significant economies. The Indian market was no different. India is a major wheat producer, but she is also a large consumer. After wheat prices spiked during the year because of higher demand relative to supply on tensions between Russia and Ukraine, domestic prices of wheat in India went up. The Indian government took up regulations to curb higher domestic prices, including placing an export ban on wheat export to force prices down in the domestic market (a form of food protectionism). In the past week, they have removed the export ban and brought it back again after wheat prices shot up again in the domestic market.


After claiming that the export ban has achieved the desired effect of cooling prices, analysts have taken a view on the effect of the country’s market disruptions and pointed out that the topsy-turvy nature of their decisions could force customers to look for a more stable market where government policies won’t create supply disruptions. A move like this would see India lose customers to other stable markets, which could cause an increase in the domestic market and push down prices in their domestic market.


Fixed Income Market


Currency Market

At the Investor and Exporter FX fixings on Friday, Naira depreciated by +0.35% (W-o-W) to settle at N429.62.


For the Nigerian Autonomous Foreign Exchange Fixing (NAFEX), it appreciated by 31bps (W-o-W) to N424.83 on Thursday (see table 3 below).


Table 3: Naira/Dollar at the I&E FX Window and NAFEX Market

Average Benchmark Yields
  05-Aug-22 12-Aug-22 % Change
I&E FX 428.12 429.62 +0.35%
  05-Aug-22 11-Aug-22  
NAFEX ($/N) 426.15 424.83  -0.31%

Source: FMDQ


Money Market

The interbank rates stayed at double-digit levels all week, given the persistent tight liquidity


As of Friday, the Open Repo rate (OPR) declined to 12.00 by -20.00% (W-o-W) and the overnight rate (0/N) also fell by -10.34% (W-o-W) to 13.00(see table 4 below).


Table 4: Money Market

Money Market Rate
  05-Aug-22 12-Aug-22 % Change
OPR (%) 15.00 12.00       -20.00%
O/N (%) 14.50 13.00    -10.34%

Source: FMDQ


Funding rates should remain elevated next week as liquidity worsens


Treasury Bills Market

The market was mostly quiet this week as the higher yields at the NTB primary auction diverted investors’ attention away from the secondary market.


However, the Nigerian treasury bill closed bearish on Friday with the average benchmark yield increasing by +11.14% (W-o-W) to 7.68.


The Average benchmark yield for OMO bills rose marginally by +0.36% (W-o-W) to settle at 11.20 (see table 5 below).


Table 5: Treasury Bills Market

Average Benchmark Yields
  05-Aug-22 12-Aug-22 % Change
T. Bills (%) 6.91 7.68 +11.14%
OMO Bills (%) 11.16 11.20 +0.36%

Source: FMDQ


We expect the market to be tepid next week as the FGN primary bond auction begins on Monday 


Nigerian Treasury Bill Auction 

At Wednesday’s NTB primary auction, the DMO sold exactly N₦150.62 billion worth of notes offered. The rates on the 91-day, 182-day, and 364-day notes were allotted at 3.50%, 4.50%, and 7.45% rising by 70bps, 40bps, and 45bps respectively. The bid-to-cover ratio across the three papers stood at 1.76x, 0.93x, and 1.25x accordingly (see table 6 below).


Table 6: Nigerian Treasury Bills Auction Result

Nigerian Treasury Bills Auction    
 Tenor Amount offered (N’bn) Total subscription (N’bn) Amount sold


Stop Rate


Previous rate (%)



91-days         1.02 1.80 1.15 3.50 2.80
182-days         1.82 1.69 1.31 4.50 4.10
364-days         147.78 184.04 148.15 7.45 7.00

Source: Commercio papers


FGN Bond Market

The bearish sentiment resurfaced this week with multiple selloffs at all tenors as liquidity tightness lingers.


At the end of the trading session on Friday, the market closed bearish with the overall average benchmark yield increasing to 12.89% by 2.85% week-on-week basis (see table 7 below).


Table 7: FGN Bonds Market

Average Benchmark Yields
  05-Aug-22 12-Aug-22 % Change
Short Tenor      11.39  11.95  +4.92%
Mid Tenor      12.34 12.89  +4.46%
Long Tenor      13.42 13.44  +0.15%

Source: FMDQ


The bearish sentiment should persist next week in expectation of inflation results.


Analysts raise concerns about Rising debt stock as Ways and means from CBN grew to N19.91trn in 2022

Following the data released by CBN, the federal government has borrowed N2.45trn from the Apex bank in the first half of the year through Ways and Means Advances, indicating a rise from N17.46trn recorded in December 2021 to N19.91trn in June 2022. The amount owed to the apex bank is not part of the country’s total public debt stock, which stood at N41.60trn as of March 2022. Despite multiple cautions from experts, the Federal Government’s incessant demand from CBN will increase the country’s debt stock. Analysts believe that the country should leverage its asset to generate revenue to close the widening fiscal deficit instead of borrowing from CBN.


Rising IDA Debt Stock Raises Analysts’ Concern as Revenue Dips 

According to World bank Fiscal year 2022 audited financial statement, Nigeria has moved up to the fourth position of the world bank’s top 10 international development borrowers’ list as IDA debt stock rose to $13bn which is the highest debt in Africa. As of June 2021, we were ranked fifth on the list with $11.7bn IDA debt stock, indicating the country has accumulated about $1.3bn IDA debt stock this year. Recently, rising debt stock has been a bone of contention although analysts believe the major concern should be the revenue constraint, not the mounting debt stock. It is believed the ranking could weigh on the decision of other countries in giving out loans to the country as the 118% debt-to-revenue ratio pose a default possibility.


Coleman Technical Industries Limited extends series 5 & 6 Commercial paper issuance to 16 August 2022. 

Coleman Technical Limited issued an N10 bn series 5 & 6 Commercial paper under the N20bn programme on 8th August, which is scheduled to close initially on Friday, 12 August 2022. The yield for the 182-days and 270-days is 14.0% and 15.5% while the discount rate is at 13.09% and 13.91% respectively. On, Friday the Company announced a reprice with the yields at 15% and 16.5% for the 182 days and 268 days respectively and extended the closing to Tuesday. The minimum subscription is N5m and multiples of N1,000. The company recorded a 92% year-on-year growth in revenue and a 250% increase in PBT in 2021 financials while GCR gave a short-term rating of BBB-.


Equity Market



  • The Nigerian bourse ended the week on a negative note as market sentiment closed in red.  The NGXASI closed the week with -2.09% loss as against +0.70% gain recorded last week. The Nigerian Exchange lost N570.79bn in naira terms WoW.
  • Year-to-date, the NGSAXI remained positive to close the week with +16.26% gain as the market capitalization settled at N27,3trn at the end of the week.
  • Sectoral performance across sectors was Bearish. At the close of trading on Friday, as 4 sector recorded gain week-on-week while NGX- Industry recorded the highest loss for the week with -10.65%












Chart 1Movement of NSEASI Index Points 08 AUG 2022- 12 AUG. 2022

Source: NSE



The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week on a positive note.  The NSI and Market capitalization closed the week at 762.18 points and 1003.35  with a rise of +0.12% respectively.


Dangote And Elumelu Index

Dangote Index closed the week negative with 135.36 basis points from 138.37 basis points recorded the previous week, representing a rise of -2.18% WoW


NASCON recorded a remained flat while DANGCEM recorded loss to close with     -2.40% and DANGSUGAR closed positive with +1.20% WoW (see table 8 below).


Table 8 : Gote Index W-o-W Change

COMPANY 05-Aug-22 12-Aug-22 % Chg
DANGCEM 265.00 258.80 -2.40%
DANGSUGAR 16.50 16.70 1.20%
NASCON 11.10 11.10 0.00%

Source: NGX






Furthermore, the Elumelu Index closed negative at 107.02 Basis points from 109.21 basis points recorded the previous week, representing a decline of

-2.01% WoW


UBCAP, AFRIPRUD closed the week positive with +1.22% and +5.45% respectively while TRANSCORP, UBA closed the week negative with -6.96% and -2.76% respectively and TRANSCOHOT closed the week flat WoW(see table 9 below).


Table 9: Toni Index W-o-W Change

COMPANY 05-Aug-22 12-Aug-22 % Chg
AFRIPRUD 5.50 5.80 5.45%
TRANSCOHOT 6.25 6.25 0.00%
TRANSCORP 1.15 1.07 -6.96%
UBA 7.25 7.05 -2.76%
UBCAP 12.25 12.40 1.22%

Source: NGX

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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