Expectations from the Markets this week 120922 – First Ideas Limited

Expectations from the Markets this week 120922

Expectations from the Markets this Week – 120922

Global Economy

 ECB Employs Hawkish Policies to Tamp down Inflation  

Analysts believe that the decision of the European Central Bank (ECB) to hike rates by a record margin of 75bp would help to put a floor on the euro and keep a lid on the extra imported inflation that the euro’s weakness has occasioned. At its Thursday meeting, the ECB decided to raise interest rates across the eurozone by a record margin to address soaring inflation that has reached double figures in some of 19 member countries. Compring the ECB rates with rates elsewhere Analysts note that the ECB may have fallen behind the curve. The EU’s main refinancing rate is now 1.25%, while the US Fed’s several rate hikes have brought rates up to between 2.25% and 2.5%.


 Canada’s Employment data stoke fears of a Recession

According to official statistics, Canada’s economy lost 40,000 jobs in August, tipping the country’s unemployment rate over by half a percentage point, to settle at 5.4%. The outcome defied the expectation of Economists who had been expecting the economy to add between 10,000 and 15,000 jobs during the month.  Such a gain would have been a reversal after two straight monthly declines in June and July. Analysts say that August’s numbers which bring the three-month tally of losses to more than 100,000 since May signal a contraction in Australia


BoE MPC expected to hike rates by 50bps after a one-week postponement

In honor of the Queen

The Bank of England’s Monetary Policy Committee is expected to raise rates by another 50 bps in its next meeting. The committee postponed its meeting to the 15th of September following the death of Queen Elizabeth II. The Committee’s decision will now be announced at 12pm on 22nd September. At its last meeting on 3rd August 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.5 percentage points, to 1.75%.


Nigeria Economy


Nigeria’s Trade Surplus Rises to N1.97tr, as India Cuts back on Crude Oil Imports

On Thursday, the National Bureau of Statistics released Nigeria’s Foreign Trade Data for Q2 2022. The figures suggest that exports rose +4.31% Q-o-Q to N7.4tr while imports dropped N5.43tr in Q2 2022 from N5.9tr in Q1 2022. This culminated in an N1.97tr surplus in Q2 2022. Analysts observed that Oil and Gas accounted for 89.7% of exports while PMS, Gas oil, and Durum Wheat jointly accounted for 30% of imports. Meanwhile, exports to India, Nigeria’s major trading partner, declined by -6.56% Q-O-Q, a development that Analysts ascribe to a global headwind and a pullback in crude oil demand from the southeast Asian country. On the other hand, China scaled-down imports to Nigeria by -5.9% Q-O-Q to N1.42tr. Analysts attribute the drop in Imports from the world’s second-largest economy to the country’s dynamic zero covid-19 policy that has seen many manufacturing hubs and ports operate skeletally.


Senate’s Plan to Increase Education Tax would be Inflationary

The Senate committee on Tertiary Institutions is considering another upward review of the Education Tax from 2.5% to 3%. The Education Trust Fund Act was intended as an intervention fund for tertiary institutions’ rehabilitation, restoration, and consolidation. Across the country, analysts noted that as the Education Tax has typically contributed between N200bn and N300bn to the Federal Governments Revenue, a 0.5% increase in the Tax would be minuscule. Analysts note that the current strike action being undertaken by ASUU supports the idea that Research administration and funding are best undertaken by the private sector if well motivated to do so. Aside from the negligible impact of the education tax on facilities at public universities, Analysts believe that another raise would have an inflationary impact on corporations already faced with higher energy and input costs.


FG grows VAT by 20% in H1 2022; Analysts express concerns over MTEF

According to the Federal Inland Revenue Service (FIRS), the Value of Added Tax rose by 20% to N1.188trn in H1 2022. Analysts attribute the consistent increase in the VAT to higher product prices and a higher rate. In H1 2021, the total sum generated through VAT stood at N1.008tn. Analysts note that the Federal Governments Medium Term Expenditure Framework (2023 – 2025) eyes revenues from VAT despite the current legal tussle between the Federal Government and the State Government over the appropriate collection authority. Analysts note that a court judgment in favour of the State governments would be a spanner in the works for the Federal Government.


Discos Continue Electricity Underutilization, Analysts Call for Greater Investment in the Sector

In an analysis of official data on the daily load by Discos, published by the Federal Ministry of Power, Analysts discovered that electricity demand by distribution companies (DISCOs) fell short by 1,936.2MW in the third week of August. Analysts have attributed the incessant cutbacks by Distribution companies to worries about electricity theft and poor payment of bills on the part of consumers. The development coincides with the renewed threats of industrial action by workers under the aegis of the National Union of Electricity Employees over what they called ‘the activities of Hustlers’ in the industry. The statement is in protest against the beneficiaries of the 2013 privatization program.  In light of the dismal performance of the sector since the privatization of the electricity sector in November 2013, Analysts have questioned the rigor of the qualification process that produced the various Discos, most of whom are believed to lack the financial wherewithal to undertake the volume of investment required.


Oil and Gas Sector 

Stakeholders Groan as Nigeria’s Crude Oil Production Falls Below 1Million Barrel Per Day (mb/d)

Production data for August 2022 released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Thursday revealed that Nigeria’s crude oil production has dropped below 1mb/d. The oil production report showed that output fell from 1,083,899 b/d in July to 972,394 b/d in August 2022, an all-time low for the country. With an average crude oil price of $100 per barrel and a production shortfall of 3.46 mb/d in August, Nigeria lost $345.67m (equivalent to N147.75bn) in the month. Analysts attributed the decline to the large-scale oil theft and vandalism of oil infrastructure, which had occasioned production shut-in across the country’s oil wells. Analysts are, however, optimistic about the many efforts by the NNPC and the regulators to curb the menace but doubt the viability of the proposed unique identifier in moderating oil theft, given the domestic dynamics of crude oil theft.



OPEC+ Re-emphasises Commitment to a Bullish Market

Oil prices pared previous session gains last Tuesday as investors considered the OPEC+ output cut by 100,000 b/d in October a largely symbolic attempt to boost oil prices. OPEC+, on Monday, had decided to reverse the 100,000 b/d increase it made for September output in October 2022. The reversal followed Saudi Arabia and other members’ call to alter the recent downtrend in oil prices. Analysts believe OPEC+ will remain committed to increasing oil prices, and the price cap on Russian oil will further tighten the market imbalance. We project that these factors will send average oil prices above US$100 per barrel for the rest of the year.


First Zero Oil Export Receipt: A Reflection of Accumulated Legacy Issues 

While crude oil prices were high at around $100 per barrel in July, the Nigerian National Petroleum Company (NNPC) limited reported zero earnings from crude oil export and N400bn earnings from gross domestic oil and gas sales to the federation account in July 2022. Analysts attributed the zero-export receipt partly to the high subsidy regime in the country and partly to the low production level pressured by crude oil theft and vandalism.Analysts see the zero-export receipt for July as a reflection of the country’s inability to meet contractual obligations due to its low production volume and the associated discounted risk in the country’s output pricing.




Nigerians Remain Anxious Over Possible Subsidy Removal

Analysts have expressed different opinions on the outcome of the recent online survey conducted by AriseTV, asking whose responsibility it is to prepare Nigerians to remove the petrol subsidy in 2023. The YouTube survey with over 4,600 respondents showed that 42% believe it is the government’s responsibility to prepare Nigerians for post-subsidy fuel prices. In contrast, 45% believe it is the responsibility of all the above (including government, economic think tanks, media, and labour unions).


Some economists noted that collective efforts of the government for policy reforms and the media for communication and articulation of necessary adjustments are needed for post-fuel subsidy preparedness in Nigeria. Others noted that government should drive the whole process while Economic Think Tank should only explain the implication to Nigerians. We believe the government has a primary role in clearly spelling out his subsidy removal decision and the palliative measures for poor Nigerians.


On Nigeria’s More Gas Export to Europe

Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, disclosed the country’s plan to export more Liquefied Natural Gas (LNG) to Europe next winter during the Gastech Exhibition and Conference in Milan. He added that Russia’s invasion of Ukraine has recently delayed more of the country’s gas deliveries to Europe. Indeed, Nigeria has vast proven gas reserves and has been developing the resources for domestic and export markets. However, while the plan to export more LNG to Europe is apt for Nigeria to generate more foreign earnings, the lack of operational infrastructure connecting Nigeria to Europe may continue to delay more gas delivery. Shipping, the current means of reaching Europe and an alternative to piping, has become inefficient given the rising freight cost and insurance charges due to the high energy cost and the war in Ukraine. Analysts believe the Trans-Sahara gas pipeline connecting Nigeria to Algeria and the Nigeria-Morroco Gas Pipeline only offers a medium to long-term respite if gas remains worthwhile globally.


Oil Prices Determinants for the Week

Oil prices slumped for most of the week, reflecting the weak oil demand from proposed rate hikes by central banks and renewed lockdowns in some Chinese cities. On the supply side, the slump reflects Russia’s proposed rerouting of oil and gas from some buyers due to proposed G7 price caps on its oil and Europe price cap on its gas. Less hope for the return of Iranian oil to the market also supported prices during the week.


Brent had a weekly decline of -2.92% (see Table 1).



Gold inched up by +0.08% and Silver also inched up by +3.58% W-o-W (see Table 1).



Cocoa prices declined by -2.20% W-o-W.


Corn prices inched up by +1.99% W-o-W while Sugar prices inched up by +0.11% (see Table 1).


Table 1: Commodity Prices

Commodity 09-Sep-22 02-Sep-22 31-Dec-21 Weekly Chg YTD Chg
Brent 91.78 94.54 78.54 -2.92% 16.86%
Gold 1726.8 1725.4 1827.1 0.08% -5.49%
Silver 18.675 18.03 23.27 3.58% -19.75%
Cocoa 2359 2412 2546 -2.20% -7.34%
Corn 680 666.7 595.5 1.99% 14.19%
Sugar 18.22 18.2 18.83 0.11% -3.24%
Source: CNBC

*Data for the 09th of September 2022 is as of 05: 16 pm (Nigerian Time)




World’s Most Consumed Food Could Increase as India Makes Export Decision

India, the world’s second-largest rice producer, has banned broken rice exports and imposed a 20% duty on exporting various grades of rice to reduce domestic prices, as traders cite below-average rainfall affecting planting. While the world struggles with high food prices, the world’s most consumed food, rice, is set to rise.


India held about 30% market share of the total global export of rice in 2020 while exporting just above 12% of the rice produced that year. Vietnam accounted for 11.8% market share, making India’s decision a major one for the price movement globally. Vietnam’s export of 19.9% of its total rice production cannot cover a deficit in the market that India’s export ban would cause.


While Nigeria is not a significant rice exporter, it stands among the highest commodity producers as the 14th highest producer in the world. The smuggling of rice from neighbouring countries has been an issue for Nigeria. Thus, the nation could be affected by the global price rise of this commodity. In recent times, the price gap between globally produced and domestically produced rice has reduced, and a price hike on the global scene could have citizens witness a price increase of domestically produced rice.


Putin’s Comment on Grain Deal to Put Pressure on Prices

Wheat Prices came under pressure after Russian President Vladimir Putin criticized the grain deal signed by Russia and Ukraine to allow the unblocking of the Black Sea for trapped grain exports. He claimed that Russia and the developing world had been cheated by the UN-brokered deal and decided to revise the deal’s terms to limit the countries receiving shipments.


Wheat prices dropped in the international market first when the United States began its harvest and sales of wheat, then after the UN-brokered deal was signed in July. Meanwhile, extreme weather conditions also pressured wheat prices as farmlands were affected severely by drought, flash floods, and relentless heat waves hitting different countries. Putin claimed that Russia would continue with the deal in the hope that its aims would still be achieved; his comments about amending the deal put pressure on wheat prices, which currently stand at +8.3% YTD.


Cotton Prices Uncertain Amid New Harvest from India

India’s second highest cotton producer commences selling cotton due to early planting in cotton-growing states, pushing cotton prices down. Currently, crop condition seems excellent and could remain excellent provided the extreme weather condition (flooding) which has affected different parts of the country does not occur. The harvest projection is 350,000,000 bales compared to the 315,000,000 bales in the current season.


With cotton prices internationally going down and fresh cotton hitting the market in early October, naturally, we should expect a continuous downtrend in cotton prices globally. The flip side is that countries including Pakistan, the United States, and China have experienced extreme weather conditions, which should cause reduced production. This could increase export demand, supporting cotton prices on the international market.


Brazil’s Newly Proposed Law on Meat Production is Dangerous Say, Analysts

The Brazilian Government has proposed a new law to end mandatory inspections of meat production, which would enable the Government to withdraw all mandatory state inspections into the animal agriculture industry. This raised alarms with the members of the Association of inspectors as they claim that private companies do not have the resources to monitor and counterbalance the interests of large food businesses. Fearing that animal vaccines, antibiotics, and anti-parasite medicines would not undergo a formal assessment by government professionals, thereby getting automatic approval, is why some senators and animal advocacy groups have kicked against the bill.


Analysts point to a similar rule taken by the Government some time ago when it gave the license for motorists to run over motorbike thieves, which reduced the care of life even as the Government claims it has reduced crime. Removal of mandatory inspections could also have a similar but more dangerous effect as big food companies would do all they can to reduce expenses. This could affect the health of Brazilians if they consume foods not correctly processed and could also affect external trade. The UK, which imports tens of thousands of animal products from Brazil, might cut down imports without proper oversight of meat production.


Nigeria’s Agricultural Production Fails to Meet Demand; Gaps Identified in Local Value Chains

The Nigerian Agricultural system is plagued with several issues ranging from poor value chain to insecurity. The production of agricultural produce has failed to meet the rising demand in Nigeria, forcing the importation of some of the products. Nigeria spent N155bn on the import of salt, palm, and coals. These commodities are found in Nigeria but have not been processed enough to meet the demand for the product. Palm production in 2020 stood at 1,280,000MT, while the country consumed 2,591,000MT of the produce; unable to meet demand locally, the nation turned to Indonesia for imports. The same situation is witnessed in salt production, which is available in quantities in Ebonyi state, having a slogan “the salt of the Nation”. Amid the vast deposits and billions committed to the Nation’s Agricultural value chain, Nigeria is still far from achieving self-sufficiency as billions of Naira are spent on importing commodities. With more imports than Exports, the pressure on FX would stay high, and food prices could stay high as imported inflation would weigh on prices.


Currency Market

Maintaining a similar trend to the previous week, the naira depreciated for most trading sessions, recording a loss of +1.12% week-on-week basis at the Investor & Exporter FX fixing.


On Friday, the Naira closed at N436.33/$1 at the I&E FX window while at the NAFEX fixing (spot market) it settled at N435.63/$1 on Thursday (see table 2 below).


Table 2: Naira/Dollar at the I&E FX Window and NAFEX Market

Average Benchmark Yields
  02-Sep-22 09-Sept-22 % Change
I&E FX 431.50 436.33 +1.12%
  01-Sep-22 08-Sept-22  
NAFEX ($/N) 428.90 435.63 +1.57%

Source: FMDQ




Money Market

The funding rates climbed up to a double-digit this week as primary auction mops out liquidity. On Friday, it slumped to a single digit of 8.50 and 9.00 for the Open Repo rate (OPR) and overnight rate (0/N). On a week-on-week basis, it dipped by -29.17% and -28.00% respectively (see table 3 below).


Table 3: Money Market

Money Market Rate
  02-Sep-22 09-Sept-22 % Change
OPR (%) 12.00 8.50    -29.17%
O/N (%) 12.50 9.00     -28.00%

Source: FMDQ




Treasury Bills Market

The multiple primary auctions ranging from FGN savings bonds to the NTB PMA intercepted the activity of the market, it stayed quiet for most trading sessions this week.


On a week-on-week basis, the average benchmark yield for the NTB and OMO bills fell marginally by -0.13% and -0.18% to 7.81 and 11.14 respectively (See table 4 below).


Table 4: Treasury Bills Market

Average Benchmark Yields
  02-Sep-22 09-Sept-22 % Change
T. Bills (%) 7.82 7.81 -0.13%
OMO Bills (%) 11.16 11.15 -0.18%

Source: FMDQ


We anticipate selloffs to continue in the coming week


Nigerian Treasury Bill Primary Auction 

At Wednesday’s NTB primary auction, the DMO sold exactly ₦214.74 billion worth of notes offered. The rates on the 91-day, 182-day, and 364-day notes were allotted at 5.50%, 5.85%, and 10.00% rising by 150bps, 85bps, and 150bps respectively. The bid-to-cover ratio across the three papers stood at 0.05x, 0.34x, and 1.28x accordingly (see table 5 below). 





Table 5: 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         20.77 1.13 1.03 5.50 4.00
182-days         31.29 10.55 10.55 5.85 5.00
364-days         162.68 208.87 203.15 10.00 8.50

Source: Commercio papers


FGN Bond Market

For the bond market, the average benchmark yield stayed unchanged for most trading sessions this week as investors divert to the PMA settlement.

On a week-on-week basis, it closed bearish, and the average benchmark yield curve rose by 38bps (W-o-W) to settle at 13.20 (See table 6 below).


Table 6: FGN Bonds Market

Average Benchmark Yields
  02-Sep-22 09-Sep-22 % Change
Short Tenor      12.54  12.50  -0.32%
Mid Tenor      13.01 13.14  +1.00%
Long Tenor      13.66 13.68  +0.15%

Source: FMDQ


The selloff sentiment should continue next week in anticipation of inflation figures 


FGN Savings Bond Primary Auction 

The Debt Management Office (DMO) issued the monthly Federal Government Savings bond consisting of 2-years and 3 years tenors. The interest rates for the 2-years and 3-years rose by 17.3% and 15.6% to 11.041% and 12.041% when compared to the previous auction. The rise is to attract investors as inflation expectations trend higher. The auction is presently ongoing and closes on Friday 9th September with a minimum subscription of N5000 and a maximum of N50,000,000.


Euro slides as Russia Halt supply to European countries 

Euro plunges to 20 years low as Russia back out from the Saturday deadline to resume flows of gas supply to Germany, the euro fell by 0.5% to $0.99 on Monday. Initially, Russia halted supply through Nord Stream 1, which runs under the Baltic Sea for three days of maintenance. However, on Friday, Moscow blamed sanctions imposed by the west after Russia’s invasion for hampering routine operations and stated it could not restart deliveries without indicating a speculated date of resumption. Analysts expect further depreciation of the currency coupled with the current recession risk, but the European Central Bank is expected to raise the rate this week which should assist the currency.


Banditry to affect investor’s take on Zamfara state’s bond issuance, Analysts predict 

ZSG-SPV Company Limited announced N19.8bn bond issuance at a coupon rate of 17% with a 7-year maturity, the issuance will be sponsored by the Zamfara State Government and secured by an irrevocable standing order (ISPO) authorized by the federal ministry of finance. The fund is intended to support developmental projects across key sectors in the state to improve the standard of living of residents and raise the government’s internally generated revenue (IGR). The state recorded a 14% growth in total revenue between 2020 and 2021 with the IGR and VAT constituting 19% and 29% respectively. The subscription is strictly restricted to institutional investors with a minimum amount of N10m, analysts believe investors might pull back a bit as the state battles banditry which will likely weigh on its revenue as funds will be diverted towards curbing insecurity.


Multiple Commercial Paper Issuance as the Hawkish MPR raises lending rate

Under its N150 billion commercial paper programme, MTN Nigeria Communication Plc announced the issuance of a Series 3 commercial Paper of N23bn with an implied return of 11.00% and a discount rate of 10.42% for 184 days tenor. The issuance closes on September 13, 2022, with a minimum of N5m required to invest. Analysts noticed the coupon rate as relatively low compared to other CP issuance due to its strong rating of ‘AAA’ by GCR rating and ‘Aa’ by Agusto & Co. The current yield is 46.7% higher than the previous yield of 7.5% at the April issuance. We expect the rise to entice investors as it’s higher than what is offered in the Nigerian Treasury bill market.


Similarly, C & I leasing company issued a commercial paper of N50bn for an implied return of 16.50% and a discount rate of 14.72% with a tenor of 267 days. The maturity date is June 9, 2023, and the issuance would close on September 13, 2022; a minimum of N5m and a multiple of N1m thereafter is required to invest. Analysts expect GCR’s ‘A3’ rating to attract risk-inclined investors.




Zambia’s Eurobond Tumbles as Country Seeks US$8.4bn Debt Relief 

Zambia seeks $8.4bn debt relief from its external creditors (Chinese and Eurobond lenders) for 2022 to 2025. The restructuring is required to bring down debt servicing to 14% by 2025. Currently, the country spends nearly two-thirds of its revenue on debt servicing. The decision came after receiving a US$1.3bn bailout from IMF to prevent the reoccurrence of the default recorded in 2020, with the country’s debt-to-GDP ratio at 126% in 2021. The goal is to reduce it to 104.7% by the end of 2025. Zambia plans to ask creditors to either agree to an outright write-down of the debt or extend their loan repayment term. Analysts expect a dip in prices of the Eurobond as investors begin to sell excessively as a reaction to the announcement.




NGX – Listed Equities

  • The Nigerian bourse ended the week on a negative note as market sentiment turned negative.  The NGXASI closed the week with -0.70%loss as against +0.73% gain recorded last week. The Nigerian Exchange recorded N188.94bn loss in naira terms.


  • Year-to-date, the NGSAXI maintained its positive position to close the week with a gain +16.34%as the market capitalization settled at N26.99trn.


  • Sectoral performance across sectors was broadly negative. At the close of trading on Friday, three (3) sectors closed positive while thirteen (13) sector closed negative and one (1) sector closed Flat. The NGX INSURANCE Index topped the gainers list chart with +1.041% gain WoW while the NGX AFRBVI Index topped the loser’s chart with a loss of -1.89%WoW (See tchart 1 below).


Chart1: Movement of NGXASI Index Points 29 AUG 2022- 9 SEP. 2022


Source: NGX


NASD OTC Exchange – Unlisted Equities

The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week on a negative note.  The NSI and Market capitalization closed the week at 756.43 points and 995.78 with a decline of -0.75% respectively (See table 7 below).


Table 7 : NASD W-o-W Change

Parameter 02-Sep-22 09-Sep-22 WoW Chg
USI                                   762.12                                  756.43 -0.75%
MKT Capitalization (Bn)                               1,003.27                                  995.78 -0.75%
Volume Traded                           21,900.00                           117,835.00 438.06%
Value Traded (000)                         753,550.00                     23,002,909.90 2952.61%
Deals Executed                                      8.00                                     17.00 112.50%

 Source: NGX


Dangote And Elumelu Index

Dangote Index closed the week positive at 128.44 basis points from 128.39 basis points recorded the previous week, representing an increase of +0.04% WoW DANGCEM, NASCON remained flat while DANGSUGER recorded gain to close with +0.91% WoW (See table 8 below).


Table 8 :Dangote Index W-o-W Change

COMPANY 02-Sep-22 09-Sep-22 % Chg
DANGCEM 245.00 245.00 0.00%
DANGSUGAR 16.40 16.55 0.91%
NASCON 11.00 11.00 0.00%

Source: NGX


Furthermore, the Elumelu Index closed positive at 110.47 basis points from 108.44 basis points recorded the previous week, representing an increase of +1.87% W-o-W UBA closed the week positive with +4.14%, while , TRANSCORP, UBCAP and AFRIPRUD  closed the week negative with a -2.73%, -1.24% and -1.79% respectively while TRANSCOHOT closed the week flat W-o-W (See table 9 below).




Table 9 : Elumelu Index W-o-W Change

COMPANY 02-Sep-22 09-Sep-22 % Chg
AFRIPRUD 5.60 5.50 -1.79%
TRANSCOHOT 6.25 6.25 0.00%
TRANSCORP 1.10 1.07 -2.73%
UBA 7.25 7.55 4.14%
UBCAP 12.05 11.90 -1.24%

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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