Expectations from the Markets this week – First Ideas Limited

Expectations from the Markets this week

Expectations from the Markets this Week – 101022

Global Economy


Latest Data suggest US economy is slowing but OPEC decision may keep inflation hot

According to the US Department of Labour, the non-farm payrolls (NFP) increased by 263,000 in September. Economists had penciled in an increase of 250,000. Meanwhile, the unemployment rate fell by marginally to 3.5%. In what may have also been cheerful news to the Fed, the Manufacturing and Service PMI in the US had dropped to 50.9 and 56.7 index points respectively indicating that the economy may be cooling. The decision of OPEC to cut production by 2mbpd however means that energy prices would stay high while the Fed may continue with its aggressive rate hikes to combat inflation


World Bank downgrades Sub-Saharan Africa’s growth to 3.3% in 2022

The World Bank’s Africa Pulse Report published during the week cut the 2022 growth forecast of Sub-Saharan from 3.6% back in April to 3.3% in the September edition of the report. The downgrade has been attributed to a combination of drivers namely: slowing global growth, drought, increased risk of debt distress and rising inflation made worse by Russia’s war in Ukraine. Analysts have noted that the continuous rate hikes by the more developed economies could tip the global economy into a recession. In which case, emerging markets would be the hardest hit. Already African countries have to make a choice between using a depleted foreign exchange reserve to service debt obligations or to provide food and energy for their citizens.


Australian Reserve Bank Effects a Dovish Pivot, Analysts See Other Banks Sustaining Hawkish Tone


In an unexpected move, the Reserve Bank of Australia (RBA) chose to raise rates by only 25bp, following an improved outlook for inflation and a record level of trade-supported growth. The Polish central bank on the other hand, also surprised Analysts by refraining from lifting rates after being on a steady path of tightening monetary policy over the past year lifting the policy rate to 6.75% from 0.1%. Analysts however note that most monetary policy authorities would continue with the hawkish tone as inflation continues to rage in such economies.


Nigeria Economy

President Buhari Presents N20.51trn budget, Analysts question Oil Production assumptions


The N20.51trn proposed budget presented, on Friday, by President Muhammadu Buhari is N750bn higher than the N19.76trn projected by the Medium-Term Expenditure Framework (MTEF) 2023-2025. Analysts had speculated yesterday that last-minute changes were being made to the proposed budget by the Federal Government ahead of the ceremonial presentation of the budget by the President to the joint session of the National Assembly. The appropriation bill assumes a crude oil price of $70bpd and daily crude oil production of 1.69mb. As part of the assumptions of the budget, the Naira is expected to exchange at a rate of N435/dollar.


The bill earmarks N5.15trn for capital expenditure, N8.21trn is provided for re-current expenditure while N6.31trn is set aside for debt service. Analysts note that although the proposed budget, in Naira, is 16% larger than the 2022 budget (N17.13trn), a comparison of the dollar equivalent of the two budgets shows that the 2023 proposed budget is 7% less than the 2022 budget indicating the impact of a severely devalued Naira. Analysts also question the feasibility of the budget’s assumed daily oil production of 1.69mb. Nigeria’s crude oil production crashed to 900,000bpd in August extending a streak of crude oil underproduction by the country dashing hopes of an improvement in the government revenue.


World Bank Group Downgrades Nigeria’s Growth Outlook

The October 2022 edition of the World Bank’s Report titled: Africa’s Pulse downgraded Nigeria’s 2022 GDP growth outlook by 0.5% to +3.3% due to an underperforming oil sector. According to the report, the challenges in the oil and gas sector would also account for an elevated government deficit over the forecasting horizon, increasing Debt pressures to 102.3% of GDP by the end of 2022. On a brighter note, the current account balance is expected to improve from an account deficit of -0.4% of GDP in 2021 to a surplus of 1.1% in 2022.  Analysts advise that the government deficit must be rationalized by addressing oil theft and thoroughly reviewing the subsidy regime.


Nigeria’s Gain from Declining Western Fertility Rates 

As countries like the US, Canada, and Germany experience declining birth rates, Analysts believe that without immigrants, the working population in such countries would also decline, with implications for productivity and tax revenue. The birth rate in the US is 1.73 births per woman, falling below the replacement rate, suggesting that average couples have below two children. Although the situation in the US is better than that of Europe, the world’s largest economy, like others, is counting on Immigrants to support its workforce.


According to the European Union Digital Economy and Society Index report, there is an indication of a shortage of information technology (IT) specialists in the European Union’s (EU’s) labour market, with about a million IT professionals needed to fill the gap. Nigeria, which has recently recorded a massive migration of professionals, has typically received an average of $20bn annually from its national resident in the diaspora. Analysts say the government’s coordinated talent export policy could further boost its foreign earnings.


Analysts Bemoan Nigeria’s Slow Growth and Underdevelopment After 62 years of Independence

As Nigeria marked its 62nd independence anniversary on October 1, 2022, Economists noted that the growth trajectory of the country has been checkered.  Analysts associate this with the over-dependence of government revenue and capital expenditure on the volatile oil and gas export proceeds. In the last five years, the economy has recorded two recessions both associated with a crash in global crude oil prices. While a recent streak of GDP growth rates has been positive, analysts claim that the impact of the growth rates on unemployment and poverty levels has been minuscule.  With a population growth rate of 2.5%, and an average of 600,000 graduates per year Analysts put the country’s Unemployment rate at about 45%. This suggests that the economy’s growth is not sufficient to alleviate poverty and misery.



Brent had a weekly growth of +11.58% (see Table 1).



Gold inched up by +1.77% and Silver also inched up by +5.41% W-o-W (see Table 1).



Cocoa prices inclined by +1.74% W-o-W.

Corn prices declined by -0.51% W-o-W and Sugar prices inched up by +2.02% (see Table 1 below).


Table 1: Commodity Prices

Commodity 07-Oct-22 30-Sep-22 31-Dec-21 Weekly Chg YTD Chg
Brent 98.38 88.17 78.54 11.58% 25.26%
Gold 1709.1 1679.3 1827.1 1.77% -6.46%
Silver 20.26 19.22 23.27 5.41% -12.94%
Cocoa 2392 2351 2546 1.74% -6.05%
Corn 683.25 686.75 595.5 -0.51% 14.74%
Sugar 18.67 18.3 18.83 2.02% -0.85%
Source: CNBC,

*Data for the 7th of October 2022 is as of 05: 43 pm (Nigerian Time)


Stakeholders Call for Cassava Inclusion in Bread Production

At the one-day workshop on how cassava and wheat can be used together to produce bread, the President of the Industrial Cassava Stakeholders Association of Nigeria indicated that cassava inclusion in bread production could help reduce the amount spent on wheat imports saving around US$2bn annually. They also claimed this move could reduce the price of bread by about 15% – 20%. If there is total acceptance, we could see prices for bread moderate.


Nigeria produces over 60 million tonnes of cassava annually, majorly for human consumption, while less than 5% is used in Industries. Popularly used for the production of garrifufulafun, and starch, an additional line of demand from the bakeries could call for increased production to meet the demand. If accepted nationwide, Nigerians might have to adjust to the taste of the new formula while also spending less on bread purchases.


Security and Extreme Weather Serve as Hindrance to Agricultural Development in Nigeria

One of the many issues hindering the Nigerian agricultural sector is the lack of access to information, as the founder of AgribusinessNG. To create awareness of the opportunities that lay bare for young Nigerians, the company organized a sensitization forum to empower 5000 youths with Agric funding and empowerment at the National Stadium, Surulere, Lagos. It was highlighted at the meeting that a fund of N22bn had been made available by the MasterCard Foundation in care of Sterling Bank for aspiring young farmers interested in agriculture and has laid fallow for almost 2 years, also pointing out that if the funds had been tapped, Nigeria would not be affected by the problems with regards to food scarcity and insecurity.


Analysts, however, feel this claim is half complete as more problems make such access to funds ineffective. Problems such as security which has driven farmers away from their homes and farms, and problems relating to extreme weather conditions such as drought and extreme flooding that have displaced many farmers and destroyed many crops, block the effectiveness of these funds even after they have been taken.


Gold Price Uncertain as Markets Lean into Q4 2022

Gold prices have shocked many who felt it would experience significant declines following the last FED rate hike. While many feel there is an inverse relationship between gold and interest rates, research into gold price movements has shown that expectation of interest rate stance is one factor that determines if the gold prices would appreciate or depreciate. After the recent rate hike, gold prices have tended upwards as investors still weigh the possibility of these continuous interest rate hikes on the economy, pointing out that while not visible now, it is very likely for the move to impact the economy negatively. The heavy loss was felt in Q3 2022 with the bullion dropping below the US$1,800 mark and then fell below the US$1,700 mark on September 15, 2022, and stayed below the price level, which served as a support for weeks until October 3 2022 where it again crossed the US$1,700 mark supporting the claim that gold prices might improve next year as the effect of the interest rate hike seeps into the real economy


Fixed Income Market


Currency Market

At the I & E FX window, the domestic currency dipped by +0.49% on a week-on-week (W-o-W) basis to N439.17/US$ at the close of trading on Friday.

Naira appreciated slightly at the NAFEX window to N435.75 on Thursday (see table 2 below).


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

Average Benchmark Yields
  30-Sep-22 07-Oct-22 % Change
I&E FX 437.03 439.17  +0.49%
  29-Sep-22 06-Oct-22  
NAFEX ($/N) 436.78 435.75  -0.24%

Source: FMDQ,


Money Market

As liquidity tighten with the raised MPR, money market rates moved up this week.


On Friday, the Open Repo rate (OPR) and Overnight rate (O/N) increased to 17.25 and 16.25, indicating a weekly rise of +4.84% and +7.81% respectively (see table 3 below).


Table 3: Money Market

Money Market Rate
  30-Sep-22 07-Oct-22 % Change
OPR (%) 15.50 17.25    +3.33%
O/N (%) 16.00 16.25     +7.81%

Source: FMDQ


Funding rates should continue to edge higher in the absence of any major inflows.





Treasury Bills Market

The buying interest continued for most trading sessions this week. However, on Friday, the NTB closed bearish with the average benchmark yield rising by +2.38% (W-o-w) to 7.31.


The CBN OMO bill’s average benchmark yield dropped by 27bps to settle at 10.95 (See table 4 below).


Table 4: Treasury Bills Market

Average Benchmark Yields
  30-Sep-22 07-Oct-22 % Change
T. Bills (%) 7.14 7.31 +2.38%
OMO Bills (%) 10.98 10.95 -0.27%

Source: FMDQ


We expect the market to sustain a similar trend next week in the absence of any major drivers.


FGN Bond Market

Bond prices fell significantly this week as selloffs dominated most trading sessions with the ongoing FGN savings bond primary auction.


On Friday, the average benchmark yield increased to 14.00% from 13.66% in the previous week (See table 5 below).


Table 5: FGN Bonds Market

Average Benchmark Yields
  30-Sep-22 07-Oct-22 % Change
Short Tenor      13.18  13.89  +5.39%
Mid Tenor      13.43 13.77  +2.53%
Long Tenor      14.19 14.29  +0.27%

Source: FMDQ,


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



Debt Servicing Grew by 86% in Q2 as Eurobond Yields Spike

According to the DMO, debt servicing on Nigeria’s foreign bonds rose by 86% from $246.16m in Q1 2022 to $457.01m in Q2 2022. The country spent $246.16m on Eurobond in Q1 2022, while the $457.01m for the second quarter was for Diaspora bonds and Eurobond settlement; $148.57m on Eurobond and $308.44m on Diaspora bonds. The spike in debt servicing is expected considering the recent rise in Nigeria’s Eurobond yields following the hawkish interest rate to fight rising inflation. In March, the country raised $1.25bn Eurobond to finance capital projects, contributing to the rise in the cost of borrowing. Analysts expect a further rise in debt servicing for quarters 3 and 4 as yields might continue to trend higher in the expectation that the rate hike will persist until the end of the year.


Falling Foreign Reserves with Currency Intervention 

Globally, countries’ foreign reserves have been dropping as the consistent fall in currencies prompted dollar-selling intervention to support the dwindling currency. Japan’s foreign reserves dipped by $54 billion to a record low of $1.238 trn at the end of September. Indonesia has used $1.4bn of its FX reserves to support the falling rupiah which has slumped to $130.8bn. Data released this week showed foreign reserves declined in Asian economies, China’s fell by 0.85% to $3.029 trn likewise South Korea had the second biggest monthly decline to $416.77 bn. Analysts worry that the FX reserves might continue to drop if the interest rate differential widens with the hawkish Fed stance.


Sukuk Bond Debt Servicing Soared by 306% in Q2 2022

Sukuk Bond debt servicing rose by 306% from N8.17bn in Q1 2022 to N33.13bn in Q2 2022. According to the FGN Sukuk Rental payment Dates, only one payment was made in the first quarter as against the three rental payments made in Q2, 2022 which constituted the rise.  The N250bn Sukuk bond issued at the end of 2021 with a rental rate of 12.80% higher than the previous issuances also aided the rise. similarly, the country recorded a 86% rise in Eurobond debt servicing in Q2 and is expected to continue to rise with the high-interest rate environment.  The uptick in debt servicing across all debt instruments with the large country’s debt size stirs debt sustainability concerns.




NGX – Listed Equities

  • The Nigerian bourse ended the week on a negative note as market sentiment remained negative.  The NGXASI closed the week with -3.41% loss as against 0.01% loss recorded last week. The Nigerian Exchange recorded N660.35bn loss in naira terms.


  • Year-to-date, the NGSAXI maintained its positive position to close the week with a gain +10.85% as the market capitalization settled at N25.791trn.



  • Sectoral performance across sectors was broadly negative WoW. At the close of trading on Friday, no sector closed positive WoW while fifteen (15) sector closed negative WoW and on (2) sector closed Flat WoW. NGX GROWTH and NGX AseM closed flat WoW while the NGX MAIN BOARD Index topped the loser’s chart with a loss of -5.25%WoW (see chart 1 below).


Chart 1: Movement of NGXASI Index Points 26 SEPTEMBER 2022- 07 OCTOBER. 2022

Chart 1: Movement of NGXASI Index Points 26 SEPTEMBER 2022- 07 OCTOBER. 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 727.98 points and 958.33 with a decrease of -1.06% respectively (see table 6 below).


Table 6: NASD W-o-W Change

Parameter 30-Sep-22 07-Oct-22 WoW Chg
USI 735.79 727.98 -1.06%
MKT Capitalization (Bn) 968.60 958.33 -1.06%
Volume Traded 105,440.00 494,695.00 369.17%
Value Traded (000) 1,608,410.00 81,407,025.00 4961.34%
Deals Executed 6.00 10.00 66.67%

 Source: NGX,


Dangote And Elumelu Index

Dangote Index closed the week negative at 128.15 index points from 128.26 index points recorded the previous week, representing a decline -0.09% WoW DANGCEM, DANGSUGAR remained flat respectively WoW while NASCON closed with a -13.64% loss WoW (see table 7 below).

Table 7: Dangote Index W-o-W Change

COMPANY 30-Sep-22 07-Oct-22 % Chg
DANGCEM 245.00 245.00 0.00%
DANGSUGAR 16.05 16.05 0.00%
NASCON 11.00 9.50 -13.64%

 Source: NGX


Furthermore, the Elumelu Index closed negative at 101.62 index points from 104.56 index points recorded the previous week, representing a decrease of -2.81% W-o-W. UBCAP, UBA, TRANSCORP closed the week negative with -1.35%, -3.57% and -4.55% respectively while, AFRIPRUD and TRANSCOHOT closed the week flat W-o-W (see table 8 below).


Table 8: Elumelu Index W-o-W Change

COMPANY 30-Sep-22 07-Oct-22 % Chg
AFRIPRUD 5.00 5.00 0.00%
TRANSCOHOT 6.25 6.25 0.00%
TRANSCORP 1.10 1.05 -4.55%
UBA 7.00 6.75 -3.57%
UBCAP 11.15 11.00 -1.35%

 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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