Expectations from the Markets this week 17.10.22 – First Ideas Limited

Expectations from the Markets this week 17.10.22

Expectations from the Markets this Week – 171022

Global Economy


U.S. Inflation hits 8.2%, Retail Sales Data Hint at another Jumbo rate hike by the FOMC

According to data from the Bureau of Labor Statistics, U.S. inflation hit 8.2% year over year this represents a 10bp decline compared with August’s 8.3% reading as the pace of price increases remains at multi-decade highs, High food prices, shelter, and medical care sent the consumer price index for September up by 0.4%, compared to August’s 0.1%. Meanwhile, retail sales remained unexpectedly flat in September as households cut back on purchases of motor vehicles and other big-ticket items like electronics and appliances amid stubbornly high inflation and rapidly rising interest rates.  Even though Industrial production data due for release next week is expected to show continued deterioration, Analysts say that the Federal Open Market Committee is expected to conduct another jumbo rate hike.


UK Minister of Finance Resigns after IMF chief identifies policy incoherence


Kwasi Kwarteng, UK Minister of Finance resigned on Friday, following wide criticisms of the administration’s tax cuts policy.  International Monetary Fund (IMF) Managing Director Kristalina Georgieva during the IMF and World Bank annual meetings also rebuked the United Kingdom over its planned tax cuts saying it contradicted the Bank of England’s (BoE’s) contractionary policy. Meanwhile, UK’s new Finance Minister Jeremy Hunt is expected to set out the government’s medium-term fiscal plan on October 31, sticking to the date his Kwarteng earlier announced. With unemployment falling to 3.5% from 3.8%, in the three months to August according to the Office for National Statistics (ONS), Analysts say that the tight UK labor market as well as energy and food prices would keep inflation.  high. Analysts would further look to UK consumer confidence and Retail Sales data due for release next week to gauge the situation of the economy.


Kenya registers 5.2% growth in Q2 2022 as Ruto Promises to Deliver on ambitious Privatization program

The Kenyan economy recorded a 5.2% real GDP growth in Q2 2022, with the growth deriving from financial services, insurance, transportation, and wholesale and retail trade. Analysts attribute the impressive growth figure to the fact that The Central Bank of Kenya has been one of the least active in the continent despite the country’s high inflation rate. Rates were hiked only a second time by 75bps in September, taking them to 8.25%. Meanwhile, Kenyan President William Ruto has promised to privatize up to 10 public companies and have them get listed on the Nairobi Stock Exchange (NSE). Analysts believe the move would help to improve Kenya’s public sector finances as the establishments are expected to be more efficient and less of an encumbrance.


Nigeria Economy 


Nigerians Bemoan Poor Clearing Logistics at Sea Ports

Recent investigations suggest that up to 8,000 cargoes, valued at about N3trn, have remained stranded in Nigerian sea ports for over 90days. Analysts say that the inefficient cargo-clearing logistics in Nigerian ports are due to the lack of port scanners, which slows down the process substantially. The overzealousness of the customs also has been fingered for the large volume of backlogs; Analysts say that the increasing FG targets come in the way of what should be the customs’ actual remit of facilitating trade. While on the part of the importers, the adverse movement in the exchange rate is believed to have imposed a greater-than-budgeted clearing tariff on the importers. Nigerian sea ports take not less than 28days to clear cargo, a situation that has made many importers opt for importation through ports in neighboring countries


Analysts Dissect 2023 Budget, Highlight Weaknesses

The 2023 Federal Government budget eyes an N1.92trn retained oil revenue, assuming an oil production of 1.69mbpd. Analysts say that the projections are fraught with errors given that Nigeria’s production for August was only 900,000bpd due to oil theft, raising the likelihood of revenue underperformance. Meanwhile, the N20.51trn budget will result in an N10.78trn deficit funded by N8.8trn in new borrowing. The borrowing will push government debt to N50trn even without the N20trn Ways and Means advances by the Central Bank of Nigeria (CBN). The worries about debt sustainability are made worse by the fact that less than a third of next year’s spending (N5.35trn) is committed to capital expenditure, while N6.31trn (31%) would be used to service debt obligations


IMF Lowers Nigeria’s FY 2022 Growth Projection to 3.2%, Analyst less optimistic

The October Issue of the IMF’s World Economic Outlook (WEO) lowered Nigeria’s 2022 growth projection to +3.2%. This is 0.2% lower than the +3.4% projected in its July 2022 report. The multi-lateral organization’s weaker outlook was due to the downward revision of the growth projection for some of the country’s trading partners. In addition, tighter financial and monetary conditions were identified as reasons for the downward revision. According to the Washington-based institution, global growth would slow from an estimated 6.1% in 2021 to +3.6% in 2022. Analysts believe that FY 2022 growth would come in at between +2.8% and +3% as the MPC is expected to continue with its aggressive stance. The impact of a devalued Naira is also likely to imply Private sector productivity and overall growth.



Analysts anticipate a further rise in Inflation following sharp depreciation in Naira  

As the National Bureau of Statistics (NBS) prepares to publish the inflation rate for September, Analysts say the consistent devaluation of the Naira may have informed a further spike in inflation to 21.26%. The Naira depreciated by 5% in the parallel market from N703/US$ to N740/US$ in September.  In August, headline inflation had come in at a 17-year high of 20.52%, just as food inflation rose to 23.12%. However, the data from last month showed signs of improvement as Month-on-Month (M-o-M) inflation moderated to 1.77% from 1.82%, the lowest since last December. Analysts attribute the development to a streak of hawkish monetary policy actions by the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), which has seen the base rate rise by 400bp since May. As nationwide floods are expected to put upward pressure on food prices and food inflation; analysts, pencil in a 24% food inflation rate for September 2022.


Oil and Gas


Nigeria’s Crude Oil Production Takes a Further Wallop

The latest Monthly Oil Market Report (MOMR) for September 2022 by the Organization of Petroleum Exporting Countries (OPEC) showed that Nigeria’s oil production dropped further behind Angola, Libya, and Algeria. Nigeria’s crude oil production dropped by -3.56% m-o-m from 972,394b/d in Aug ’22 to 937,766b/d in Sept ’22 based on direct communication. On the contrary, the country’s crude oil production, based on secondary sources, increased by +2.84% m-o-m from 1.057mb/d in Aug ’22 to 1.087mb/d in Sept ’22. Analysts attributed the low production level to shutting in at Bonny, Brass, and Forcados terminals on the back of crude oil theft, pipeline vandalism, and maintenance repairs. They expect the coming onstream of the oil facilities and the current efforts to curb oil theft to shore up the country’s oil production towards the end of the year

Nigeria-Morocco Gas Project Comes under Threat in the Face of Industry Challenges 

In a Bloomberg interview, the Group CEO of the Nigerian National Petroleum Corporation Limited (NNPCL), Mele Kyari, disclosed that the project partners would make a final investment decision on the Nigeria-Morocco pipeline next year. The world’s longest offshore pipeline, estimated at US$20 to US$25bn, is expected to run 5,600km from Nigeria along 11 other West African countries to Morocco before connecting with European pipelines. Analysts rate the probability of Nigeria getting financing for its 50% equity stake in the project low, given the inability of the NNPC to meet its immediate payment obligation to its import partners and the many challenges associated with the country’s oil and gas projects. Elsewhere, they consider the offshore nature of the project relatively safe but remain pessimistic about the capacity of Nigeria to meet its contractual obligations on gas delivery.


Oil Theft and Lack of Domestic Supply Obligations Stall Modular Refineries 

The rising scale of crude oil theft, ageing infrastructure, and years of underinvestment, which has led to shut in of many oil facilities, has made it difficult for promoters of modular refineries to get feedstock to run their refinery operations in Nigeria. The lack of feedstock has also deterred investment in modular refineries, undermining the target of having over 20 functional modular refineries to boost petroleum products in the country. Thus, aside from the industry challenge, Analysts observed that the slog in drafting regulations on domestic crude oil supply obligation, as provided by the PIA, contributed to the hostile environment for modular refineries in the country. The situation has affected oil processing at Waltersmith Refining and Petrochemical Limited and stalled the progress of Edo Refinery and Petrochemical Company Limited, Duport modular refinery, and OPAC refinery. Amidst the challenges, analysts consider modular refineries critical to making Nigeria a refining hub for Africa.


Financial Fragility of the NNPCL amidst Profit Announcements Worry Business Economists

The Capital Commitment Agreements of the Nigerian National Petroleum Company Limited (NNPCL), detailed in its latest financial statement, highlights the company’s financial fragility despite the huge 2021 profit after tax. Analysts observed financial constraints in the NNPCL report, which has led to some commitment deals with its business partners. One deal involves a cash-for-crude Forward Sales Agreement (FSA) where the partners make upfront payments to the NNPCL and the NNPCL, in turn, supplies crude oil and gas in exchange for the payments. The NNPCL is in such a deal with Eagle Export Financing Limited, NLNG, and Lekki Refinery Funding Limited, among others. Analysts doubt the continuous capacity of the NNPCL to deliver on its obligation to provide crude to the partners, given the country’s challenges of low crude production occasioned by the legacy issues in the industry.


Oil Prices Face Downside Risk Pressures

Oil prices moderated for most trading sessions of the week following the waning of the initial enthusiasm over OPEC+’s 2mb/d production cuts. Oil prices dropped on a weakening global demand predicated on a flare in COVID-19 cases in China and the US Federal Reserve’s (Fed’s) commitment to raising interest rates to curb inflation. OPEC and US Energy Department cut their global demand outlooks on the downside risks. OPEC now sees oil demand growing by 2.64mb/d in 2022, down from 3.1mb/d, while US Energy Department now sees demand growing by 1.5%, down from the earlier 2% growth forecast.

Brent had a weekly decline of -6.35% (see Table 1  below).



Gold dropped by -3.34% and Silver also dropped by -9.67% W-o-W (see Table 1).



Cocoa prices declined -0.46% W-o-W.

Corn prices inched up by +1.32% W-o-W and Sugar prices inched up by +1.02% (see Table 1).


Table 1: Commodity Prices

Commodity 14-Oct-22 07-Oct-22 31-Dec-21 Weekly Chg YTD Chg
Brent 92.13 98.38 78.54 -6.35% 17.30%
Gold 1652.1 1709.1 1827.1 -3.34% -9.58%
Silver 18.3 20.26 23.27 -9.67% -21.36%
Cocoa 2381 2392 2546 -0.46% -6.48%
Corn 692.25 683.25 595.5 1.32% 16.25%
Sugar 18.86 18.67 18.83 1.02% 0.16%
Source: CNBC

*Data for the 14th of October 2022 is as of 05: 43 pm (Nigerian Time)




Japan Food Industry Looks Towards Rice Flour as Wheat Becomes Expensive

The Japanese consumption of rice as a staple has declined, with more people turning to bread and noodles. The country’s demand dropped below 7 million tons for the first time in many years as wheat prices stayed high. Japan imports about 80% of its wheat, but the war in Ukraine and a weak Japanese yen have made domestic prices of wheat more expensive. Different types of rice have been developed, including those used for making bread or noodles. Local Governments support the move by providing subsidies for products using prefecture-made rice flour. In Japan, technologies for developing rice fodder have improved. Among its many uses, rice fodder can also be used as chicken feed but can only be limited to 10% as more significant amounts could result in a whitish yolk.


Climate Change Threatens Global Food Prices

As a result of global warming, farmers are looking for the best means of producing food. A shift in rain patterns, temperatures, and decreased soil health has posed more risks to regular agricultural practices as more extreme temperatures, and precipitation can prevent crops from growing. Increasing irrigation systems, altering planting, harvesting times according to weather changes, and diversifying crops to reduce vulnerability are all strategies some farmers recommend fighting the current climate change effect.


Analysts believe that the threat of a global food crisis is inevitable as prices of farm inputs soar as climate change affects planting, extreme weather conditions which stifle crop growth, and the growing population that needs more food. For countries like Nigeria with low productivity, mechanization needs to be brought into the agricultural sector to increase productivity per hectare of land.


Fixed Income


Currency Market

At the I & E FX window, the Naira appreciated only on Wednesday and depreciated for the rest of the week. At the close of trading on Friday, the Naira depreciated against the US dollar to N441.38/US$. Indicating a +0.50% week-on-week (W-on-W) depreciation of the legal tender.


At the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window on Thursday, it depreciated by -0.98% to N440.00/US$ (see table 2 below).


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

Average Benchmark Yields
  07-Oct-22 14-Oct-22 % Change
I&E FX 439.17 441.38  -0.50%
  29-Sep-22 06-Oct-22  
NAFEX ($/N) 435.75 440.00  -0.98%

Source: FMDQ

Money Market

The funding rates maintained double-digit all week as the liquidity system remained weak. However, the Open Repo rate (OPR) fell marginally by -6.26% (W-o-W) to 16.17 while the Overnight rate (O/N) increased by +1.54% (W-o-W) to 16.50 (see table 3 below).


Table 3: Money Market

Money Market Rate
  07-Oct-22 14-Oct-22 % Change
OPR (%) 17.25 16.17     -6.26%
O/N (%) 16.25 16.50     +1.54%

Source: FMDQ


The interbank rates should maintain the double-digit barring any significant inflows.


Treasury Bills Market

This week the treasury bill market was broadly quiet, maintaining the same average benchmark yield for most trading sessions.  On Friday it closed slightly bullish as the average benchmark yield contracted to 7.30 and 10.25 for the treasury bills and OMO bills respectively (See table 4 below).


Table 4: Treasury Bills Market

Average Benchmark Yields
  07-Oct-22 14-Oct-22 % Change
T. Bills (%) 7.31 7.30 -0.14%
OMO Bills (%) 10.95 10.25 -6.39%

Source: FMDQ


The September inflation figures will determine the outcome of the market next week.


NTB Primary Auction

Following the MPR hike, the Nigerian treasury bill rates soared at the primary auction on Wednesday, October 12, 2022. The DMO raised N179.32bn as compared to the N141.34bn offered with the oversubscription skewed to the 364-day tenor. The rates on the 91-day, 182-day, and 364-day rose significantly by 99bps, 150bps, and 225bps to settle at 6.495, 7.50%, and 12% respectively. The bid-to-cover ratio for the three tenors stood at 0.20x, 0.17x, and 2.15x 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      14.27 1.65 1.55 6.47 6.49
182-days      25.56 2.62 2.52 7.90 7.50
364-days      151.06 107.67 30.76 13.00 12.00

Source: Commercio paper


FGN Bond Market

Despite the negative yield return with the accelerating inflation, the bond market recorded some buying interest this week skewed at the short tenor.

However, it closed bearish weekly with the average benchmark yield rising by 86bps to 14.12% (See table 6 below).


Table 6: FGN Bonds Market

Average Benchmark Yields
  07-Oct-22 14-Oct-22 % Change
Short Tenor      13.89  13.85  -0.29%
Mid Tenor      13.77 13.95  +1.31%
Long Tenor      14.29 14.45  +1.12%

Source: FMDQ


The bond market should remain bearish in the coming week as investors concentrate on the FGN Bond PMA. 


DMO Debunks Debt Restructuring Rumour 

On Wednesday, Bloomberg reported that the Minister of Finance, Zainab Ahmed, stated that Nigeria is considering debt restructuring and extending its credit obligation repayment period as it faces a rising debt-servicing burden. As of April 2022, the country’s debt service at N1.94 trillion surpassed the revenue of N1.63 trillion in the first four months of the year as the country’s revenue dwindled with falling oil production. She also stated that the government plans to refinance domestic debt obligations due this year and next. However, on Thursday, the Debt Management Office (DMO) published a press release debunking an alleged debt restructuring reported by international media on Wednesday. The document stated that the Minister’s statement was misinterpreted, and that the country was still committed to meeting all its debt obligations, local and international. However, the report stated the government was looking forward to exploring other appropriate debt liability management options such as bond-buy back and bond exchanges. Analysts believe the clarification may restore investors’ confidence and curb the selloffs seen across the domestic bonds and Eurobond market on Thursday.


Higher Rates on October FGN Bond Issuance May Attract Larger Investor Interest

The Debt Management Office (DMO) announced the Re-opening of its monthly bond issuance, slated for 17th to 19th October 2022. The offer for subscription is a total of N225 billion notes, with N75bn each across the three tenors. The rate for the FGN APR 2029 maturity has been adjusted to 14.55% compared to the 13.53% offered in September, while the rates for FGN APR 2032 and FGN APR 2037 stayed at 12.50% and 16.2499%, respectively. A minimum subscription of N50m and a multiple of N1000 are required to invest. Analysts expect the adjusted rate of the 10year tenor to attract investors to the auction slated to hold next week.


Pension Funds Move to Corporate Debt Securities Amid Rising Interest Rates 

According to the data released by National Pension Commission, the Pension Funds Administrators have widened their investments in corporate bonds in the first seven months of 2022. The investment in corporate fixed-income securities rose by 41.1% to N1.371 trillion from N957.7 billion in the corresponding period in 2021, contrary to the +5.3% slight increase in equities investment to N1.020 trillion against N968.8billion in the previous year. The PFA’s Investment allocation showed that corporate securities had a higher quota of 9.5% and equities had 7.1% of their total investments during the period. Diversifying corporate securities can be attributable to the rising interest rate and political uncertainty. Analysts believe the recent interest of institutional investors in corporate securities has driven the many issuances of commercial papers and corporate bonds in 2022.


Egyptian Banks Tighten Dollar Accessibility as Scarcity Bites Harder 

As the dollar shortage worsens in Egypt, some Egyptian banks have tightened limits on foreign currency withdrawals from local currency accounts, although no outright industry-wide rules have been announced. One of the big banks, HSBC, has reduced the maximum monthly withdrawal for travel purposes to $1,500 from $5,000 and the maximum amount that customers could withdraw abroad to $5,000 from $10,000 a month. First, Abu Dhabi Bank has lowered the cash withdrawals abroad limit to 10,000EGP from 50,000 EGP before, and other banks have also implemented a similar review of the withdrawal limit. The war between Ukraine and Russia triggered the dollar shortage as Ukrainians and Russians account for 30% of the country’s tourists, which is part of the country’s dollar inflows, with Egypt’s foreign currency reserves falling from about $40bn in 2021 to $33.14bn in July. Analysts believe the considerable demand for the dollar with the falling Egyptian pound necessitated the limit placed by the banks similar to Nigeria’s commercial banks.


Ways and Means Hit N22.07trn in August 2022

Recent data from the Central Bank of Nigeria (CBN), shows that the Federal Government has borrowed N4.61tn from the Bank between January and August 2022. The borrowing rose from N20.61tn in July 2022 to N22.07tn in August 2022. The N22.07tn owed to the apex bank is not included in the country’s total public debt stock, which stood at N42.84tn as of June 2022. The CBN financing of the FGN fiscal deficit is believed to adversely affect domestic prices and exchange rates. Analysts note that the CBN’s ways and means of financing will continue to weaken the currency and widen the gap between the official exchange rate and the parallel market rate.


Equity Market


NGX – Listed Equities

  • The Nigerian bourse ended the week on a positive note as market sentiment turned positive.  The NGXASI closed the week with a +0.46% gain as against a 41%loss recorded last week. The Nigerian Exchange recorded N118.52bn gain in naira terms.


  • Year-to-date, the NGXASI maintained its positive position to close the week with a gain of +11.36% as market capitalization settled at N25.909trn.
  • Sectoral performance across sectors was broadly positive WoW. At the close of trading on Friday, twelve (12) sectors closed positive WoW while three (3) sectors closed negative WoW and two (2) sectors closed flat WoW. NGX INDUSTRIAL and NGX AFRBVI topped the gainer’s chart with a gain of +3.17% and 16% WoWrespectively while the NGX OIL and GAS Index topped the loser’s chart with a loss of -2.13% WoW (see chart 2 below).

Chart 2:  Movement of NGXASI Index Points 04 OCTOBER 2022 – 14 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 727.88 points and 958.19 with a decrease of -0.01% respectively (see table 7 below).


Table 7  NASD W-o-W Change

Parameter 07-Oct-22 14-Oct-22 WoW Chg
USI 727.98 727.88 -0.01%
MKT Capitalization (Bn) 958.33 958.19 -0.01%
Volume Traded 494,695.00 614,276.00 24.17%
Value Traded (000) 81,407,025.00 135,754,996.00 66.76%
Deals Executed 10.00 1.00 -90.00%

Source: NGX


Dangote And Elumeli Index

Dangote Index closed the week flat at 128.15 index points from 128.15 index points recorded the previous week, DANGCEM, DANGSUGER, and NASCON remained flat respectively WoW (see table 8 below).


Table 8 : Gote Index W-o-W Change

COMPANY 07-Oct-22 14-Oct-22 % Chg
DANGCEM 245.00 245.00 0.00%
DANGSUGAR 16.05 16.05 0.00%
NASCON 9.50 9.50 0.00%

 Source: NGX


Furthermore, the Elumelu Index closed positive at 103.68 index points from 101.62 index points recorded the previous week, representing an increase of +2.03% W-o-W. UBCAP, UBA, and AFRIPRUD closed the week positive with +3.18%, +2.22% and +8.00% respectively. Meanwhile, TRANSCORP and TRANSCOHOT closed the week flat W-o-W (see table 9 below).









Table 9: Elumelu Index W-o-W Change

Elumelu INDEX
COMPANY 07-Oct-22 14-Oct-22 % Chg
AFRIPRUD 5.00 5.40 8.00%
TRANSCOHOT 6.25 6.25 0.00%
TRANSCORP 1.05 1.05 0.00%
UBA 6.75 6.90 2.22%
UBCAP 11.00 11.35 3.18%

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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