Expectations from the Markets this week – First Ideas Limited

Expectations from the Markets this week

Expectations from the Markets this Week – 051222

Global Economy


US Jobs Data signals further rate hikes

US Labour Market appears to still be running hot as the Non-Farm Payrolls (NFP) data released on Friday showed that employers added 263000 jobs in November. The figure which is only slightly less than the revised 280000 figure for October beat forecasts which were pencilled in at around 220,000 jobs. Analysts say that the unexpected number of new recruitments can be chalked up to service sectors like education, health care and hospitality. While jobs in interest rate-sensitive sectors like housing and Manufacturing acted declined as expected. Before the release of the NFP data, Fed Chairman, Jerome Powell had stated that the December meeting of the Federal Open Market Committee (FOMC) was likely to see a slower rate hike. Analysts believe that despite the stronger-than-expected jobs data the FOMC would raise the interest rate by 50bp when it meets in the middle of the month. The S&P Composite PMI data set for release next week would also form part of the committee’s considerations.


UK property demand slides 44% As the Market Anticipates Another Disappointing PMI Data

As the UK prepares for another underwhelming PMI data for the month of November, analysts’ consensus forecast (48.3) shows that private sector productivity may have contracted again in November. In the housing sector, demand for U.K. residential properties nearly halved year-on-year in the four weeks to Nov. 20 following the presentation of the mini-budget. New home sales fell 28% over the period. According to Analysts, prices are widely expected to further fall next year and that would be a shake-out rather than a precursor to a housing crash. The fiscal package, announced on Sept. 23, caused a sell-off in bonds and led to predictions of a potential housing market crash as interest rate expectations rose sharply.


Analysts React to AfDB Attracting $31bnworth of Investment Interest 

At the end of the Africa Investment Forum Market Days for 2022, investment interest from investors attracted by African Development Bank (AfDB) totalled US$31bn. This is according to a statement issued by the AfDB. The 2021 Africa Investment Forum Market Days, which was rescheduled to March this year, also saw the AfDB raising US$32.8bn. Analysts have commended the outcome while noting the need for African countries to attract more foreign direct investment and ensure the private sector remains the driving force of the continent’s transformation.  Until now, private sector financing of public infrastructure has been faced with the peculiar challenge of bankability. According to Analysts, the investment gap in infrastructure across the continent has not been due to a shortage of capital; instead, investors would only show interest in bankable and investment-ready projects, which in turn requires the design of optimal risk-sharing protocol at the project development phase. Such multilateral organizations as the AfDB have a key role in helping African governments improve the bankability of potential projects.


Analysts also say that international banks must be onboarded to complement domestic banks, which tend to have little exposure to infrastructure finance.


China’s factory activity at lowest reading since April, As Chinese Govt Considers Easing Lockdown

China’s factory activity fell for a second straight month in November, highlighting the economic toll of the “zero Covid” policies that have fuelled mass protests across the country. Data from the National Bureau of Statistics (NBS) showed on Wednesday that China’s Purchasing Managers’ Index fell to 48 compared with 49.2 in October, while the non-manufacturing PMI, fell to 46.7 down from 48.7 in October. Following protests, Chinese authorities have now signalled a shift in its Covid stance as it moves to ease some virus restrictions despite high daily case numbers. Analysts say in the first few weeks of relaxed covid protocols, infection rates would spike, a situation which could potentially affect the labour market in  China. Meanwhile, pent-up demand as well as the accommodative monetary policy stance of the Chinese government is bound to lead to higher inflation which would, in turn, affect the global economy.


Nigerian Economy


Analysts Raise Concerns over NBET’s New Energy Trading Platform

The Nigerian Bulk Electricity Trading has set up an automated energy trading platform to see Power generation, distribution and transmission companies, gas suppliers, consumers, and electricity transactions in real-time. Analysts believe that the initiative would enable IPPs (Independent Power Plants) to immediately access a comprehensive database of commercial/industrial customers across the country and the west African sub-region. Analysts, however, raise concerns about the infrastructure requirement of such a deal. The national grid has been plagued by inadequate transmission infrastructure, threatening the smooth operation of the new system that would rely on the existing transmission infrastructure.


Insecurity Rationalizes the Gains from Nigeria’s Blue Economy 

The Executive Secretary of the Nigerian Shippers Council, Emmanuel Jime, at the ongoing National Transport Summit of the Chartered Institute of Transport Administration, stated that shippers were paying high freight costs on goods because of the country’s poor security rating. Shedding light on the issue, the Executive Secretary noted that the insecurity in the Niger Delta waterways meant cargoes bound for the eastern ports diverted to Lagos as the differential between the war risk premium of cargoes bound for the two parts of the country increased. Analysts note that the insecurity concerns transcend the water transport sector, recalling that the Abuja-Kaduna railway line has not been operational for months due to a recent terrorist attack that saw some passengers killed and others kidnapped. Analysts say that if the security situation across the country continues, the government’s efforts at upgrading the ports in the Eastern parts of the country will yield little results. Due to congestion, over 8,000 cargoes are stranded in the country’s seaports.


FG released N1.7trn for capital expenditure

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, yesterday said that the Federal Government, FG, has so far released N1.7 trn for capital expenditure out of the N2.7 trn budgeted for 2022. The underperformance of Capital expenditure can be attributed to the FG’s revenue shortfall which culminated in a N5.33trn deficit as of August (N430bn higher than the targeted deficit). Meanwhile, reacting to the statement of the Minister that the FG is  solvent and needs no debt restructuring, Analysts have said that with a debt profile of N42.8trn as of June 2022, and Debt Service to revenue ratio at 83.24% as of August the Federal government is indeed walking a tight rope. While efforts are being made to improve oil revenue by tackling oil theft, the government must consider more innovative ways of raising revenue such as the securitization of the many idle assets of the country.


GENCOs face liquidity crisis, receive 57% invoice

Of the N453.575bn invoice issued by electricity generation companies (GenCos) to the Nigerian Bulk Electricity Trading (NBET Plc), only N262.075bn has been paid. Analysts believe that the development indicates that the GenCos are now faced with a serious liquidity challenge. With an unpaid balance of N191.5bn, Analysts say the recent streak of improved in electricity generation may be shortlived if the illiquidity crisis is not addressed urgently. Taken together with aged payables, NBET owed the GenCos N1.64 trn:  N214.93 bn in 2015; N273.32bn in 2016; N236.47bn in 2017, N264.08 bn in 2018, and N256.97 bn, in 2019, N266.01bn in 2020, and N120.25bn in 2021.


Oil and Gas


Economists Urge New Pricing Model for Petrol

Oil marketers under the aegis of the Independent Petroleum Marketers Association of Nigeria (IPMAN) have warned that the petrol price could hit N400 per litre against analysts’ expectations of between N200-250 per litre before year-end. While IPMAN predicated its outlook on the inability of its members to secure the fuel at the depot but rather buying from third parties at N220 per litre, analysts had expected an industry consensus to peg the product price at N250 per litre due to the scarcity of FX, logistical issues, and the thin margin of marketers. On the whole, the silence of the industry regulators and NNPC Ltd could heighten the scarcity and lift the petrol pump price to about N400 per litre by year-end. Analysts believed that the quick fixes are to raise the pump price to N250 per litre, discontinue the dollar charges by NIMASA and NPA on fuel importation, and for NNPC Ltd to release fuel from their depots.


Meanwhile, in the interest of fair play and market efficiency, analysts call for discontinuing preferential treatment to NNPC Ltd in Access to FX at the official window. This amount to double subsidies (petrol subsidy and FX subsidy) for the company at the expense of other marketers. This distortion has remained a significant impediment to the proper functioning of Nigeria’s downstream oil industry.


No Respite from Fuel Scarcity

Breaking weeks of long chain silence, the Nigerian National Petroleum Company (NNPC) Limited and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) reacted separately to the petrol scarcity in the country. The NNPC Ltd blamed the scarcity largely on ongoing road projects around Apapa and other access roads to parts of Lagos depots. The company hopes for normalcy soon, having channeled vessels and trucks to unrestrained depots with many load outs. The NMDPRA attributed the scarcity indirectly to panic buying, diversion, and hoarding, noting that it has no intention of increasing the petrol pump price during the festive period as there is enough petrol for 34 days. Analysts believe the silence of the regulator in restating its specific approved petrol price signals its comfort with the new pricing model. Increasing supply without resolving the legacy issues of market distortion would constantly bring fuel scarcity to the country.


Economists Call for Market Efficiency to Ease Fuel Scarcity

With the Yuletide fast approaching, Nigerians are coming to terms with new petrol prices. Premium motor spirit (PMS) currently sells between N180 and N250 per litre in major filling stations across the country, while black marketers sell the liquid energy gold for between N350 and N400 per litre. Despite claims by the FGN that there is sufficient petrol to last 34 days, fuel queues have grown longer at dispensing outlets. A combination of bad roads and market distortions remain the primary impediment to distribution. Analysts believe there are unsustainable compromises in resolving short-term distribution glitches. However, without addressing the legacy distortions to market efficiency in the industry, petrol scarcity will become endemic, a part of everyday existence.


NEITI Report: Nigeria Earned US$741.48bn from Oil and Gas Sales in 21 Years

The Executive Secretary of Nigeria Extractive Industries Transparency Initiative ((NEITI), Dr. Orji Ogbonnaya Orji, disclosed that the organization has conducted and published 21 cycles of audit reports in the oil and gas sector. Analysts noted that auditing the oil and gas industry is key to assessing system control’s adequacy, identifying risks, and promoting accountability. The reports covered 1999 to 2020 and observed that Nigeria made a cumulative US$741.48bn in revenue earnings from the industry. This translates to about US$35.3bn annually in oil and gas revenue. This effectively put the average annual oil and gas revenue at about N14.8trn using the official rate of N420/$, representing a significant portion of the country’s annual budget.  Analysts note that the NEITI reports provided an accountability and transparency framework for the oil and gas industry. However, the lag in releasing the reports often waters down its impacts. Analysts believe a timely audit of the industry will strengthen the report’s impact and trigger high-end reforms in the sectors than projected.


Domestic Oil Refining in H1 2023 Hangs in the Balance

Ending the importation of petroleum products might not be feasible again in the first half of 2023. The Nigerian Minister of State for Petroleum Resources, Timipre Sylva, has disclosed that Nigeria will exit importing petroleum products possibly in the third quarter of next year in a worst-case scenario but much earlier in a base-case scenario. Based on antecedent, Analysts noted that the Minister’s statement is a subtle way of shifting the responsibility to the next administration. Although analysts expect the country to become a refining hub with the onboarding of its many refineries, it is more of a medium-term prospect than a quick fix.


Oil Traders Note that Prices are Down but Volatile

Oil prices traded higher for the week on hopes of a relaxation of COVID-19 curbs in China, US crude inventory drawdown, and a lower greenback. However, the volatility in oil prices for the week was predicated on concerns around the OPEC+ decision and EU/G7 Price cap on Russian crude oil. There are concerns OPEC+, at its next meeting, might decide to hold policy unchanged, fueling a further downtrend in oil prices or agree to more output cuts, which would reverse the decline in oil prices. Investors are also watching how significant the EU-agreed US$60 per barrel price cap on Russian oil will distort supply. Analysts expect the OPEC+ decision at its December 04 meeting, implementation of the EU and G7 price cap on December 05, and China’s covid relaxation to determine the trend of oil prices in the coming week. Locally, analysts expect further petrol scarcity, albeit less severe than in previous weeks.




Brent had a weekly growth of 1.98% (see Table 1 beow).



Gold grew by 3.05% and Silver inched up by 8.35% W-o-W (see Table 1).



Cocoa prices inched up by 1.81% W-o-W.


Corn prices declined by 1.66% W-o-W and Sugar prices grew by 0.93% (see Table 1).




Table 1: Commodity Prices

Commodity 02-Dec-22 25-Nov-22 31-Dec-21 Weekly Chg YTD Chg
Brent 86.84 85.15 78.54 1.98% 10.57%
Gold 1803.2 1749.8 1827.1 3.05% -1.31%
Silver 23.175 21.39 23.27 8.35% -0.41%
Cocoa 2531 2486 2546 1.81% -0.59%
Corn 652.25 663.25 595.5 -1.66% 9.53%
Sugar 19.58 19.4 18.83 0.93% 3.98%
Source: CNBC

 *Data for the 02nd of December 2022 is as of 05: 25 pm (Nigerian Time)


Fixed Income


Currency Market

Naira appreciated against the US dollar by 22bps to N445.33 at Investor and Exporter FX windows this week


At the NAFEX window, the naira also appreciated by 9bps to N444.10, week-on-week (see table 2 below). 


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

Average Benchmark Yields
  25-Nov-22 02-Dec-22 % Change
I&E FX 446.33 445.33  +0.22%
  24-Nov-22 02-Dec-22  
NAFEX ($/N) 444.50 444.10   +0.09%

Source: FMDQ


Money Market

Interbank rates stayed elevated for most of the week, then fell to a single digit on Thursday with OMO maturities. On Friday, the rates settled at 11.38% and 13.00% respectively.


The Open Repo Rate (OPR) rate declined by -7.10% weekly while the Overnight rate (O/N) increased by +2.93% (see table 3 below).


Table 3: Money Market

Money Market Rate
  25-Nov-22 02-Dec-22 % Change
OPR (%) 12.25 11.38      -7.10%
O/N (%) 12.63 13.00      +2.93%

Source: FMDQ

The FGN Saving Bond Next week will mop out liquidity and should keep the rates elevated


Treasury Bills Market

The Nigerian Treasury market had some cherry-picking this week while the OMO bills stayed flat for most trading sessions. However, the NTB closed the week bearish with the average benchmark yield up by +9.96% (W-o-W) to 11.37.


The average benchmark yield for OMO bills declined by -0.28% to 10.77, week-on-week (See table 4 below). 


Table 4: Treasury Bills Market

Average Benchmark Yields
  25-Nov-22 02-Dec-22 % Change
T. Bills (%) 10.34 11.37   +9.96%
OMO Bills (%) 10.80 10.77  -0.28%

Source: FMDQ


The NTB should be quiet in the coming week as the FGN savings Bond auction distracts investors


FGN Bond Market

The bulls dominated the market this week, as the buying interests towards the end of the week outweighed the selloffs at the beginning of the week. On Friday, the average benchmark yield contracted by 96ps (W-o-W) to settled at 14.51% (See table 5 below).


Table 5: FGN Bonds Market

Average Benchmark Yields
  25-Nov-22 02-Dec-22 % Change
Short Tenor      14.31  14.06  -1.75%
Mid Tenor      14.55 14.41  -0.96%
Long Tenor      14.95 14.81  -0.54%

Source: FMDQ


The bond market should tread bearish next week 


FG borrows N6.31trn through Ways and Means 

The Federal Government’s borrowing from the Central bank of Nigeria (CBN) through Ways and Means Advances has accumulated to N23.77trn in October 2022 compared to N17.46trn as of December 2021. For the ten months in 2022, the Federal government borrowed N6.31trn, which is not part of the total public stock, which stood at N42.84trn as of June 2022. According to Section 38 of the CBN, the apex bank may grant temporary advances to the federal government to fund a temporary budget revenue deficit at an interest rate as the bank may determine. However, the increasing borrowing will create fiscal pressure on the country’s expenditure, as stated by the World Bank in 2021. Analysts recall that the FG intends to convert N20trn to a 40-year bond as the country’s revenue shrinks, showing an inability to fund the borrowings. To prevent a further rise in debt, the FG needs to explore methods to widen its revenue sources.


Ghana Plans Oil for Gold Exchange 

Ghana plans to adopt the trade-by-barter system by buying oil with gold instead of dollars. The policy is meant to tackle the dwindling foreign currency reserves coupled with the demand for dollars by oil importers, which has weakened the local currency this year. The country’s gross international reserves have fallen by about one-third from US$9.7bn at the end of 2021 to US$6.6bn at the end of September 2022. The current reserve value can only cover less than three months of the country’s goods and services import, according to the budget speech delivered by the finance minister Ken Ofori-Atta. The country’s currency has fallen against the US dollar, becoming the worst-performing currency in the world in 2022 on strong demand for dollars from oil importers. According to a report, the country has ordered all large-scale mining companies to sell 20% of their entire stock of refined gold at their refineries to actualize the policy. Implementing the policy should slow down the demand pressure on the dollar and cause appreciation in Cedis.


Non-oil Export Soars Under CBN RT200 FX Programme

According to the CBN, the non-oil export proceeds repatriated into Nigeria increased to $4.98bn in nine months of 2022 from $3.1bn recorded in 9M 2021. The CBN’s RT200 non-oil export programme launched in February, which a rebate of N65 to exporters for every $1 of goods sold to third parties through the investors and exporters (I&E) window, appears to aid the improvement. The CBN governor stated that a total of N81bn was paid as rebates to exporters, with only $1.966bn out of $4.98bn qualifying for the rebate programme while $1.559bn was sold at the investors and Exporter (I&E) window. The value of non-crude oil export stood at N1.49trn, and non-oil exports stood at N675.1bn in Q2 2022. The increase suggests the scheme is achieving its goals to widen the foreign exchange revenue generation and reduce the reliance on oil exports for FX. However, the scheme requires scrutiny to prevent arbitrage that might want to profit from the wide gap in the parallel market.


CBN Spends US$11.42bn to Defend Naira between January and July 

CBN has spent a total of US$11.42bn in ensuring exchange rate stability at the authorized currency windows between January and July 2022, a +6.23% rise from $10.75bn in the corresponding period of 2021. This year’s substantial gains in the dollar have lessened the currency’s value, pulling the naira down to a record low at the parallel market. The CBN spent US$4.86bn in Q1 2022 and a lower amount of $4.81bn in Q2 2022. The amount of forex sold for this period has been on a downtrend, monthly, -15.4% decline to US$1.750bn in July from US$2.07bn in June.


Reviewing the windows, the interbank/invisible market and matured Swaps fell by -22.0% and -59.1%, respectively, in July, to US$0.13 billion and US$0.27 billion, below their respective levels in June. However, the Investors and Exporters (I&E), Secondary market Intervention Sales (SMIS), and Small and Medium Enterprises (SME) windows rose by 5.8%, 0.6%, and 65.7% to US$0.44bn, US$0.72bn, and US$0.19bn in July. The CBN intervention has depleted the external reserves to US$37.12bn from US$40bn in 2021 despite ending forex sales to Bureaux De change in July 2021. Analysts expect the forex sales for the remaining months to be higher as the naira’s depreciation worsened recently, with N444.62 at the NAFEX fixing and N445.30 at the I&E fixings as of November 30, 2022, compared to N418.45 and N419.50 as of June 30, 2022.


Commercial Paper (CP) Issuances Ebb in H2 2022

In contrast to the aggressive patronage of the fixed-income market for commercial papers (CPs) by private companies in the first half (H1) of 2022, new CP Issuances appear to have slowly dried up in H2. Amidst monetary policy tightening in the year, firms pivoted towards CP issuances for funding their short-term obligations as lending rates spiked. There was a heavy downpour of issuances in H1 2022 from both big-sized and smaller companies, amounting to an estimated N571bn. However, the market seems quieter in H2 2022, with little or no issuances, particularly in Q4. Analysts are of the opinion that the high rates of risk-free assets (NTB) subject CP issuances to higher rates. Higher CP rates suggest higher borrowing costs for companies, which might affect their profit in an inflationary period. The most recent Nigerian treasury bill auction had a rate of 14.84% for 364 days and 8.05% for 182 days, higher than the 6.44% and 3.84% offered in June. Firms are possibly sourcing funds from financial institutions, bidding for cheaper rates.


Rating Agencies Downgrade Ghana’s Foreign and Local Bonds Rating

Following Ghana’s debt restructuring proposal released in November, Moody’s rating has downgraded the country’s long-term issuer ratings to Ca from Caa2 or further junk status. The downgrade by the rating reflects the expectation that private creditors will likely incur substantial losses with the restructuring plan. The proposed restructuring states that investors will lose 30% of their principal and forgo some interest for the foreign and local bonds. The Ca rating is the second-lowest score at Moody’s. However, Moody’s changed the outlook rating to a stable with the assumption that the debt restructuring will lead to funding from IMF that will prevent default. Other rating agencies followed suit, Fitch rated it two notches above default at CC, and S&P Global Ratings assigned CCC+, seven levels into junk. The downgrade will further raise the yields of bonds and affect the subscription of future issuances.


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 gain of 26% as against a 6.8% gain recorded last week. The Nigerian Exchange recorded N326.977bn gain in naira terms.


  • Year-to-date, the NGXASI maintained its positive position to close the week with a gain of +12.73% as market capitalization settled at N26.23trn.
  • Sectoral performance across sectors was broadly positive WoW. At the close of trading on Friday, thirteen (13) sectors closed positive WoW while three (3) sectors closed negative WoW and one (1) sector closed flat WoW. NGX AFR BANK VALUE topped the gainer’s chart with a gain of +3.45% WoWwhile the NGX INDUSTRIAL Index topped the loser’s chart with a loss of -1.20% WoW (see chart 1 below).


Chart 1: Movement of NGXASI Index Points 1ST NOV. 2022 – 2ND DEC. 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 710.58 points and 933.71 with an increase of -0.15% respectively (see table 6 below).


Table 6: NASD W-o-W Change

Parameter 25-Nov-22 02-Dec-22 WoW Chg
USI                                    711.66                                   710.58 -0.15%
MKT Capitalization (Bn)                                    935.12                                   933.71 -0.15%
Volume Traded                            82,525.00                      2,189,799.00 2553.50%
Value Traded (000)                     5,530,630.00                      10,694,141.31 93.36%
Deals Executed                                    10.00                                    20.00 100.00%

 Source: NGX


Dangote And Elumelu Index

Dangote Index closed the week negative at 136.84 index points from 136.86 index points recorded the previous week, representing a decrease of -0.01% W-o-W. DANGSUGAR closed the week negative with -0.31% W-o-W while DANGCEM and NASCON  closed the week flat  (see table 7 below).


Table 7: Dangote Index W-o-W Change

COMPANY 25-Nov-22 02-Dec-22 % Chg
DANGCEM 262.30 262.30 0.00%
DANGSUGAR 16.25 16.20 -0.31%
NASCON 10.00 10.00 0.00%

 Source: NGX


Furthermore, the Elumelu Index closed positive at 111.29 index points from 110.35 index points recorded the previous week, representing an increase of 0.85% W-o-W. UBCAP closed the week positive with 7.29%, TRANSCORP closed the week negative with -1.68% while TRANSCOHOT, UBA and AFRIPRUD closed the week flat W-o-W (see table 8 below).


Table 8: Elumelu Index W-o-W Change

Elumelu INDEX
COMPANY 25-Nov-22 02-Dec-22 % Chg
AFRIPRUD 5.30 5.30 0.00%
TRANSCOHOT 6.25 6.25 0.00%
TRANSCORP 1.19 1.17 -1.68%
UBA 7.30 7.30 0.00%
UBCAP 12.35 13.25 7.29%

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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