Economy news

Macroeconomic /Socio-Political Update

· Inflation figures released by the National Bureau of Statistics last week indicate that Nigeria’s inflation remained stable in August from 9.4% in July to 9.3% year-on-year. Food inflation, in contrast, rose to 8.7% from 7.9% in July as a result of an increase in food prices induced by the Muslim fasting period and celebrations during the month. Core inflation, measured by all items less farm produce, moved in tandem with headline inflation, declining from 11.5% in July to 10.9% year-on-year.



· We believe that the Monetary Policy Committee (MPC), in its meeting scheduled for this week, will seek to consolidate on the success achieved in attaining single digit inflation. Therefore, we see the MPC sustaining its tightening efforts with the aim of maintaining single digit inflation till the end of the year.



Equity Market Review & Outlook



· The Nigerian equity market closed relatively flat last week as gains recorded on Wednesday eroded the losses of other trading sessions during the week. The NSE All-Share Index closed at 21,106.67 points, with the year-to-date loss maintained at 14.8%.



· The Nigerian equity market has continued to see low levels of activity and a dearth in trading liquidity as investor confidence remains weak. However, we reiterate our stance as BUYERS of Nigerian equities as many stocks remain largely undervalued. We also anticipate that the conclusion of banking reforms by the end of this month and the release of quarterly results from next month will drive a modest rally in select stocks in the near term.



Money Market Review & Outlook

· As expected, money market rates moved up marginally last week, as outflows for forex transactions reduced system liquidity.



· The Federal Account Allocation Committee (FAAC) meeting was suspended indefinitely today as a result of issues regarding the NNPC’s debt. We therefore foresee interbank rates inching up further this week, as the expected FAAC inflow for the month of August is withheld from the system.





Foreign Exchange Market Review & Outlook

· Demand for the Dollar at the official market stood at US$873.4m, 10.8% less than the US$979.4m demanded in the previous week. The CBN also reduced the total amount offered last week by 12.5% to US$700.0m from a previous total of US$800.0m.



· We expect demand for the Dollar at the official market to remain at current levels, while a shortfall in supply of the greenback is envisaged at the inter-bank market.



Bond Market Review & Outlook

· The bond market was volatile last week, with yields falling on the short tenored bonds (3yr, 5yr and 7yr) and rising on the longer end (10yr and 20yr) by the end of the week. The release of August inflation figures, which saw headline inflation at 9.3% - 10bps lower than the July figure, also supported the bullish run on the short-tenored bonds.