Last week, Airtel Africa and MTN received approval in principle to operate mobile money services (Smartcash and Momo Payment Service Bank Ltd respectively) in Nigeria, marking the first step towards obtaining final licences from the nation’s Central Bank. The two operators announced the move in separate statements, highlighting its benefits for enhancing financial inclusion in the country.
The final approval (based on satisfying certain standard conditions within six months) would mean the opportunity for Airtel Africa and MTN Nigeria to expand their digital financial offerings and reach the millions of Nigerians that do not have access to traditional financial services – Mobile World.
Also, the Nigerian National Petroleum Corporation (NNPC) released a report revealing that a total of N864.07bn was spent between January and September (nine months) for the Premium Motor Spirit (PMS) subsidy.
Elsewhere, the Group Managing Director of NNPC, Mallam Mele Kyari, said NNPC Refineries’ 445,000 bpd, Dangote Refinery’s 650,000 bpd and the 250,000 bsd expected to come from the Condensate Refineries through the private sector partnership would be the major drivers of PMS needs in Nigeria.
The monthly data released by the National Pension Commission showed that the total value of pension fund assets rose by 0.9% m/m to N12.90 trillion in Aug’21. A cursory look at the report revealed that 64% of the total pension asset was invested in FGN securities (investment in FGN bonds rose by 1.8% m/m to N7.78 trillion while investment in treasury bills declined by 6.0% to N0.41 trillion in Aug’21).
Global and Emerging Market Economic Updates
In the past week, the U.S. Federal Reserve (the Fed) stated last week that it would begin to wind down the pace of its $120 billion monthly asset purchase later this month. The tapering measure will commence with the reduction in the amount of Treasury securities purchases by $10 billion and mortgage-backed securities by $5 billion, making a total of $15 billion monthly reduction. They also affirmed that the pace of reduction could be adjusted if warranted by changes in the economic outlook.
Also, the Fed maintained their opinion that inflation which is currently at a 30-year high is transitory and expected to gradually moderate to its 2% target by the middle of next year. The U.S. Feds maintained an ultra-loose stance, keeping the benchmark rates between a range of 0.00%-0.25%, with the likelihood of instituting the first-rate hike towards the end of 2022.
The U.S. jobs report was released last Friday, revealing an impressive performance after two consecutive months of subpar job gains. Nonfarm payrolls for the month of Oct’21 grew by 531,000 outpacing a 450,000 projection. Championing the join gains is the leisure and hospitality sector, adding 164,000 jobs in the review month on the back of the reduced impact of the Covid-19 Delta Variant.
The Nigerian Equities Market
In the oil market, Brent crude declined by 1.17% w/w to $82.74/barrel, as US crude inventories increased. Meanwhile, OPEC+ maintained its position on output (not raising its production parameters on a quicker pace) despite pressures from the U.S. and complaints from other oil consumers (Japan and India) on elevated energy prices caused by a widening supply gap.
The NGX ASI closed the week in red by 0.06% as it closed negative in 3 of the 5 trading sessions during the week as a result of sell pressures in bellwether stocks such as UNILEVER (-14.42%) and ETERNA (-15.49%). Consequently, at 42,014.50 points, the equities market’s Year-to-Date return declined to 4.33% as market capitalisation decreased by 0.05% to close at N21.93 trillion.
Market breadth (a measure of investor sentiment) weakened last week, decreasing from 1.88x to 0.53x as 23 stocks appreciated against 43 stocks that declined. REGALINS and MULTIVERSE topped the market gainers with 18.92% and 10.00% respectively WoW, while ETERNA and UNILEVER were the top laggers with declines of 15.49% and 14.42% respectively WoW.
The activity level weakened as the trade volume and value decreased by 52.42% and 64.19% respectively WoW. A total turnover of 1.428 billion shares worth N12.373 billion in 23,987 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume were FBNH, STERLNBANK and UBA. They accounted for 402.924 million shares worth N3.063 billion in 3,208 deals; contributing 28.22% and 24.76% to the total equity turnover volume and value respectively.
Outlook for the week
We expect bullish momentum to return in the coming week as the equities market still presents decent opportunities for investors chasing positive real return on investments.
The Nigerian Fixed Income
There was relatively bearish sentiment in the bond market last week as three (3) of the five (5) tenor yields under coverage closed higher while the yield on the 1-Year and 5-Year tenor bond decreased by 30bps and 3bps respectively WoW. The yields on the 3-Year, 10-Year and 30-Year tenor bonds increased by 30bps, 6bps and 3bps respectively WoW.
The activity in the Nigerian Treasury Bills Market closed in bullish form as the 91, 182 and 364-day paper compressed by 0.45%, 0.36% and 0.01% respectively WoW.
In the Money Market space, the Open Buy Back (OBB) and Overnight (O/N) rates decreased to 12.00% and 12.38% from 18.00% and 18.50% respectively WoW.
Outlook for the week
We expect market activity in the fixed income market to be influenced by liquidity levels and foreign investor participation.