What To Expect From The Markets This Week - 050721


Saturday, July 03, 2021 07:00 AM / Proshare Content / Header Image Credit: EcoGraphics

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Nigeria: Economic Dashboard @ 020721 

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Editor's Note

Source: Proshare Research - July 03, 2021

Nigeria Economy

  • The Minister of Finance, Budget, and National Planning disclosed on Thursday at the presentation of the draft for the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper that the Federal Government had spent 92.7 % of the prorated budget, which amounts to N4.8tn. Of which, N1.8tn  an equivalent of  37.5%was released for debt servicing, while N1.5tn (31.25%) was spent on personnel cost, and N973.13bn (20.2%) was spent on capital projects. Also at the event, the minister disclosed that the government would spend up to N900bn on petrol subsidy in 2022.
  • The Revenue Mobilisation Allocation and Fiscal Commission have disclosed that it would soon commence the review of the allocation formula applicable to the revenue retained in the Federation Account. The review would begin with the vertical sharing formula which shows the proportion of revenues allocated to the three tiers of government. This will be followed by the horizontal formula which addresses sharing among states and local governments. An official of the commission concluded that whatsoever the commission fixes are final and cannot be surpassed.
  • According to data obtained from the Central Bank of Nigeria (CBN), banks' credit to Nigeria's private sector increased by +4% (N1.29 trillion) in Q1 2021 to reach N31.44 trillion in Q1 2021. This is coming on the back of the bank's continued effort to encourage lending to the real sector to stimulate Nigeria's economic growth. Meanwhile, credit advanced to the public sector reduced by N410.7 billion in the review period. A further breakdown of the figures reveals that while total credit to the economy rose by+2% (N880.65 billion) in Q1 2021, from N42.55 trillion as of December 2020 to N43.44 trillion at the end of Q1 2021. Meanwhile, credit allocation to the government declined by -3% (N410.62 billion) from N12.4 trillion to N11.99 trillion.
  • The federal government stated in the week that electricity subsidy has been reduced by N20bn per month. This is following record-high tariff collections of N65bn in the December 2020 cycle up from an average of N39bn).  the Minister of Power, however, stated that the Federal Government still paid over N50bn monthly to subsidize electricity supply in the country. You would recall that the International Monetary Fund had in its 'Resilience through reform' report expressed concern over the subsidies in Nigeria.
  • Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, disclosed on Tuesday that the price of petrol should be more than N280/liter which is the price of Automotive Gas Oil(diesel). PMS which unlike diesel is subsidized by the government currently sells for N162/liter. According to the NNPC Group Managing  Director, AGO (diesel) should normally sell for above the price of PMS.
  • The National Pension Commission PenCom announced on Wednesday that the Federal Government has approved payment of outstanding accrued pension rights for verified and enrolled retirees of treasury-funded MDAs that retired but are yet to be paid their retirement benefits, as well as the backlog of death benefits claims due to beneficiaries of deceased employees of treasury funded MDAs. In keeping with the Pensions Reform Act (2014) the Federal Government is required to contribute the payment of the 10% rate as an employer under a pension contribution for its employees, while the employees contribute 8%) 

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Global Economy

  • According to data released on Friday by the Bureau of Labor Statistics, the US economy created 850,000 jobs in June, a figure which surpasses the earlier forecast of 720,000 jobs. The current administration has therefore created over 3m jobs. However, the increase in payrolls notwithstanding the unemployment rate inched up slightly to 5.9% from 5.8%  month-on-month. A further breakdown of the figures shows that the leisure and hospitality sector added 343,000 jobs in June. Other sectors which recorded new jobs include education and services. Analysts are of the view that the positive jobs report lends credence to the view that the Federal Reserve should begin to consider increasing rates to curb the throbbing problem of inflation. US employment level however remains below its pre-pandemic levels. More than 9m people are still unemployed, compared to 5.7m in February 2020.
  • The World Bank has stated that the Chinese economy may grow at about +8.5% this year. This forecast follows an April report by the multi-lateral organization, which stated that  China and Vietnam were the only East Asian economies to achieve a "v-shaped" recovery in 2020 since then consumption levels are back above pre-outbreak levels. This expected growth has led to a reduction in the expected growth of China in 2022 to a less optimistic 5.4%.  The positive sentiments are borne out of the 40% rate of Covid-19 vaccination already achieved by the second-largest economy in the world. Although, there are concerns about the new delta variant for which reason authorities have re-imposed travel controls in some areas.
  • According to India Ratings and Research (Ind-Ra), India's FY22 GDP growth rate is now expected at 9.6 %, lower than an earlier estimate of 10.1 %. Similarly, the State Bank of India SBI  also lowered the country's  FY22 growth forecast to 7.9% from its previous projection of 10.4 % growth.
  • Mexico's central bank expects that the Mexican economy will reach pre-pandemic levels by  Q3 2021, the country's gross domestic product had contracted by -8.5% last year due to pandemic-related factors. A preliminary estimate published by national statistics agency INEGI  on Thursday stated that Mexico's economy grew +24.8% in May compared with the same month last year.


Summary & Outlook

Fiscal authorities have, despite dwindling earnings, maintained an aggressive posture. The government is making disbursements under the Special Public Works Programme and has recently announced its plan to expend $1bn on the construction of 3 major highways in the country, all to reflate the economy. With the unemployment rate at 33%, analysts are concerned about whether or not jobs would be growth elastic especially as job creation is the medium through which growth impacts households and individuals. Similarly, there are concerns about the discounting effect associated inflation could have on purchasing power.

On the monetary side, the CBN in collaboration with RIFAN recently sought to reduce the food price level by supplying 27,000metric tonnes of paddy rice to millers across the country. There have been fears that food prices were, in the month, on the rise with increases recorded in the prices of staples, spices, and condiments. The MPC would consider the next inflation figures for June 2021 to determine whether MPR should be raised when it meets in July.

In the external sector, we have continued to see net imports rise as well as a reduction in government earnings amidst OPEC production cuts. This critically constrains CBN's capacity to defend the Naira against the Dollar in the long term.

On the global scene, stimulus packages have continued to boost recovery although the Delta variant of the COVID-19 infection has now been reported in 85 countries. Full economic recovery, therefore, depends on whether the positive sentiments and improved consumer confidence earlier seen are sustained.

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Commodities Market

Weekly Review and Outlook



  • On Monday, the landing cost of Premium Motor Spirit being imported into Nigeria surged by more than 60 percent between December 2020 and mid-June this year. From an average of N143.60 per liter in December, the landing cost of petrol rose to N231.98 per liter on June 16 this year on the back of the rally in global oil prices and the depreciation of the naira against the dollar. 
  • On Tuesday, the price of Automotive Gas Oil, also known as diesel, jumped to N280 per liter amid the recent increase in global prices and naira devaluation.
  • The Senate on Thursday passed the Petroleum Industry Bill and approved that three percent of the profit made by oil firms should be shared to host communities. The Senate also approved that 30 percent of profits accruing from oil and gas operations by the Nigeria National Petroleum Corporation would be set aside for exploration of oil in the frontier basin.


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  • Oil prices fell 2% to a one-week low on Monday after hitting their highest since 2018, as a spike in COVID-19 cases in Asia and Europe put a break on the rally before OPEC+ Meeting.
  • On Tuesday, OPEC's chief and experts expect global oil demand will rebound strongly in the second half of 2021 with oil inventories shrinking but warns that coronavirus variants pose a risk to recovery.
  • Prices on Wednesday extended the previous day's small gains after an industry report showed U.S. crude stockpiles fell last week, overriding trader and investor concerns about transportation curbs in some countries as COVID-19 cases surge.
  • Oil prices rose roughly 2% on Thursday on indications that OPEC+ producers could increase output more slowly than expected in the coming months while rising global fuel demand causes supply to tighten.
  • Prices inched lower on Friday after OPEC+ ministers delayed a meeting on output policy as the United Arab Emirates balked at a plan to add back 2 million barrels per day (BPD) in the second half of the year.
  • Brent had a weekly growth of 0.04% (see Table 1).


Gold appreciated by 0.17% while Silver also inched up by 1.27% W-o-W (see Table 1).


  •  Earlier this week, the Central Bank of Nigeria approved the release of 50,000 metric tonnes of maize to 12 major producers from strategic maize reserve under the Anchor Borrowers' Programme. According to the CBN, the release of maize to the companies, which is the third of such releases, will reduce the price of grain in the market by checking the activities of middlemen who are hoarding the product and causing artificial scarcity. The listed recipients of the grains include Premier Flour Mills, Crown-Olam, Grand Cereals, Animal Care, Amobyn Hybrid Feeds, Obasanjo Farms, Zartech, Wacot, Sayeed Farms, Pandagri Novum, and Premium Farms.
  • Cocoa prices dived by -3.26% this week.
  • Corn prices jumped by 10.90% W-o-W while Sugar appreciated by 6.23% (see Table 1).


Table 1Weekly Change in Commodity Prices





Weekly Chg






































Source: Bloomberg, Proshare Research

*Data for 2nd July 2021 is as of 4:27 pm (Nigerian Time)



  • In the coming week, oil prices are expected to be mixed as OPEC+ seeks agreement on oil output policy after initial talks end in disarray. The spread of the Delta variant is likely to pare gains in the near term.
  • Gold prices are expected to be mixed in the coming week, as the dollar strengthens, and while the spread of the Delta variant is expected to support gold as it can delay economic recovery.
  • Cocoa prices to be bearish next week on weak global demand.
  • Sugar prices are expected to be rise next week as U.S. and Brazil are expected to constrain ethanol output in the coming months.
  • Corn prices are expected to be bullish next week amid strong demand from China.

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Fixed Income and Money Market 


Currency Market

The currency market was bearish this week at the BDC market while it appreciated slightly at the official window.


It depreciated against the US dollar by +1.01%, appreciated against the British Pound by -0.56% while it remained flat against the Euro on a week-on-week (W-o-W) basis at the BDC window. 


At the I & E FX window, the Naira appreciated week-on-week by +0.10% and +0.14% at the NAFEX window.


The Naira closed the week at $/N411.25 at the I&E FX window, at the NAFEX (spot market) it closed at $/N410.42.





% Change

I & E FX Window ($/N)








BDC ($/N)




Source: FMDQ, AbokiFX, Proshare Research


Money Market

Money market rates continued their double-digits trend this week, however, on a W-o-W basis, both overnight rates and open buyback fell significantly.


At the close of the trading session this week, funding rates fell. Open Buyback (OBB) closed at 12.00% while Overnight (O/N) rates closed at 12.50% indicating a W-o-W decline of -45.45% for OBB and -45.65% for O/N rates.


Money Market Rate




% Change

OBB (%)




O/N (%)




Source: FMDQ, Proshare Research


Funding rates are expected to continue their double digits trend in the coming week in the absence of any maturity.


Treasury Bills Market

The Treasury Bills Market started the week on a bullish note, with the average benchmark falling by 38bps. Although the bullish sentiment was not maintained throughout the week.


At the close of the market on Friday, average benchmark yields for T-bills fell by -4.71% to 6.58% while OMO bills rose marginally by +1.87% W-o-W to close at 9.92%, CBN's Special Bill fell by -2.46%.


Average Benchmark Yields



% Change

T. Bills (%)




OMO Bills (%)








Source: FMDQ, Proshare Research


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


The CBN sold N163.61 billion worth of notes against N81.72 billion offered at its NTB auction this week. The 91-day, 182-day & 364-day notes were allotted at 2.50%, 3.50%, & 9.15% respectively. Compared to the previous auction, rates on the 91-day & 182-day were unchanged while the 364-day paper fell slightly by 25bps.

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FGN Bond Market

The Bond market opened in a relatively bullish trend at the start of the week as demand was seen across the board and continued for most of the trading session in the week.


At the close of the week, the overall market was bullish with buying interest seen across the board.


The overall average benchmark yields closed at 9.62% for the week which fell W-o-W by -2.17%.



Average Benchmark Yields



% Change

Short Tenor (%)




Mid Tenor (%)




Long Tenor (%)




Source: FMDQ, Proshare Research 


FGN Eurobond Market

The relatively weak trend in the Eurobond market persisted this week, as renewed covid-19 concerns coupled with the rising US inflation, continue to dampen demand across the board.



We expect market sentiment to remain soft as inflation concerns continue to linger.

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Nigerian Capital Market

  • The Nigerian bourse closed the week on a positive note inching up by +1.47%. The Nigerian Stock Exchange gained N292.39bn thus, year-to-date return moderated to -5.11%.
  • Sectoral performance across sectors tracked was significantly bullish this week as the NSE Consumer Goods was the highest gainer for the week with +5.15% while NSE-Oil and Gas recorded the highest decline with -1.05%. NSE-IND, NSE Pension, NSE-30 and, NSE Banking closed the week positive with +2.10%, +1.88%, +1.89%, and +1.34% respectively.

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Chart 1: Movement of NSEASI Index Points 25 June - 02 July 2021

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Source: NSE, Proshare Research


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The NASD OTC Security Index (NSI) and Market Capitalization both closed the trading week with a negative movement. The NSI and Market capitalization closed the week at 753.73 points and N535.76bn with a decline of -0.67% and -0.14% respectively.


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Dangote and Toni Index  

Dangote Index closed the week on a mixed note, DANGSUGAR rose by +2.22%, NASCON inched up by +9.76% while DANGCEM declined by -0.04%.


Table 2: Dangote Index W-o-W Change




WoW Change













Source: NSE, Proshare Research 



The Toni Index closed largely positive with 93.34 basis points from 87.54 basis points recorded the previous week, a W-o-W growth of +1.08%.

TRANSCORP, UBA, and UBCAP closed the week positive with +1.12%, +1.38% and, +104.25% respectively while AFRIPRUD closed negative with -2.42%. TRANSCOHOT closed flat W-o-W. 



Table 3: Toni Index W-o-W Change




WoW Change





















Source: NSE, Proshare Research 





In the coming week, we expect the possibility of sustained bargain hunting as investors look to take advantage of good bargains, however, press releases from listed companies and other macroeconomic developments are likely to impact investors' decisions.


In addition, we expect investors to monitor the movement of yields in the fixed income market.

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