Changing Market Conditions
Prologue
Recently, the global oil market has been wrought with persistent price fluctuations. These fluctuations are attributed to various factors, one of the most significant being the ongoing conflict between Israel and Palestine. Further, incidents such as bombings of sea vessels have directly or indirectly impacted the oil supply. During the recent MPC meeting, the Committee expressed satisfaction with the stability achieved in the foreign exchange market and acknowledged the CBN’s efforts in meeting verified foreign currency obligations. On Thursday, the Central Bank announced an increase in the minimum capital requirements for Banks, an action expected to boost investors’ confidence and attract foreign investments to Nigeria.
Changing Market Conditions
On March 25th and 26th, the Monetary Policy Committee (MPC) gathered for its second session in 2024. After careful deliberation, the Committee tightened the Monetary Policy Rate (MPR) by 200 basis points, raising it to 24.75% from its previous 22.75% set in February 2024. This decision reflects the Central Bank of Nigeria’s proactive stance in addressing inflationary pressures and attracting Foreign Portfolio Investment (FPI) inflows. In addition to the MPR adjustment, the Committee modified the asymmetric corridor to +100/-300 basis points, maintained the Cash Reserve Ratio (CRR) of commercial banks at 45%, increased the CRR of merchant banks from 10% to 14%, and sustained the Liquidity Ratio at 30%.
We observed that the Committee placed significant emphasis on addressing the current inflation in the country and maintaining exchange rate stability. These priorities underscore the CBN’s dedication to safeguarding Nigerians’ purchasing power in the short to medium term. While acknowledging that rising headline inflation is primarily driven by food prices tainted with supply shortages and high logistical costs, the Committee stressed the importance of addressing food insecurity to mitigate inflationary pressures. Members commended the Federal Government’s ongoing initiatives to tackle food insecurity, including providing palliatives, releasing grains from strategic reserves, and distributing seeds, fertilizers, and farm implements to support dry-season farming.
In the latest Nigerian Treasury Bills (NTBs) auction held on March 27, 2024, the Central Bank of Nigeria sold over N1.19 trillion worth of bills, which settled the next day. Rates closed at the same rate as the last auction.
Despite the recent hikes and system liquidity, markets are showing strong interest at current rates. Total allotments on the 91-day were at N29.8 billion compared to N5.72 billion at the last auction, the 182-day saw N25.58 billion allotted compared to the previous N4.92 billion, and the 364-day saw N1.13 trillion allotted compared to N150.8 billion at the previous auction.
Market Highlight: Vol. 92
- Nigeria’s FX reserves dip by over $2 billion in less than one month, hitting the lowest level in over six years.
- BDCs now buying dollars at ₦980/$, naira appreciating faster than expected – ABCON President.
- Customs’ revenue at Tincan Port increases by 139% in Q1 2024.
- UBA seeks shareholders’ approval to issue 10.8 billion shares.
- Nigeria records ₦234 trillion e-payment transactions in Q1 2024.
- NGX urges FG to drive listings to deepen the capital market and boost tax revenue.
- Transcorp Power reports N28.772 billion pre-tax profit in Q1 2024.
- Egypt, Ghana, Nigeria, and others emerge as African countries with the highest T-bill yields in Africa.
- Pension Fund Administrators (PFAs) channelled 72% of investments in fixed-income assets in 2023
Local News
Nigerians fail to repay over 62% of CBN and NIRSAL COVID-19 loans.
AfDB approves a $50 million loan to Yobe State for climate change and food security.
FCCPC busts deceptive rice weight claims in Garki Modern Market, Abuja.
Nigerian crude sells at a premium, Brass River nears $90 a barrel.
LASG releases land use charge bills for 2024 and offers a 15% discount on early payments.
Global Developments
US monthly inflation slows, consumer spending surges.
Nissan targets a 30% cost reduction for electric vehicles amidst rising Chinese competition.
World court orders Israel to take action to address Gaza famine.
S&P 500 closes higher to secure strongest first quarter since 2019.
The draft budget shows that the Mexican economy is expected to grow by 3.5% in 2024.
