Economic Development and Financial Outlook
Prologue
The Nigerian financial markets witnessed a dynamic week marked by key events in the money market, inflationary trends, and international economic engagements. It unfolded with economic vigor as it became a stage for pivotal events spanning the money market, inflationary trajectories, and global economic liaisons. The spotlight shone brightly on the Open Market Operations (OMO) auctions orchestrated by the Central Bank of Nigeria (CBN) and the Minister of Finance, Mr. Wale Edun, who took centre stage while revealing that Nigeria is in talks with the World Bank for budgetary support.
Examining the market movements of WTI Crude Oil and Brent Oil, it is observed that WTI Crude Oil saw a minor upturn on the first day of the trading week, followed by a decline on Friday, while Brent Oil experienced a modest decrease on both dates, suggesting an overall short-term downturn in the market value of these oil commodities. The implications of the observed market trends in WTI Crude Oil and Brent Oil, characterized by a fluctuating pattern with a slight increase in WTI on 15-01-2024 followed by a decline on 19-01-2024, and a consistent decrease in Brent Oil on both dates, suggest potential shifts in supply and demand dynamics, geopolitical factors, and economic conditions that could impact investment decisions, energy sector stability, and global economic trends.
Economic Development and Financial Outlook
The week commenced with the Open Market Operations (OMO) auctions, where the Central Bank of Nigeria (CBN) offered three tenors – 92-Day, 183-Day, and 365-Day. The allotments amounted to a total of 300bn across the three tenors. Interestingly, the 92-Day and 183-Day tenors experienced under subscription, with 15.00 billion and 16.00 billion remaining unsubscribed, respectively.
However, the 365-Day tenor saw a substantial increase in subscription, reaching a remarkable 488.90 billion. This surge in demand is indicative of investor confidence in the longer-term government securities. The stop rates for the three tenors were set at 10.0000, 13.5000, and 17.5000, which showed a slight decrease of 50bps for the shorter tenors. In the secondary market, the new bill traded at 10.5000, reflecting the prevailing market sentiment. These developments in the OMO auctions underscore the delicate balancing act that the CBN faces in managing liquidity and interest rates, as well as investor appetite for varying tenors.
Amidst the financial market activities, the National Bureau of Statistics (NBS) released the consumer inflation rate for December 2023, indicating a further rise to 28.92 from 28.20% reported in November 2023. The uptick in inflationary pressures underscores the challenges faced by the average Nigerian citizens as prices of goods and services rises and purchasing power declines, requiring a different approach to monetary and fiscal policies.
Addressing inflationary concerns will be crucial for sustaining economic stability and ensuring that the purchasing power of the Nigerian populace is preserved. Policymakers may need to explore a mix of measures to curb inflation, ranging from monetary policy adjustments to structural reforms aimed at addressing supply-side constraints.
At the international stage, the ongoing 2024 World Economic Forum witnessed the active participation of leaders from across the globe. Notably, Nigeria’s Minister of Finance, Mr. Wale Edun, took the opportunity to engage with global counterparts. In discussions with Bloomberg, Mr. Edun revealed that Nigeria is in talks with the World Bank for budgetary support, highlighting the nation’s commitment to seeking external partnerships to bolster its economic resilience.
Moreover, Mr. Edun hinted at the possibility of Nigeria exploring Eurobond issuance towards the end of the current year. This strategic move aligns with the global trend of rising interest rates, as mentioned by the Finance Minister. Navigating the financial markets effectively and tapping into international capital markets can provide Nigeria with the necessary resources for infrastructure development and economic growth.
We can safely allude that the week’s financial activities and economic indicators paint a multifaceted picture of the Nigerian economy. While challenges such as inflation persist, strategic engagements on the international front and adept management of monetary policy instruments can contribute to steering the country towards sustainable economic development. Going forward, stakeholders will keenly watch for policy responses and innovative solutions to foster resilience and make informed investment decisions.
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
FG moves FAAN headquarters from Abuja to Lagos.
Internet coverage exposure slashes extreme poverty in Nigeria by 7% in 2023 – World Bank.
AFDB approves capital investment of $10.5 million to support sub-Saharan African businesses.
FG plans over $3tn for energy transition.
Global Developments
US, China urges calm as Pakistan, Iran look to ease tensions.
Red Sea shipping attacks pressure China’s exporters as delays, costs mount.
JPMorgan CEO Jamie Dimon’s pay rises 4% for 2023.
