Nigerian Financial Markets Weekly

Nigerian Markets

Key Events this week:

Yields on Nigeria’s domestic fixed income market dropped to their lowest in 7months on Friday, with the
long-end of the yield curve dropping below the 14% mark during trade on a rise in demand for both
government bonds. Yields on the nation’s Eurobonds also dropped today, with the 2049 maturity losing ca -15bps. This comes after the declaration of current President, Muhammadu Buhari as the winner of the just concluded general elections, with investors’ expectation of a possible relaxation in current tight monetary policy stance by the Central Bank (CBN) post elections.

We expect continued demand for the nation’s fixed income risk assets at current levels and in the near term, on investors rising optimism of a continuance in government’s fiscal and monetary policies of the previous 4years, and as Foreign Portfolio Investors (FPIs) source for higher risk-adjusted returns in Emerging (EMs) and Frontier (FMs) markets.

Other Events this week included:

• Yields on U.S. treasury bonds rose to a 4week high this week, after the release of the U.S. Q4 2018 GDP growth rate figure which showed a better-than-expected growth of +2.6% year-on-year (y/y) vs market analysts’ expectation of +2.4% y/y. This comes on the back of continued positive growth in personal consumption of +2.8%, non-residential investment of +6.2% and fixed investment growth of 3.9% in Q4 2018. Despite the quarter-on-quarter softening in economic growth, average yearly GDP growth rose to its highest in 3yrs at 3.1%, boosting investors’ optimism of economic growth in 2019, with the 10yr U.S. bond treasury yield rising to ca +2.713%. We maintain our expectation of a more challenging year for global economic growth, with both U.S. and China expected to grow a slower paces in 2019, on the back of continued uncertainties of U.S./China trade tensions and expectation of lower crude oil demand vs 2018. We also expect this to keep the U.S. Federal Reserve Bank benchmark rate at current levels for a better part of 2019.

• Global financial markets traded on a positive note, with the Chinese SHANGHAI index gaining ca +6.77%, on increased investors’ optimism of U.S./China trade negotiations, after the U.S. President – Donald Trump, extended the earlier 01 March deadline for a deal to be reached between the world’s 2 largest economies. We expect investors’ optimism and sentiments of U.S./China trade tensions to pull investors’ interest in global risk assets into positive territory vs Q4 2018. However, we expect the trade boost from this will not sufficiently pull global growth higher than previously forecasted at 4.5% by the International Monetary Fund (IMF).

Nigerian Financial Markets Weekly Update – 01 March 2019

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