Key Events this week:
Global equities market appreciated week-on-week, with most benchmark indices gaining ca +0.50% to +4.50% this week. This came after the release of the minutes of the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve Bank (Fed) meeting held in January, further emphasizing the Fed’s current dovish monetary stance and indication of a possible halt to the reduction of its current asset holding of ca $3.8 trillion government treasuries before the end of 2019. This also comes despite the release of weak economic data with the Philadelphia Federal Reserve business index dropping to negative at -4.1pts, its lowest since May 2016, IHS Markit manufacturing purchasing managers’ index dropping to a 17-months low at 53.7 in February and the Conference Board’s leading economic index declined for a 2nd consecutive month, its first since 2016.
We expect the release of weak U.S. economic data and increasing expectation of a negative impact on the U.S. economic growth for 2019 to further dampen investors’ expectation of global growth in 2019. We also expect this to keep the U.S. Federal Reserve Bank on the watch to maintain its current dovish monetary stance for a longer period in 2019.
Other Events this week included:
- Global crude oil prices also rallied to its highest since November 2018 and new year-to-date high this week, with Brent crude oil price rising to ca $67.20 per barrel on Friday. This can be attributed to continued investors’ optimism of a positive outcome to the U.S/China trade negotiations, with the expectation of an extension to the 01 March deadline for a deal to be reached. We expect current optimistic sentiments of U.S./China trade negotiations to keep investors’ interest in risk assets of developed economies higher vs Q4 2018, and on the back of rising expectation of continued dovish monetary policy stance by the U.S. Federal Reserve Bank for a better part of 2019.
- Trading activities in Nigeria’s fixed income markets declined to its lowest in 2019 on Monday, with only ca ₦73 billion worth of trades vs ₦381 billion averaged daily year-to-date. This comes on the back of the postponement of the nation’s general elections the week-end before, by 1 week and can be attributed to a gradual rise in political uncertainties. However, sell-offs was more evident in the nation’s equities market, with highly capitalized equities declining week-on-week and the Nigerian Stock Exchange All Share Index losing ca -0.61% week-on-week. We expect subdued reaction by investors to the political uncertainties, supported by Brent crude oil price at its highest in 2019 at ca $67.20 per barrel and on better than expected GDP and inflation data released by the Nigerian Bureau of Statistics last week.
Liquidity in the banking system opened the week positive at ca ₦65bn. Inflows of ca ₦578bn from maturing Open Market Operations (OMO) treasury bills on Thursday improved system liquidity with the Central Bank of Nigeria (CBN) conducting 2 OMO auctions on either side of a bond’s primary market auction. System liquidity was expected to open the last trading day of the week on a negative note after debits for both bonds and OMO auctions.
A very bullish trading week in the treasury bills market for a 3rd consecutive week, particularly after the no-sale on the first Open Market Operations (OMO) in the week and improved banking system liquidity from inflow maturing OM treasury bills. The Central Bank (CBN) conducted another OMO auction on Thursday to tighten system liquidity, takin out ca ₦688bn. Average rates declined ca -52bps week-on-week. Please find below the summary of the OMO auctions held this week:
|Open Market Operations (OMO) – 18 February 2019|
|Amount Offered:||₦ 5.00 billion||₦ 10.00 billion||₦ 15.00 billion|
|Subscription:||₦ 3.15 billion||₦ 10.57 billion||₦ 114.05 billion|
|Amount Allotted:||No sale||No sale||No sale|
|Range of bids:||11.9000% – 11.9000%||13.5000% – 15.0000%||15.0000% – 15.0000%|
|Open Market Operations (OMO) – 21 February 2019|
|Amount Offered:||₦ 50.00 billion||₦ 100.00 billion||₦ 400.00 billion|
|Subscription:||₦ 7.91 billion||₦ 53.06 billion||₦ 725.61 billion|
|Amount Allotted:||₦ 7.91 billion||₦ 53.06 billion||₦ 627.22 billion|
|Range of bids:||11.9000% – 11.9000%||13.5000% – 15.0000%||14.980% – 15.0000%|
Open Buy back (OBB) and Overnight (O/N) rates closed at 18.83% and 20.25% from 15.83% and 17.50% levels respectively, the previous week. Average fixed deposit rates amongst banks monitored showed at the end of the week:
– tier-1 rated banks at 3.50% for 30 – 60 days tenor on ₦10mln – ₦100mln.
– tier-2 rated banks at 7.50% for 30 – 60 days tenor on ₦10mln – ₦100mln.
Continued demand was seen in the bonds secondary market this week, with activities still at the mid-to-long end of the curve. Average yield lost -4bps week-on-week, particularly the July 2034 maturity which lost -32bps week-on-week. Please find below the summary of the results of the primary market auction (PMA) held this week:
PRIMARY MARKET AUCTION (PMA) – 20 February 2019
|S/N||AUCTION DATE||MATURITY DATE||AMOUNT OFFERED(NGN)||AMOUNT ALLOTED(NGN)||MARGINAL RATE|
|1||20-Feb-19||27-Apr-23||₦ 50.00 billion||₦ 1.50 billion||14.52000%|
|2||20-Feb-19||21-Mar-25||₦ 50.00 billion||₦ 28.85 billion||14.7999%|
|3||20-Feb-19||28-Feb-28||₦ 50.00 billion||₦ 136.25 billion||14.9390%|
The equities market declined week-on-week, after 2 consecutive weeks of gains, on sell-offs by investors after the postponement of the general elections last week. The Nigerian Stock Exchange All Share Index (NSE ASI) lost -0.61% week-on-week to close at 32,515.52pts, with market’s year-to-date returns at +3.45%. This was largely attributed to price decline in Dangote Cement Plc (-0.82%) and Nigerian Breweries Plc (-3.61%).
The Naira depreciated further against the dollar at the interbank market window, at ₦306.80/$1 from ₦306.75/$1. At the parallel market, the Naira appreciated against the U.S. Dollar, Pound Sterling and Euro at ₦360/$1, ₦470/₤1 and ₦408/€1 from ₦362/$1, ₦472/₤1 and ₦410/€1, respectively. The Naira also appreciated week-on-week at the Nigerian Autonomous Foreign Exchange (NAFEX) window at ₦361.44/$1 from ₦361.54/$1.
|AIICO Money Market Fund (AMMF)|
|Net Yield (As at current date)||13.28% per annum|
|Added Benefit||Personal accident insurance cover|
|AIICO Capital Guaranteed Income Note (GIN) Rates p.a.|
|Amount (NGN)||30 Days||60 Days||90 Days||180 Days||364 Days|
|10,000,001 – 50,000,000||10.00||10.50||11.00||12.00||13.00|
|50,000,001 – 100,000,000||11.00||11.25||11.50||12.50||14.00|
|100,000,001 – 400,000,000||12.00||12.25||12.50||13.00||14.50|
|Trading Treasury Bills Rates p.a.|
|Maturity Dates||Tenor (Days)||Discount Rate||Effective Yield|
|Select Macro-economic Indices|
|Inflation % (December 2018)||11.44 (-25.57% ytd)|
|PMI (January 2019)||58.50|
|MPR (%)||14 (-5%/+2% around mid-point)|
|Brent Crude Price US$ pbbl||67.18 (+2.46% w/w)|
|External Reserve (US$’billion)||42.69 (-0.93% ytd)|
|GDP % (Q4 2018)||+2.38% (Q3 2018: +1.81% y/y)|
|NSE All Share Index (ASI)||32,515.52 (-0.61% w/w; +3.45% ytd)|
|Market Capitalisation (₦’Trillion)||12.13|