Weekly Economic & Market Commentary

Last week in Nigeria, the DMO conducted its NTB auction for March, which was oversubscribed due to strong demand. Foreign trade decreased in Q4’22 due to a decline in import trade, but increased by 31.8% YoY. Nigeria’s composite PMI sank to 44.7 in February, ending a 32-month expansion sequence, largely due to cash shortage and fuel shortages. The Nigerian equities market closed bullish, while the naira appreciating in the parallel market. In the US, Silicon Valley Bank collapsed, and the latest job numbers showed that US employers hired more workers than expected in February. The FED will consider these circumstances in their upcoming meeting on whether to hold or raise interest rates.

• Foreign Trade Performance — According to National Bureau of Statistics (NBS) foreign trade data for Q4’22, total international trade decreased QoQ by 4.9% from N12.3trn in Q3’22 to N11.7trn in Q4’22. Foreign trade fell in Q4’22 due to a 14.3% decline in import trade. However total foreign trade increased by 31.8% to N52.4trn in 2022 when compared to N39.75trn in 2021. The overall trade balance recorded a N1.2trn surplus in 2022. Given that crude oil production is expected to increase in 2023 even as oil prices are expected to moderate compared to 2022 levels, it suggests that total exports will likely increase in 2023. At the same time, imports are expected to increase although slowly, given the lingering impact of currency depreciation and CBN’s FX restrictions and rationing.
• Stanbic PMI – The Stanbic IBTC Bank Nigeria PMI sank to 44.7 in February, from 53.5 in the prior month, ending a 32-months sequence of expansion of the manufacturing and service sector. Aside, from the COVID induced 2020 contraction, the February contraction was the worst in 9 years. This decline was largely attributable to cash shortage. Meanwhile, persistent fuel shortages saw petrol pump prices increase, which added to price pressures and led to supplier delivery delays.  Consequently, firms scaled back their purchasing activity and employment.
• NTB Auction Closed High – The DMO conducted its NTB auction for the month of March and its offered a total of N224.5bn across the 91-day, 182-day, and 364-day papers. The strong inevitably demand led the DMO to oversold as the bid bid-to-offer stood 4.04x with the total subscription at N906.21bn. The marginal rates significantly increased across all the tenors except the 91-day paper which declined by 156bps. Closing rates on the 182-day and the 364-day papers increased by 276bps and 10bps, respectively. Overall, stop rates closed on 91-day, 182-day, and 364-days at 1.44%, 6%, and 10% respectively.
• Equities and Currency –The Nigerian equities market closed bullish last week. Specifically, the NGX All-Share Index and Market Capitalization appreciated by 0.48% to close the week at 55,794.51 and N30.395 trillion respectively. Overall, YTD return printed at +8.87%. Twenty-two (22) equities appreciated in price during the week lower than fifty-three (53) equities in the previous week. Forty-one (41) equities experienced share price decline relative to twenty-one (21) in the previous week.

In the parallel market, the naira appreciated by N6 to close the trade on an average of $/N754 WoW. The I&E window closed at $/N461.29 with an appreciation of N0.01 Wow basis. Elsewhere, the NAFEX rate appreciated by N0.4 WoW to settle at $/N461

• SVB Collapsed – In the foreign scene, the collapse of Silicon Valley Bank was the focus last week in the US market besides the latest job numbers. On Friday, regulators took control of the Californian bank after its shares sank sharply, marking the biggest bank failure since 2008. The run-on deposits doomed the tech-focused lender’s share sale to shore up its balance sheet amidst losses from bond sales. Meanwhile, employment reports showed that US employers hired more workers than expected in February, with nonfarm payrolls increasing by 311,000. These dice circumstances will be a major consideration for FED in their upcoming meeting on whether to hold or rise interest rates.