The National Bureau of Statistics (NBS) will release its CPI and inflation report for the month of March next week (April 15) as scheduled. Expectations are that Nigeria’s headline inflation (year-on-year change in the general price level) will increase further to 32.13% from 31.7% in February i.e. the average price of commodities will increase by 32.13% between March 2024 and March 2023. However, the rate of increase is expected to reduce to 0.43% (the difference between 32.13% in March and 31.7% in February) from 1.8% (the difference between 31.7% in February and 29.9% in January). This suggests that inflation could reach its peak soon and begin to decline.

Interestingly, month-on-month inflation, which is the monthly change in the general price level is projected to decline by 0.93% to 2.19% (annualized at 29.64%), after increasing for four consecutive months. This further supports the notion that headline inflation could begin to taper soon.

Notably, both the food and non-food baskets are expected to exhibit similar trends, with the annual food and core inflation rates increasing but at a slower pace to 38.49% and 25.27% from 37.92% and 25.13% respectively in February. On a monthly basis, food inflation is projected to fall to 2.49% from 3.79%, while core inflation is estimated to decline to 2.02% from 2.18%.

This ease in inflationary pressures can be largely attributed to the CBN’s forex market reforms and aggressive monetary tightening. In the last seven (7) weeks, the MPC has increased the monetary policy rate by a total of 600 basis points to 24.75% p.a. and the Naira has gained over 30%.
![Inflation Chart](https://res.cloudinary.com/dbkiemdqb/image/upload/v1712946935/ubjwd8swwoa6yvyzkahw.png)

#### **Inflation cools across Sub-Saharan Africa**

Inflation is beginning to taper in most countries across Sub-Saharan Africa. Of the 48 SSA countries, 15 have reported their inflation data for the month of March with nine (9) recording declines, five (5) posting increases, and one (1) flat. According to the World Bank, The median inflation rate in the region is expected to decline to 5.1% in 2024  from 7.1% in 2023, supported by the improvement in the global supply chains, monetary tightening, and fiscal consolidation.

![Inflation Table](https://res.cloudinary.com/dbkiemdqb/image/upload/v1712946460/xyfqxv7hshdvcydhwj0h.png)

#### ***Nigerian inflation could reach an inflection point in Q2’2024***

Nigerian headline inflation is likely to reach its peak in Q2 and begin to decline afterward on sustained monetary tightening and stability of the exchange rate. According to the World Bank, Nigerian inflation is expected to average 24.8% in 2024, slightly higher than an average of 24.52% in 2023.

Nigeria’s inflation to increase but at a slower pace in March as exchange rate stabilizes

#### Key Economic Events

* ***Federal Reserve Leaves Interest Rates Unchanged*** 

During its latest Federal Open Market Committee (FOMC) meeting on May 1st, the Federal Reserve unanimously voted to keep its policy rates unchanged at 5.25% - 5.50%, marking the sixth consecutive meeting of maintaining the status quo. This decision was driven by concerns about inflation and the tight labour market. Although the Fed has succeeded in lowering inflation from its peak of 9.1% in June 2022, recent data indicates a halt in progress towards reaching the Fed's inflation target of 2%. In March, US inflation rose for the second consecutive month, reaching 3.5% from 3.2% in February. 

The Fed chair notably emphasized that a rate hike might not be imminent, as the current policy stance is deemed appropriately restrictive. Additionally, the Federal Reserve announced plans to gradually reduce its quantitative tightening starting in June. This adjustment involves scaling back the maximum amount of Treasury securities removed from the balance sheet by nearly 60%, reducing it to $25 billion per month from the previous $60 billion.

##### Implications

Even though the Fed Chair has stressed that a rate hike may not be on the horizon, the current high interest rates will continue to support capital flight from emerging markets such as Nigeria. Presently, the inflation-interest rate differential in the US stands at 1.67%, indicating a positive real rate of return, whereas in Nigeria, it sits at -12.5%, indicating a negative real rate of return. It is also worth mentioning that elevated interest rates in the US will push up debt servicing costs for emerging markets.

* ***Fitch Upgrades Nigeria’s Credit Outlook***

Fitch Ratings, a prominent global rating agency, has upgraded Nigeria's economic outlook from stable to positive, following a similar move by Moody’s in December 2023. This positive adjustment primarily reflects significant reforms implemented over the past year aimed at restoring macroeconomic stability and improving policy coherence and credibility. These reforms have mitigated distortions resulting from previous unorthodox monetary and exchange rate policies, leading to notable inflows into the official foreign exchange (FX) market. However, Fitch highlighted potential short-term challenges such as high inflation and recent FX market volatility, noting that the lack of clarity regarding net FX reserve size constrains the country's credit profile. 
The agency anticipates further increases in the CBN monetary policy rate in the latter half of 2024 and a strengthening of monetary policy transmission. Consequently, inflation is forecasted to average 26.3% in 2024 and 18.2% in 2025.

##### Implications 

An upward revision in Nigeria’s credit rating will boost investor confidence in the Nigerian economy. This could attract more foreign investment into the country as investors perceive reduced risks and higher potential returns. With a positive credit rating, Nigeria may also enjoy lower borrowing costs when accessing international capital markets. Lenders typically offer more favorable terms to countries with higher credit ratings, resulting in reduced interest expenses for the government when issuing bonds or seeking loans.

* ***PMI***

The Stanbic Purchasing Managers’ Index (PMI) inched up by 0.2% to 51.1 points in April from 51 points in March. This is the fifth consecutive month that the PMI reading has remained above 50 points. Notably, a PMI reading above 50 points signals an improvement in business conditions while a reading below 50 points shows deterioration. The slight uptick in the April reading, largely reflects the gradual deceleration in prices, following the appreciation in the exchange rate. After climbing to a record low of N1,915/$ in February, the Naira strengthened to a 5-month high of N1,055/$ in mid-April, before depreciating to close the month at N1,360/$. 
![stanbic pmi](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123849/p6i5dycdmg1phvz8xhmn.png)
The PMI reading comprises five sub-indices: new orders, output, employment, suppliers’ delivery times, and stock of items purchased. In April, the levels of output and new orders remained largely unchanged compared to the prior month, with business conditions still significantly affected by fluctuations in the naira and consequent price adjustments. Meanwhile, there was a slight improvement in overall employment in April following declines in February and March.

##### Implications 

The PMI reading above 50 points in the last five months is an indication that real GDP growth will remain positive in the first quarter of 2024. However, the drop in the reading from 54.5 points in January to 51 points in February and March suggests that real GDP growth will remain tepid and likely to be non-inclusive. 
 
***Market Update***

* ***Oil market – Brent crude prices recover after hitting a 7-week low***

Brent crude price maintained its downward trend in the first three days of the week, hitting a seven-week low of $83.44 barrels per day on May 1. This decline was attributed to concerns about a potential slowdown in US GDP growth and oil demand, prompted by the Federal Reserve’s decision to keep its benchmark interest rates unchanged, coupled with an unexpected boost in US oil inventories (up 1.61% to 460.9 million barrels). However, prices recovered thereafter, buoyed by expectations that OPEC+ would extend voluntary oil production cuts, alongside speculation that the drop in WTI prices to $79 per barrel might prompt the US government to replenish its strategic petroleum reserves, which were depleted in 2022. On average oil prices fell by 3.66% to $85.27 per barrel during the review period from $88.51 per barrel the preceding week.
![brent crude price](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123792/x77rtataxqtq3asxdz9w.png)

##### Outlook 

Oil prices are expected to remain elevated in the coming week on expectations of an extension in OPEC output cut and a forecast of a build-up in US strategic reserves. However, the prospect of a ceasefire agreement between Israel and Hamas is likely to reduce the geopolitical risk premium, leading to a decline in oil prices.

* **Forex market – Volatile trading as demand outpaces supply**

At the parallel market, the Naira traded within a band of N1,340/$ - N1,380/$ during the review period. It lost 2.17% to close the week at N1,380/$ from N1,350/$ at the beginning of the week, partly due to dollar scarcity amid heightened demand. Meanwhile, the Naira appreciated to close the week at N1,400.4/$ at the NAFEM window after touching a 5-week low of N1,419.11/$ on April 29, supported by a boost in the level of activities in the market. Daily forex turnover rose by 36.56% to $201.88 million on May 3rd from $147.83 million on April 29.
![exchange rate](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123692/ntjnos1fr6b3oiybegak.png)
Meanwhile, the gross external reserves continued its steady accretion, gaining 0.16% ($52.28 million) to close at $32.28 billion on May 2 from $32.23 billion at the start of the week.

##### Outlook 

The exchange rate is expected to continue its volatile trading in the coming week, driven by the demand and supply dynamics.

##### Money Market 

For the first time in three weeks, the opening position of banks closed the week on a positive note at N19.61 billion on May 3rd, suggesting an ease in the tight liquidity conditions. Meanwhile, on a week-on-week basis, the average opening position was N275.72 billion short, an improvement from N759.26 billion short in the prior week. Consequently, short-term interbank interest rates (OPR and ON) fell by 4.00% and 4.17% respectively to close the week at 26.25% and 27.08% from 30.25% and 31.25% last week.
![Short term index](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123562/wnfmrnpdjb2nva3wpuah.png)

##### Outlook 

Short-term interest rates are likely to fall slightly in the coming week if the improvement in liquidity conditions is sustained. 

* ***Fixed income market***

The average yield across the Federal Government of Nigeria (FGN) bond curve declined by 0.09%, concluding the review period at 18.75% compared to 18.84% the previous week. The majority of trading activity during the week focused on the shorter and intermediate segments of the yield curve, although there was some demand observed at the longer end, albeit with limited supply. Specifically, the FGN-2026 bond decreased by 20 basis points to 17.85%, the 30-year bond fell by 68 basis points to 17.77% while the FGN-2031 bond increased by 0.19% to 19.29%.

In the secondary treasury bill market, sentiment was predominantly bearish as the average benchmark yield rose by 13 basis points to close the week at 22.37%, compared to 22.24% the previous week. Notably, there were sell-offs at the longer end of the curve due to tight market liquidity, while investors selectively pursued attractive yields across the curve.

##### Outlook 

The Debt Management Office (DMO) has released a revised Q2 bond issuance circular, announcing the issuance of the 19.30%-FGN-2029, FGN-2031, and FGN-2033 bonds at the next primary market auction scheduled for May 13, 2024. 

There will be a primary market treasury bill auction by mid-week, with marginal rates likely to remain at current levels. In the secondary market, we anticipate continued selling pressure, particularly at the longer end of the curve.

* ***Stock market – Bearish sentiment as selloffs overtake buying activities*** 

The Nigerian equities market rebounded last week, recording its first weekly gain (N812 billion) after six consecutive weeks of bearish trades. Notably, the market gained in three (3) out of the four (4) trading sessions.  The NGX ASI rose by 1.46% to close the week at 99,587.25 points from 98,152.91 points at the end of the prior week. Similarly, market capitalization increased by 1.46% to N56.32 trillion on May 3 from N55.51 trillion on April 26. This bullish trend was supported by optimistic buying attitudes towards certain high-value stocks as well as blue-chip companies with strong fundamentals. The impressive Q1 corporate results and the commencement of the dividend earnings season also supported the upward trend. 
![All share index](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123445/loo0wzqmapdaey1qsgap.png)
On a sectoral basis, performance was mixed as two of the five indices were positive while the other three were negative. The Banking and Insurance indices gained 9.42% and 0.98% respectively, driven by strong interest in financial stocks. Meanwhile, oil and gas lost 0.68%, followed by Industrial goods (0.36%) and consumer goods (0.3%). 
![Scale performance](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123339/whjove8y4fjl8vte7i00.png)
Market activity showed a positive trend during the week. The average trading volume rose by 31.95% to 485.31 million units compared to 367.81 million units in the preceding week. Similarly, the average trade value increased by 19.12% to N8.16 billion from N6.85 billion in the preceding week. 

Market breadth for the week was positive as 41 shares gained, 33 lost and 65 remained unchanged. FBNH topped the gainers’ list with a 32.68% increase in its share price, followed by STERLINGNG (27.75%), UACN (24.60%), JBERGER (23.76%), and FLOURMILL (20.66%). 
![TOp 5 Gainers](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123031/xdg62pjtm3lq0lxhusp1.png)The laggards were led by NASCON (-17.03%), UPL (-16.67%), BERGER (-9.87%), VITAFOAM (-9.81%) and LINKASSURE (-9.47%).
![Top 5 losses](https://res.cloudinary.com/dbkiemdqb/image/upload/v1715123123/lfrqlxqmkfd2nf2s8lbh.png)

##### Outlook 

The equities market is likely to sustain its positive trajectory this week as investors position for dividend payments. However, higher yields in the fixed-income market could taper the expected rally. 

Weekly Economic Update (April 29th – May 3rd)

### **Key Economic Events**

* ***US GDP Growth slowed to 1.6% as inflation spirals***

In the first quarter of 2024, the US economy expanded at an annualized rate of 1.6%, significantly below market forecasts of 2.5% and 1.8% lower than the 3.4% growth recorded in the fourth quarter of 2023. This marks the slowest pace of growth since the second quarter of 2022. The slowdown was partly attributed to a deceleration in consumer spending, which dropped to 2.5% in Q1 2024 from 3.3% in Q4 2023.
Concurrently, the personal consumption expenditures price index rose to 3.4% in Q1 2024 from 1.8% in Q4 2023, exceeding the Federal Reserve's long-term target of 2% by 1.4%.

#### **Implications**

Despite the slowdown in GDP growth, the uptick in the PCE price index suggests that the Federal Reserve will probably delay any rate cuts until later in the year. Elevated interest rates in the US increase the chances of capital flight from emerging markets like Nigeria.

* ***FG Launches Consumer Credit Scheme***

The FGN has approved the launch of the first phase of the Consumer Credit Scheme, targeting working citizens in the country. The scheme aims to provide credit facilities, starting with civil service members before extending to the general public. Consumer credit is highlighted as vital for modern economies, enabling citizens to access goods and services upfront and pay responsibly over time, thereby enhancing their quality of life. The Nigerian Consumer Credit Corporation (CREDICORP) is tasked with strengthening credit reporting systems, offering credit guarantees, and promoting responsible consumer credit.
The credit market in Nigeria is substantial, with approximately 39 million adults, representing 32% of the population, relying on informal sources for financial assistance. Estimates from a 2023 survey by Enhancing Financial Inclusion and Access (EFInA) indicate a market size of $2.1 billion for consumer credit, with an additional $621 million in untapped potential within the informal borrowing segment.

#### Implications

Nigeria's new consumer credit scheme represents a transformative initiative that holds the promise of expanding access to finance, improving living standards, and driving inclusive economic growth.

### Market Update

* ***Oil market – Weak demand fears overshadow concerns of escalating Middle East crisis***

Brent crude prices fell below the $90 per barrel mark during the review period as concerns over weak oil demand especially in the United States overshadow the fears of an escalation in the Middle East tensions. On average, oil prices fell by 0.57% to $88.51 per barrel from $89.02 per barrel last week.![Brent crude price](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714471485/hqk4znv2er4udnr3gwcj.png)

#### Outlook

Oil prices are expected to remain at current levels as markets continue to evaluate the effects of the ongoing crisis in the Middle East alongside worries about demand in the US, the largest consumer of oil.

* **Forex market – Naira depreciates despite the CBN’s forex sales to BDCs**

During the past week, the Naira experienced significant depreciation in both official and parallel markets. In the parallel market, the Naira reached a four-week low of N1,450/$ on April 25 before rebounding to close the week at N1,400/$. Meanwhile, at the NAFEM window, the currency continued its steady decline, losing 12.64% to close the week at N1,339.23/$ compared to N1,169.99/$ at the previous week's end. This renewed pressure on the currency was attributed to heightened demand for foreign exchange amidst reduced dollar availability, as some foreign portfolio investors withdrew from the Nigerian market. However, the Central Bank of Nigeria's (CBN) sales of additional dollars to eligible Bureau de Change operators (BDCs) began to alleviate the situation towards the end of the week, particularly in the parallel market. At the start of the week, the CBN announced the approval of the fourth tranche of FX sales ($10,000) to 1,583 BDCs at N1,021/$. Additionally, the EFCC froze 300 accounts associated with illicit forex trading to defend the Naira.![Exchange Rate](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714471412/za8jpnprpeq1c3h3venx.png)
The gross external reserves reversed its downward trend on April 22, gaining 0.06% (24.92 million) to close at $32.13bn on April 25 from $32.11 billion at the end of last week.

#### Outlook

We expect the Naira to appreciate further this week, supported by the CBN’s sale of forex to BDCs. Nevertheless, as traders and manufacturers rebuild their inventory levels, there may be a surge in demand for the dollar. Without sufficient dollar supply to match this demand, the currency is expected to face depreciation in the near term.

#### *Money Market*

During the week, the opening position of banks remained in the negative territory although there was an improvement compared to the previous week. On average, banks’ opening position was N759.26 billion short, an improvement from N814.53 billion short last week. This was partly due to a reduction in the net primary market outflows to N6.09 billion from N452.3 billion last week coupled with the April FAAC disbursement (N1.123 trillion). The tight liquidity conditions kept short-term interest rates elevated.  Specifically, OPR and ON rates averaged 29.31% and 30.53% respectively compared to 30.32% and 31.33% the preceding week.![Short term interest rate](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714471317/czez92q2q9cubjtiosqr.png)

#### Outlook

Interest rates are expected to stay high as liquidity conditions remain tight.

* **Fixed Income Market**

The average yield across the Federal Government of Nigeria (FGN) bond curve decreased by 0.12%, ending the review period at 18.84% from 18.96% the previous week. Positive sentiment was notably present in the short-term and mid-maturity segments of the curve due to the demand for short-dated and mid-maturity bonds. The FGN-2026 bond declined by 0.66% to 18.04%, the FGN-2031 bond reduced by 0.1% to 19.1%, while the 30-year bond remained unchanged at 18.45%.

During the review period, there was a primary market treasury bill auction which was oversubscribed by 254.23% as investors sought opportunities in the fixed-income market with high yields. Particularly, strong demand persisted for the 364-day treasury bill, oversubscribed by 595.94%. The 182-day and 91-day treasury bills were also oversubscribed by 104.09% and 238.36% respectively. The stop rates remained unchanged at 16.24%, 17%, and 20.7% for the 91-day, 182-day, and 364-day tenors respectively.

In the secondary treasury bill market, there were selloffs across mid to long maturities ahead of the primary market auction. However, after the auction, sentiment turned bullish as the average yield dropped by 2.72% across the benchmark curve, closing the week at 22.24% compared to 25.14% the previous week, with unsettled bid demand entering the secondary market. The average benchmark yield decreased by 0.07% across all tenors, closing at 18.53%.![tenor market](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714471162/eyubnzgw2xix9lcqx9ro.png)

#### Outlook 

We expect the high yield in the fixed-income market to persist as the CBN intensifies efforts to mop up excess liquidity and taper inflationary pressures. 

* ***Stock market – Bearish sentiment as selloffs overtake buying activities*** 

The Nigerian equities market maintained its bearish run during the review period. The NGX ASI fell by 1.39% to close the week at 98,152.91 points from 99,539.75 points at the end of last week. Similarly, market capitalization decreased by 1.40% to N55.51 trillion on April 26 from N56.3trillion on April 19. This decline was primarily driven by sell-offs as investors moved towards less risky investments offering higher yields. ![Share loss](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714471033/bikthn6yriclltin2vtl.png)
 
On a sectoral basis, performance was largely negative as three of the five indices declined. The Banking index lost -3.10%, followed by oil & gas (-1.41%) and Consumer goods (-1.15%). Meanwhile, the insurance and industrial goods gained 0.02% and 0.38% respectively.![Sectorial Basis](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714470857/p88ygm8eqsocf5xc8mjr.png)
 
Market activity showed a positive trend during the week. The average trading volume rose by 15.16% to 367.81 million units compared to 319.39 million units in the preceding week. Similarly, the average trade value increased by 6.04% to N6.85 billion from N6.46 billion in the preceding week.
 
Market breadth for the week was negative as 27 shares gained, 43 lost and 84 remained unchanged. SUNUASSUR topped the gainers’ list with a 25% increase in its share price, followed by CAP (20.21%), LIVESTOCK (14.48%), JAPAULGOLD (14.37%), and UNILEVER (11.03%).![Top 5 Gainers](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714470748/x5ypuz3do7cxvmtakie9.png)
 The laggards were led by OANDO (-19.57%), SOVRENINS (-18.18%), THOMASWY (-16.82%), FBNH (-16.26%) and WEMABANK (-12.59%).![Top 5 losses](https://res.cloudinary.com/dbkiemdqb/image/upload/v1714470617/b65xf0q0z525ftglkox9.png)

#### Outlook 

There is a possibility of a slight improvement in market performance this week as investors capitalize on price corrections and strategically invest to qualify for dividends.

Weekly Economic Update (April 22nd – 26th)

**Key Economic Events**

* ***IMF revises Nigeria’s 2024 GDP growth forecast upwards by 0.3% to 3.3%***

The IMF, in its April 2024 World Economic Outlook (WEO), expects the global economy to expand by 3.2% in both 2024 and 2025, maintaining the same growth rate observed in 2023. This forecast for 2024 represents a slight increase compared to the projection made in January 2024, and it is 0.3% higher than the forecast made in October 2023. The upward adjustment in the global GDP growth outlook primarily reflects the resilience of the economy despite potential downside risks. Specifically, advanced economies are anticipated to see a modest increase in GDP growth from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025, while emerging markets and developing economies are expected to experience a slight slowdown in GDP growth from 4.3% in 2023 to 4.2% in both 2024 and 2025.

The IMF has maintained its forecast for Sub-Saharan Africa (SSA) GDP growth in 2024 at 3.8%, unchanged from the January projection, reflecting an improvement from the 3.4% estimated in 2023. However, Nigeria's GDP growth projection for 2024 has been revised upward by 0.3% to 3.3% from the previous projection of 3.0%. This new forecast is 0.4% higher than the estimated growth rate of 2.9% in 2023. Meanwhile, South Africa's GDP projection for 2024 has been reduced by 0.1% to 0.9%, although it remains higher than the 2023 estimate of 0.6%.

Despite the upward adjustment, the IMF anticipates that Nigeria once considered the economic powerhouse of Africa, will slip to the fourth position in terms of economic size in 2024, with a GDP of $253 billion. This places Nigeria behind South Africa ($373 billion), Egypt ($348 billion), and Algeria ($267 billion). This decline is primarily attributed to the devaluation of the currency. In 2022, the IMF ranked Nigeria as the largest economy in Africa, with a GDP of $477 billion. However, currency devaluation led to Nigeria losing this position, dropping to third place in 2023 with a GDP of $375 billion, trailing behind Egypt ($394 billion) and South Africa ($378 billion). By 2024, Egypt relinquished its position as the largest economy in Africa, descending to the third position, while Nigeria further slid down the rankings to fourth place on the continent. This downward shift is attributed to the devaluation of the Naira and the Egyptian Pound. Year-on-year, the Naira depreciated by 39.84%, while the Egyptian Pound depreciated by 35.67%.

***Implications***
The upward revision in Nigeria’s GDP growth indicates a further boost in economic activities, which is likely to bolster investor confidence, increase government revenue, stimulate job creation, and reduce poverty levels.

* ***Nigeria’s inflation to drop to 26.3% in 2024 - IMF***

According to the IMF, global inflation is expected to fall from an average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Similarly, Nigeria’s inflation is projected to moderate to 26.3%, 23%, and 18% in 2024, 2025 and 2026 respectively. The World Bank, in its recently published Africa Pulse publication also expects Nigeria’s inflation to decline to 24.8% in 2024 and settle at 15.1% in 2026. This slowdown will be largely supported by the tight liquidity conditions due to the CBN’s hawkish monetary policy stance, coupled with the 7.94% adjustment in the exchange rate for import duties payment to N1,147/$ from N1,238.1/$, and lower diesel prices (down 16.67% to N1,000/litre).

***Implications***
Lower inflation rates will boost consumer purchasing power and increase living standards. According to the World Bank, rising inflation and weak earnings pushed 10 million Nigerians into poverty in 2023.

* ***CBN reduces the loan-to-deposit ratio to 50% from 65%***

The Central Bank of Nigeria (CBN) has reduced the loan-to-deposit (LDR) ratio for Deposit Money Banks (DMBs) from 65% to 50%, representing a 15% decline. This adjustment aligns with the Apex Bank’s shift towards a more contractionary monetary policy stance. Previously, the CBN had raised the Cash Reserve Ratio (CRR) for DMBs to 45% from 32.5%, and for merchant banks to 14% from 10%.

***Implications***
Undoubtedly, the decrease in the LDR will limit the availability of credit to businesses, potentially leading to higher interest rates. Nonetheless, it will play a role in reducing the risks associated with excessive lending and ensure the judicious utilization of depositors' funds, thereby bolstering the stability of the banking sector.
Banks are urged to maintain strong risk management practices and the CBN has emphasized its commitment to closely monitoring compliance and adjusting the LDR as necessary to align with market dynamics, ensuring the continued effectiveness of the policy.

***Market Update***

* ***Oil market records volatile trading due to Middle East crisis & global demand concerns***

The oil market was volatile during the period under review. In the first two days of the week, Brent crude prices stabilized at $90 per barrel as the US unveiled intentions to impose new sanctions on Iran after its drone assault on Israel during the weekend. However, prices dipped in the subsequent two days, reaching $86.66 per barrel due to concerns regarding global oil demand and a larger-than-anticipated increase in US oil inventories. Eventually, prices rebounded to conclude the week at $90.54 per barrel, spurred by reports of Israel's strike on Iran. The average price of Brent crude during the week stood at $89.02 per barrel, marking a slight decrease of 1.2% from the preceding week's $90.10 per barrel.
![Brent crude prices](https://res.cloudinary.com/dbkiemdqb/image/upload/v1713799201/n9dbll61qipnrqzcsksd.png)

***Outlook***
The escalation in the Middle East conflict is likely to keep oil prices elevated in the coming week as Iran is OPEC’s third largest oil producer, accounting for 11.98% of the cartel’s production.

* **Forex market**

At the parallel market, the Naira sustained its steady appreciation at the beginning of the week, strengthening to a six-month high of N1,055/$ on April 16, before depreciating to close the week at N1,230/$, losing 8.54% compared to the closing rate of N1,125/$ at the end of last week. Similarly, the official rate (NAFEM) appreciated to N1,072.74/$ on April 17 before depreciating to close the week at N1,169.99/$, a loss of 2.36% relative to the closing rate of N1,142.38/$ at the end of last week. The CBN’s intense efforts to restore confidence and promote transparency in the forex market boosted foreign investors' participation in the Nigerian market, pushing up the dollar supply. However, there are concerns about the Apex Bank depleting its reserves to defend the Naira. This is as the country’s gross external reserves levels plunged by 4.35% to $32.11bn on April 18 from $33.57bn on April 2. However, the CBN Governor maintained that the decline in external reserves is not a result of the CBN defending the currency but rather the payment of debt and other financial obligations.
![Exchange Rate](https://res.cloudinary.com/dbkiemdqb/image/upload/v1713799355/zouhaeg9bu8rsvcc6dqd.png)

***Outlook***
The Naira is expected to remain relatively stable in the coming week as tight liquidity conditions weigh on forex demand. This is because the high yield in the fixed-income market due to the CBN’s hawkish monetary stance is incentivizing investment in fixed-income securities, thus reducing system-wide liquidity and the available Naira to demand for forex. However, as the Summer season approaches, there is likely to be a surge in dollar demand for travel. If this doesn’t coincide with a boost in dollar supply, the currency is likely to depreciate.

The gross external reserves are likely to deplete further in the coming month as the CBN strives to meet Nigeria’s external financial obligations to keep the country’s credibility intact. However, a sustained boost in foreign portfolio investment due to the sanity in the forex market as well as the high yield in the fixed-income market will slow the pace of depletion. Notably, the FG has disclosed plans to introduce a Diaspora Bond before the end of the year, aimed at attracting funds held abroad by Nigerians at home and in the Diaspora. In addition, the Finance Minister, at the 2024 Spring Meetings of the IMF and World Bank mentioned that Nigeria is qualified for a World Bank loan of $2.25bn at 1% interest with a 40-year tenor, and 10-year moratorium. The FG is also in talks with the African Development Bank for budget support funding at a low-interest rate. All these are expected to boost forex inflows, boosting the gross external reserves in the medium term and supporting the stability of the Naira.

* ***Money market***

The opening position of banks was negative all through the week, emphasizing the tight liquidity conditions in the system. The average opening position during the week was N814.53bn short compared to a long position of N9.5bn in the preceding week. This sharp drop in banking liquidity position led to an increase in the short-term interest rates. Average NIBOR (OBB/ON) rates rose by 2.81% to 30.82% pa from 28.01% in the preceding week.
 
***Outlook***
Interest rates are expected to remain high in the coming week, reflecting the tight liquidity conditions. There will be a primary market t/bill auction next week. We expect yields to remain elevated.

* ***Fixed income market***

The average yield along the Federal Government of Nigeria (FGN) bond curve declined by 0.22% to 18.96% on Friday from 19.18% at the end of the prior week. Notably, positive sentiments prevailed mainly in the short-term and mid-maturity segments of the curve due to demand for short-dated and mid-maturity bonds despite limited liquidity. The FGN-2026 bond fell by 53bps, closing at 18.70%, whereas the FGN-2027 bond remained unchanged at 19.28%. In the mid-maturity range, the Feb-2034 bond closed at 19.06%, while yields stayed relatively stable across the longer end, with the 30-year bond closing flat at 18.45%.

However, a bearish sentiment was observed across the Nigerian Treasury Bills (NTB) curve due to selling pressure in the mid-maturity and long-term segments amid ongoing liquidity constraints. As a result, the average yield on the benchmark curve increased by 615 bps (w-o-w) to 25.14% on Friday, compared to 18.99% at the end of the previous week.
***Outlook***
Fixed income yields are expected to remain high as the Apex Bank continues its drive to attract foreign investment by offering high-yield treasury bills and FGN bonds.

* ***Stock market – Bearish Market Sentiment***

The stock market performance was largely bearish this week. The NGX ASI lost 2.71% to close the week at 99,539.75 points from 102,314.56 points at the end of last week. Market capitalization also declined by 2.7% to N56.3 trillion on April 19 from N57.86 trillion on April 12. This bearish market sentiment was driven by the tight liquidity as investors shifted to safer instruments with higher yields in the fixed-income market. In addition, this release of corporate earnings did not result in the expected gains in the market.
![All shares](https://res.cloudinary.com/dbkiemdqb/image/upload/v1713799516/d9emqb4zpqagtwgttrer.png)

Market activity showed a negative trend during the week. The average trading volume declined by 43.57% to 319.39 million units compared to 565.99 million units in the preceding week. Similarly, the average trade value dipped sharply by 54.89% to N6.46 billion from N14.32 billion in the previous period.
Morison topped the gainers’ list with a 45.31% increase in its share price. This was followed by Guinness (10.00%), Academy Plc (9.77%), Prestige (8.93%), and ThomasWY (8.63%).
![Top 5 Gainers](https://res.cloudinary.com/dbkiemdqb/image/upload/v1713800258/mb3sqrktxgkvyw4avsyb.png)The laggards were led by GTCO (-19.08%), Unity Bank (-19.00%), Livestock (-18.99%), Japaulgold (-18.54%) and Chams (-16.67%).

![Top 5 Losses](https://res.cloudinary.com/dbkiemdqb/image/upload/v1713800552/eimalz8ry2oqfzdpvrd5.png)***Outlook***
The equities market is likely to remain bearish in the near term as we approach the end of the earnings season. We expect more depression from current levels, even as the market looks up to a stimulant to determine its further direction. In addition, investors will continue to rebalance their portfolio in favour of fixed-income securities due to the impressive yields on offer, leading to a fall in market activity and liquidity.

Weekly Economic Update (April 15th - 19th)

According to data from the National Bureau of Statistics, Nigeria's headline inflation continued its upward trajectory in March, reaching a 28-year peak of 33.2%. This marked a significant increase of 1.5% compared to February's rate of 31.7%. Despite the central bank's aggressive monetary policy rate hikes, totaling 600 basis points so far this year, and the resulting appreciation of the Naira, inflation remained high. This persistence can be attributed to the effect lag of monetary policy, which is the time lag between the implementation of policy measures and when the impact is being felt. One factor contributing to this delay is the tendency for commodity prices to be sticky downwards as manufacturers and traders typically adjust prices only when they are confident in the stability of the Naira, considering replacement costs.
The good news is that month-on-month inflation declined by 0.10% to 3.02%, following four consecutive months of increase. This suggests that prices are likely to be more responsive to the appreciation in the currency in the near term. Hence, headline inflation is likely to peak in Q2’2024 and begin to decline in the second half of the year.

#### ![Inflation Chart](https://res.cloudinary.com/dbkiemdqb/image/upload/v1712946935/ubjwd8swwoa6yvyzkahw.png)*Food inflation hits 40% - Nigeria among the top 5 countries with the highest food inflation rate* 

In March, Nigeria witnessed a surge in its food inflation rate, surpassing the 40% mark to reach a record high of 40.01%, up from 37.92% in February. This escalation can be attributed to persistent security challenges and elevated logistics costs, among other factors. Presently, Nigeria stands as the fourth country in Africa with the highest food inflation rate, trailing behind Zimbabwe (84.4%), Egypt (50.9%), and Sierra Leone (49.82%). 
According to the National Bureau of Statistics (NBS), key commodities experiencing significant price hikes include garri, millet, akpu, yam tuber, water yam, dried fish, sardine, mudfish dried, palm oil, vegetable oil, beef, coconut, watermelon, Lipton tea, bournvita, and milo. Notably, most of these items are locally produced with no direct import content, highlighting the impact of the planting season, substitution effect, security challenges, and higher logistics costs. The continued upward trend in commodity prices has eroded the purchasing power of consumers, making it challenging for many households to afford daily meals, thereby impacting overall health and well-being. The Cost of a Healthy Diet (CoHD), representing the most economical combination of locally available items meeting globally recognized food-based dietary guidelines, surged by 9.32% to N938 in February from N858 in January. 

#### ***Core inflation climbs to 25.9% in March***

Core inflation, representing inflation excluding volatile items such as agricultural products and energy costs, saw upticks both annually and monthly. On a year-on-year basis, it climbed by 0.77% to 25.9%, while on a month-on-month basis, it rose by 0.37% to 2.54%. Price hikes were observed in road transport fares, rental fees, medical charges, and pharmaceutical expenses. While core inflation has maintained its upward trend, the yield on the 365-day treasury bills declined to 20.7% at the last auction, widening the negative real rate of return to 5.2%. 

#### ***Higher inflation – Possible Policy response***

The MPC is scheduled to meet again next month (May 20/21) and one of the major considerations will be the elevated inflationary pressures. We expect the inflation data for April to be released before the meeting and expectations are that inflation will increase further but at a slower pace as commodity prices become more responsive to the appreciation in the value of the currency. Hence, the committee will most likely leave the monetary policy unchanged.

Nigeria's Inflation Soars as Commodity Prices Remains Resistant to Decline

By this point, the hype of the new year and the motivation to see resolutions through might have begun to fade away. New year resolutions start off quite determinedly and then dwindle as the year gets older and old habits offer comfortability. It is easy to fall back into old patterns rather than push ourselves to try out different, potentially better paths.

The truth is change can be daunting but what makes it doable are the positive results that come from embracing the shift. In 2023, we recommend staying committed to a specific number of resolutions, in order to stay focused and even get motivated for other goals. One of the key areas in your life that should not be neglected and promises to yield rewarding ROIs, are your finances – investments, budgeting and savings.

If your method of staying motivated in seeing your resolutions through is by working with a partner that helps you stay accountable, then GDL is the perfect choice for you. We don’t just promise our support with words, these are the ways we work towards your financial growth:

* **What’s our investment philosophy?**
    We believe that through the financial success of the individual, society as a collective is impacted.
* **How do we work together?**
    Essentially, pursuing financial success with GDL as a partner is a collaborative effort. We combine your dreams, current state and your future goals with our commitment to empower clients with the financial knowledge, services or products they need to make financial success possible. To do this, we employ the trusted tools within our arsenal – financing, stockbroking, financial advisory, asset management and more – to make it possible.
    We help you gain clarity about what your financial goals are, making it easier to identify how to source knowledge and advisory that brings you closer to your goals.
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    We recognize that your financial needs are uniquely specific to you and your journey, so we have carefully curated financial products that target the different stages of your financial journey.
    * **GDL Luxury Yield Note** is for the savvy investor who wants to cushion their funds against inflation, maintain liquidity and earn higher than marketROI.
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* **What are our communication options?**
    Remember your financial success is a collaborative effort between us? This means the communication lines are wide open between you, the client and us at GDL. We want to hear from you, at every point of your journey. When you come onboard the GDL ‘financial freedom’ movement, our client relationship and fund managers are available to answer questions and advise on the next step for your investments.You can also connect with us on all our social media platforms - @gdl-nigeria – and receive in-depth information about fund performance by signing up to our weekly newsletter here.

Visit [gdl.com.ng](https://gdl.com.ng/) to take the first step to staying on track with your new year’s resolutions. Set the goals and rely on us to make them happen.
Which GDL service or product are you taking advantage of this year?

Nigeria’s inflation to increase but at a slower pace in March as exchange rate stabilizes

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Nigerian inflation could reach an inflection point in Q2’2024

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