Weekly Economic Update (May 13th – May 17th)

Key Economic Events

  • US Inflation reverses its upward trend, easing to 3.4% in April

Following a steady rise in the first quarter, US inflation began the second quarter on a moderating trajectory, declining to 3.4% (year-on-year) in April from 3.5% in March. Similarly, the monthly index slowed to 0.3% in April from 0.4% in March. This deceleration was driven by decreased shelter prices and a stabilization in food prices.


This slowdown will offer a tentative sigh of relief for the Federal Reserve, increasing market optimism that the US Fed will commence its easing cycle in September. Additionally, a reduced inflation rate will alleviate some pressure on President Joe Biden's re-election campaign team. The imminent commencement of Fed’s easing cycle signals a possible reduction in Nigeria’s debt service costs.

  • FAAC Disbursements rose by 9.82% to N1.208 Trillion

The Federal Accounts Allocation Committee distributed N1.208 trillion to the three tiers of government in the month of May from a total generated revenue of N2.19 trillion. The remaining balance of N983.996 billion covers collection costs of N80.517 billion, along with total transfers, interventions, and refunds amounting to N903.479 billion. This allocation for May marks a 9.82% increase from the N1.1 trillion distributed in April. The breakdown includes statutory revenue of N284.716 billion, VAT proceeds of N466.457 billion, Electronic Money Transfer Levy (EMTL) revenue of N18.024 billion, and Exchange Difference of N438.884 billion.

Out of the total distributable revenue of N1.208 trillion, the Federal Government received N390.412 billion (32.32%), State Governments received N403.403 billion (33.39%), and Local Government Councils received N293.816 billion (24.32%). Additionally, N120.450 billion, equivalent to 13% of mineral revenue, was shared with benefiting states as derivation revenue.

Notably, there was a significant rise in Oil and Gas Royalties, Company Income Tax (CIT), Excise Duty, Petroleum Profit Tax (PPT), Electronic Money Transfer Levy (EMTL), and CET Levies. Conversely, Import Duty and Value Added Tax (VAT) witnessed considerable declines. The Excess Crude Account (ECA) balance stood at $473,754.57.


The increase in FAAC allocation will ease the financial strain on the government, especially at the subnational level, providing more buffers to invest in capital projects, which will have a long-term positive effect on the economy.

Market Update

  • Oil prices largely bullish during the review period

Oil prices began the week positively, driven by encouraging signs of economic improvement in China and the lack of progress in the negotiation to ease tensions between Israel and Hamas. However, prices dipped slightly the next day following an OPEC report revealing that the cartel had surpassed the agreed limit by producing an additional 568,000 barrels per day last month. Nevertheless, prices eventually rebounded, closing the week at $83.98 per barrel as the market weighed strong US economic data against the International Energy Agency's forecast for weaker global oil demand growth in 2024. On average, oil prices experienced a slight decrease of 0.24%, falling to $83.15 per barrel from $83.35 per barrel the previous week. crude price


Oil prices are expected to stay within the range of $83 to $84 per barrel, influenced by ongoing geopolitical tensions. OPEC+ will meet on June 1 to discuss the developments in the oil market as well as the market outlook. The cartel maintains a positive outlook on global oil demand, forecasting an increase of 2.25 million barrels per day (mbpd) in 2024 and 1.85 mbpd in 2025.

  • Forex market - Renewed currency pressures as FPIs repatriate funds

During the assessment period, the Naira surpassed the N1,500/$ mark in both the official and parallel markets. In the parallel market, it sustained a downward trajectory during the initial four trading days of the week, remaining above N1,500/$, before rebounding to conclude the week at N1,450/$. Meanwhile, at the NAFEM window, the currency exhibited volatile movement. It crossed the N1,500/$ mark on two of the five trading days, eventually appreciating to end the week at N1,497.33/$. The currency's appreciation at week's end was partly due to expectations of a rate hike at the MPC meeting, as the CBN ramp up efforts to stabilize the currency. The average daily forex turnover surged by 39.75% to $227.13 million during the review period, down from $121.7 million the previous week. Meanwhile, the gross external reserves continued its steady accretion, rising by 0.34% to close at $32.64 billion on May 16 from $32.53 billion at the beginning of the week.Exchange rate season


The Naira is expected to extend its gaining streak, especially at the beginning of the week, in anticipation of another rate hike at the MPC meeting. However, the upcoming maturity of $1.3 billion on May 29 could trigger renewed pressures if the dollar supply does not match demand. It is worth mentioning that the impending issuance of Diaspora bonds and the World Bank loan will offer some long-term support.

  • Money market - Banks opening position was mostly negative

Market liquidity was largely depressed during the course of the week as banks’ opening position was short for four out of the five trading days. Despite a shift to a positive position on Wednesday (May 15), it reverted to negative territory the following day, ultimately ending the week with a short position. This was partly influenced by the settlement of the FGN bond auction totaling N682.07 billion. On average, banks’ opening position was N310.0 billion short compared to a long position of N161.56 billion in the prior week. Consequently, average short-term interbank rates rose to 30.26% from 28.63% in the preceding week.short term interest rateOutlook The MPC will meet next week (May 20/21) and expectations are that the committee will maintain its hawkish monetary policy stance with the possibility of a 100-200 basis points hike in the monetary policy rate. If this happens, liquidity within the banking system will remain squeezed, keeping short-term interest rates elevated.

  • Fixed Income Market

There was a primary market bond auction during the review period. At the May auction, two existing bonds (5-year 19.30% FGN APR 2029 and 7-year 18.5% FGN FEB 2031) were reopened, while one new bond (9-year 19.89% FGN MAY 2033) was issued. The Debt Management Office (DMO) offered N450 billion across these three tenors, maintaining the same amount as the April auction. However, the total allotment decreased to N380.77 billion, marking a 39.25% decrease from N626.813 billion in April. Marginal rates for the existing 5-year and 7-year bonds decreased by 0.01% each, closing at 19.29% and 19.74% respectively, while the new issue closed at 19.89%.

In the secondary market, the average benchmark yield across the FGN bond curve saw a slight increase of 0.03% week-on-week, closing the week at 18.57% compared to the 18.54% recorded at the end of the preceding week. At the onset of the week, investors redirected their focus toward the FGN bond auction, resulting in relatively subdued trading sessions amidst tight liquidity. However, some selloffs were observed across the middle and longer tenors of the curve. The FGN-2031 and FGN-2032 bonds traded at 19.50% and 19.74%, respectively. Additionally, the New-FGN-2033 bond was offered at 19.90%, and the Feb-2034 bond traded at a level of 19.84%. Towards the longer end, both the FGN-2049 and FGN-2050 bonds traded at 17.50%, while the FGN-2053 bond traded at 17.30%.

In the secondary treasury bill market, sentiment was slightly bullish despite constrained liquidity. Consequently, the average benchmark yield across the curve decreased by 0.08% week-on-week, closing the week at 22.37% compared to 22.45% at the end of the preceding week. There was a notable increase in demand for longer maturities, although matching offers were scarce as investors selectively pursued attractive yields on the longer end. The NTB-24-Oct, NTB-05-Dec, and NTB-06-Feb saw a 0.02% reduction each, closing at a discount of 19.02%, 19.58%, and 20.10% respectively. The NTB-06-Mar bill declined by 0.01% to close at a discount of 20.58% while the NTB-10-Apr bill was offered at 20.35%.


There will be a primary market t/bill auction on Wednesday, occurring a day after the two-day MPC meeting. We expect the outcome of the meeting to influence market sentiment.

  • Stock market - Bearish sentiment as investors react to macroeconomic data

The Nigerian equities market was largely bearish during the review period as the market lost in four of the five trading days. The NGX ASI recorded a 0.11% decline to close the week at 98,125.73 points from 98,233.76 points in the preceding week. Similarly, market capitalization dropped by 0.09%, concluding the week at N55.51 trillion from N55.56 trillion at the close of the previous week. This bearish trend was partly due to weak sentiment among investors, triggered by reactions to the latest inflation data and speculations regarding the upcoming MPC meeting. all share index Of the five sectors, only the industrial goods sector was positive, recording a marginal gain of 0.01%. The other sectors lost, with the banking sector topping the losers list (-6.51%), followed by the oil & gas sector (-6.49%), insurance (-3.98%), and consumer goods (-1.29%). sector performance The average traded volume fell by 23.75% to 333.54 million units from 437.45 million, while the average traded value declined by 15.7% to N8.54 billion from N10.13 billion.

Market breadth for the week was negative as 26 stocks gained, 49 lost, and 64 remained unchanged. International Energy Insurance topped the gainers' list with an 11.49% increase, closing at N1.65 per share. Custodian Investment followed with a gain of 9.68% to close at N10.20 per share, while Julius Berger rose by 9.53% to close at N6.90 per share. top 5 gainers The laggards were led by PZ (-22.16%), NEM (-18.36%), ETERNA (-18.32%), UBA (-17.23%) and OMATEK (-14.86%).top 5 losses


We expect market sentiments to remain weak as investors continue to digest the April inflation data. The outcome of the MPC meeting, wherein the consensus is that the committee will further tighten its monetary stance will further dampen market sentiment. Nevertheless, there exist potential buying prospects for value investors seeking to leverage the low prices and valuations.



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