Weekly Economic Update (May 6th – May 10th)

Key Economic Events

  • External Debt Service Cost Spiked 37.9% to $1.12 Billion

The FGN spent a whopping $1.12 billion to service its external debt in the first quarter of 2024. This represents an increase of 39.7% when compared to a sum of $801.36 million expended in the corresponding period in 2023. Notably, the external debt service costs accounted for approximately 70% of total dollar payments, highlighting the substantial burden of foreign debt on the nation's finances. This rising debt service cost can be largely attributed to soaring debt levels and elevated interest rates in the international capital markets due to the high-risk premium. The high interest rates and severe foreign exchange volatility are already taking a toll on the government at the subnational level. Three states (Cross Rivers, Ogun, and Ekiti) have proposed a suspension of their foreign debt repayments worth $501 million.


The continued spike in external service costs will put a strain on government finances, reducing the funds available for capital projects, which will weigh on the country’s development. It could also undermine macroeconomic stability, putting pressure on the country’s balance of payment, exchange rate, as well as inflation. Besides, as the foreign debt burden increases, the risk of default will rise, which could result in a downward revision of the country’s credit ratings.

  • Presidential committee proposes an increase in VAT rate

The Presidential Committee on Fiscal Policy and Tax Reforms has proposed significant changes to Nigeria's Value Added Tax (VAT) system. The proposal suggests increasing states' and local government's share of VAT revenue to 90%, while reducing the Federal Government's share from 15% to 10%, altering the existing distribution model of Federal (15%), State (50%), and Local (35%). Additionally, the committee recommended raising the current VAT rate from its current level of 7.5%. This is aimed at boosting the country’s tax revenue and increasing the tax-to-GDP ratio to a minimum of 18%.


The proposed increase in the VAT rate will further squeeze consumer purchasing power, reducing aggregate demand. Nonetheless, it is likely to boost government revenue, increasing the available funds for developmental projects, which is likely to have a long-term positive impact and trickle down to the masses.

  • Reduction in tariff for Band A

The Nigerian Electricity Regulatory Commission (NERC) has ordered a reduction in electricity tariffs for Band A customers from N225/kWh to N206.80/kWh, in response to public dissatisfaction over the 240.91% increase in tariffs from N66/kWh to N225/kWh. This decision to lower tariffs was influenced by the strengthening of the exchange rate, with the Naira briefly appreciating to N1,055/$ in April before sliding again to N1,400/$.


The reduction in tariffs will reduce the cost of electricity for consumers, potentially alleviating financial burdens on households and businesses.

  • Reps urge CBN to back down on the implementation of the cybersecurity levy

The House of Representatives has urged the Central Bank of Nigeria (CBN) to withdraw a circular regarding the implementation of the 0.5% cybersecurity levy. This comes after concerns were raised about multiple interpretations of the CBN directive and its alignment with the Cybersecurity Act. The levy, mandated by the Cybercrime Amendment Act 2024, requires financial institutions to deduct and remit 0.5% of the value of electronic transactions to the National Cybersecurity Fund.


While specific transactions were exempted to prevent repetitive imposition of the levy, the cybersecurity levy will escalate the cost of conducting business and hinder the adoption of digital transactions, exacerbating the challenges faced by Nigerians who are already grappling with various difficulties.

  • CBN extends the suspension of processing fees on cash deposits till the end of Q3'24

The Central Bank of Nigeria (CBN) has suspended charges on cash deposits until September 30, 2024. This was in response to concerns expressed by bank customers after the reintroduction of processing fees for cash deposits on May 1, wherein Individual deposits above N500,000 attract a 2% charge while corporate accounts higher than N3 million incur a 3% fee.


This decision will reinforce the CBN’s dedication to reducing system-wide liquidity and promoting the transition to a cashless economy.

Market Update

  • Oil prices recorded mixed price movement

During the review period, oil prices experienced a mixed performance, trading within the range of $82.79 to $83.88 per barrel. Saudi Arabia's decision to increase June crude oil prices for major regions such as Asia, North West Europe, and the Mediterranean, coupled with diminishing prospects of a ceasefire agreement in Gaza, bolstered oil prices. However, remarks from US Fed officials, which cast doubt on the possibility of interest rate cuts weighed on market sentiment. Week-on-week, there was a 2.25% decline in the average oil price, falling from $85.27 per barrel to $83.35 per barrel. brent crude price


Oil prices are expected to stay high in the upcoming week, buoyed by voluntary oil production cuts by OPEC+ and positive outlooks regarding continued economic recovery in China, the leading global oil importer. However, the prolonged hawkish monetary policy stance, lasting longer than anticipated, is predicted to decelerate economic growth and moderate oil demand. The US Energy Information Administration (EIA) expects oil prices to trade close to $90 per barrel for the remainder of 2024 before falling to an average of $85 per barrel.

  • Forex Market - Dollar scarcity amid growing demand mounting forex pressures

Following a slight recovery to N1,354.21/$ early in the week, the Naira experienced a 7.65% decline at the official window, ending the week at N1,466.31/$. Similarly, the currency depreciated by 3.38% in the parallel market, closing at N1,480/$ on May 10 compared to N1,430/$ on May 6. The renewed forex pressures were attributed to reduced dollar supply amidst increasing demand, which was further exacerbated by a resurgence in speculative activities. The average daily forex turnover decreased by 39.75% to $121.7 million during the review period, down from $201.98 million the previous week.

Over the last three weeks, Nigeria's gross external reserves have steadily increased. It gained 0.31% ($100.31 million), closing at $32.45 billion on May 10, up from $32.35 billion at the beginning of the week. exchange rate


The currency is likely to remain under pressure as demand continues to outpace supply, especially as the summer season approaches. There are signs of renewed speculative activities, and if left unchecked, the Naira might be on the verge of taking another tumble off the cliff. Additionally, the impending maturity of $1.3 billion on May 29 could intensify pressure on the currency.

Money market - Banks opening position return to positive trajectory

Banks maintained a positive opening position in four out of the five trading days in the week, reflecting an improvement in liquidity conditions within the banking system. Notably, the opening position slipped into negative territory on May 8, partly due to the OMO sales of N260.65 billion. Additionally, there was a net outflow of N81.29 billion in the primary market (with primary market sales amounting to N274.67 billion and primary market repayments totaling N179.36 billion), contributing to a reduced opening balance at the end of the week. On average, banks' opening position was N161.56 billion long compared to a short position of -N275.72 billion in the preceding week. Remarkably, average short-term interbank rates fell slightly to close the week at 28.63% from 28.82% last week.

short term index rateOutlook

We expect liquidity conditions to remain tight, with short-term interest rates staying high, unless there is a substantial injection of funds into the system.

  • Fixed Income market - Bullish sentiment across the FGN bond curve

During the review period, sentiment across the FGN bond curve leaned predominantly bullish, with notable demand observed across the middle and longer tenors. Conversely, there were sell-offs observed at the shorter end of the bond curve, particularly for the FGN-2025 and FGN-2026 bonds, driven by profit-taking among investors. Consequently, the average benchmark yield experienced a 21 basis points decline week-on-week, settling at 18.54% by the end of the week. In the middle and longer end of the curve, the Feb-2034 bond closed at 19.40%, meanwhile, the FGN-2050 bond rose by 0.06% to close at 17.65%.

There was a primary market treasury bill auction during the week. Notably, all three tenors were oversubscribed by 509.72%, reflecting robust investor interest in government securities, driven largely by the high yield in the fixed-income market. In a bid to contain inflationary pressures and ensure exchange rate stability, the CBN maintained a hawkish monetary stance, pushing up effective interest rates to attract local and foreign investors. The stop rates was unchanged at 16.24%, 17% and 20.7% respectively. fixed income market graph In the secondary treasury bill market, the average benchmark yield along the NTB curve increased by approximately 0.08% to close the week at 22.45%, compared to 22.37% the previous week. Notably, yields decreased for short-term and mid-term maturities but rose for longer tenors due to investors selectively seeking higher yields. At the short end, NTB-08-Aug experienced a slight decline of approximately 0.01%, closing positively at a discount rate of 18.15%. Conversely, at the long end of the curve, NTB-10-April was up 0.24% to close at 20.32%.


We expect a quiet trading session at the beginning of the week as investors shift their focus to the May 2024 FGN bond primary market auction. The results of this auction, coupled with the inflation data, which is expected to be released on May 15, are likely to determine the trajectory of bond yields afterward.

  • Stock market - Bearish sentiment due to profit-taking activities

During the review period, the Nigerian stock market saw a downturn due to profit-taking activities by investors, resulting in a loss of N716 billion. Notably, the benchmark All Share Index (ASI) dropped by 1.36%, closing at 98,233.76 points from 99,587.25 points in the previous week. Also, market capitalization fell by 1.35% to N55.56 trillion from N56.32 trillion in the previous week.all share index Of the five sectors, only the industrial goods sector was positive, recording a marginal gain of 0.1%. The other sectors lost, with the consumer goods sector topping the losers list (-1.2%), followed by the insurance sector (-1.0%), oil & gas (-0.3%), and the banking sector (- 0.1%). scale performance The average traded volume decreased by 9.86% to 437.45 million units from 485.31 million, while the average traded value rose by 24.14% to N10.13 billion from N8.16 billion. Market breadth for the week was positive as 37 shares gained, 35 lost and 67 remained unchanged. TANTALIZER topped the gainers’ list with a 27.78% increase in its share price, followed by FTNCOCOA (20.00%), PRESCO (15.31%), MAYBAKER (15.00%), and GUINEAINS (13.33%). top 5 gainers The laggards were led by PZ (-26.97%), NSLTECH (-16.95%), INTBREW (-15.27%), MANSARD (-12.90%) and TRANSCORP (-10.64%).top 5 losses


The stock market is expected to maintain a negative sentiment in the upcoming week as there are no significant factors to stimulate investor interest. Nevertheless, there is a possibility of discreet emergence of bargain-hunting activities, especially in the banking sector, as investors may seek opportunities amidst the recent downward trend.


Stock market

Sector Performance

Stock market

Fixed Income Market

Money Maarket

Short-term Interest Rate

Forex Market

Band A

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