The uptrend in the local bourse persisted last week as sustained buying interest in BUACEMENT, STANBIC and GUARANTY supported overall performance. Consequently, the NSE All-Share Index closed in the green on 4 of the 5 trading sessions in the week, rising 0.3% w/w to settle at 25,309.37 points. Similarly, YTD return improved to -5.7% while market capitalisation rose ₦45.6bn w/w to close at ₦13.2tn. Activity level was mixed as average volume rose 12.8% to 214.3m units while average value declined 27.1% to ₦1.5bn. The top traded stocks by volume were TRANSCORP (184.9m units), UACN (118.4m units) and UBA (84.2m units) while ZENITH (₦1.2bn), GUARANTY (₦702.1m) and UACN (₦679.2m) led by value.
Performance across sectors was mixed albeit positively skewed as 3 indices covered gained w/w. The Insurance index led gainers, up 2.8% on the back of buying interest in NEM, MANSARD and WAPIC. Trailing, the Consumer Goods index rose 1.1% due to price appreciation in CHAMPION, PZ and UNILEVER while the Industrial Goods index inched higher by 0.6% as investors took positions in CAP and BUACEMENT. Conversely, the Banking index emerged the lone loser, down 0.2% as UBA and ETI dragged performance. Finally, the AFR-ICT closed flat.
Investor sentiment as measured by market breadth (advance/decline ratio) weakened to 0.9x from 1.2x as 29 stocks advanced against 34 that declined. The top performing stocks for the week were UPL, FTNCOCOA and CHAMPION while BETAGLAS, ARBICO and CILEASIN were the laggards. Following consecutive weeks of gains, we expect to see some profit-taking in early trades next week.
Foreign Exchange Market: CBN to resume FX sales to BDCs
Last week, the external reserves climbed 0.3% w/w to settle at $35.7 billion. Also, Brent gained 4.3% w/w to settle at $45.6/bbl., reflecting improved sentiment in the oil market. The apex bank of Nigeria announced the resumption of FX sales to BDCs at ₦384.00/$1.00 in order to provide more dollar liquidity to the parallel market. While the weekly sales volume is $10,000.0 per BDC, the CBN also directed BDCs to sell at a cap of ₦386.00/$1.00. The sale is expected to take-off on the 31st of August ahead of the resumption of international travels.
Furthermore, the Naira remained resilient across the board this week. At the official window, the CBN spot rate gained ₦2.00 to close at ₦379.00/$1.00. However, the parallel market rate remained sticky at ₦477.00/$1.00. At the Investors & Exporters (I&E) Window, the NAFEX rate closed at ₦385.67/ $1.00, gaining 33 kobo w/w. Activity level weakened by 48.6% at the “I&E” Window to settle at $163.2m from the previous week’s $317.4m.
The FMDQ Securities Exchange (SE)FX Futures Contract segment saw new subscriptions in the DEC 2022 ($2.0m), DEC 2023 ($9.0m) and AUG 2025 ($50.0m) instruments with contract prices of ₦471.39, ₦512.97 and ₦590.10 respectively. Nevertheless, aggregate contract value fell $657.7m or 5.1% to $12.3bn as the AUG 2020 contract worth $1.6bn matured during the week. Across all contracts, the SEP 2020 instrument (contract price: ₦389.54) received the highest subscription worth $274.2m to bring its total value to $1.5bn. We expect the exchange rates to remain range-bound at the official market and the I&E window. However, following the intervention of the CBN at the parallel market, we expect gains for the local currency in the near term.
Money Market: Sell Pressures Drive Yield Higher in Secondary Market
The Open Buy Back (OBB) and Overnight (OVN) rates opened last week at 2.0% and 3.0% respectively (vs. previous week’s close of 2.0% and 2.6%) as system liquidity stood at. ₦330.0bn. Despite Thursday’s OMO auctions, the OBB and OVN rates closed at 2.0% and 2.5% respectively with the market still awash with liquidity at ₦476.3tn due to an inflow of ₦283.4bn from maturing OMO instruments. At the close of the week, the OBB and OVN rates both surged 11.9ppts and 12.3ppts w/w to settle at 13.9% and 14.9% respectively despite an increase in system liquidity to ₦650.0bn.
In line with its schedule, the CBN conducted Primary Market Auction (PMA) on Wednesday, offering instruments worth ₦197.6bn, receiving total subscription of ₦221.9bn and selling ₦197.7bn across all tenors. The sale was at stop rates of 1.15%, 1.80% and 3.34% (vs. 1.20%, 1.39% and 3.19% in the previous auction) for the 91, 182 and 364-day instruments respectively. The 91-day (Offer: ₦20.4bn; Subscription: ₦31.2bn; Sale: ₦20.4bn) and 182-day (Offer: ₦31.8bn; Subscription: ₦56.4bn; Sale: ₦55.9bn) instruments were oversubscribed at 1.5x and 1.7x respectively while the 364-day (Offer: ₦145.5bn; Subscription: ₦134.4bn; Sale: ₦121.4bn) instrument recorded a bid-to-cover ratio of 0.9x.
The CBN also conducted an OMO auction worth ₦100.0bn on Thursday. There was strong investor interest in the 89-day instrument (Offer: ₦10.0bn; Subscription: ₦20.0bn; Sale: ₦10.0bn) which was oversubscribed at 2.0x while the 187-day instrument (Offer: ₦10.0bn; Subscription: ₦10.0bn; Sale: ₦10.0bn) was subscribed at 1.0x. Conversely, the 362-day (Offer: ₦80.0bn; Subscription: ₦78.8bn; Sale: ₦77.3bn) instrument was undersubscribed at 0.9x. The OMO instruments were issued at marginal rates of 4.87% (89-day), 7.68% (180-day) and 8.94% (362-day) in that order.
In the secondary market, there was a bearish performance as average yield rose 46bps w/w to 2.2%. The 91-day instrument enjoyed the most buying interest as yields declined 60bps to 1.0% while yields on the 182- and 364-day instruments advanced 110bps and 88bps to 2.4% and 3.2% respectively. In the coming week, we expect OMO maturities worth ₦321.5bn to hit the system. As such, we see secondary market rates trending lower in the week ahead. Meanwhile, we expect the CBN to continue its liquidity mop-up via OMO sales.
Bonds Market: The Bulls Resume in the Domestic Market
Performance in the secondary market turned bullish this week as coupons were paid on Monday and average yield declined 3bps w/w to 7.8%. Although the market recorded losses on 2 of 5 trading days, respective decline of 9bps and 4bps in yields on Monday and Friday buoyed performance this week. Across tenors, the short-term bonds recorded the highest buying interest with yields falling by 21bps w/w. The long-term instruments also recorded a marginal 1bp decline in yields while yields rose 8bps at the mid-end.
Across the SSA Eurobond instruments under our coverage, the bearish performance was sustained as average yields rose 22bps to 8.5%. The bearish momentum was majorly due to sell-offs in the ZAMBIAN instruments as yields across the 2022, 2024 and 2027 instruments rose 4.5ppts, 2.8ppts and 1.8ppts respectively. This lacklustre performance was triggered by the President’s dismissal of the central bank governor amid severe economic instability. Conversely, we saw gains in the GHANA 2023 and NIGERIA 2025 instruments as yields fell 38bps and 27bps respectively.
For the Nigerian Corporate Eurobonds that we track, performance was mixed although positively skewed as average yields declined 18bps w/w to 4.9%. SIBANYE GOLD 2023 instruments led the pack with yields declining 1.7ppts w/w. BAYPORT MANAGEMENT 2022 also recorded a gain as yields declined 95bps w/w. On the flip side, ESKOM HOLDINGS 2021 recorded the highest sell-off with its yield rising 48bps w/w. In the domestic market, we expect a slightly bullish performance next week. Although we expect sustained demand in the Eurobonds market, the ZAMBIAN instruments may experience further sell-offs.
