The strange yield curve

The strange yield curve

The Strange Yield Curve   By Coronation Research   Since the beginning of the year fixed income yields have been rising. Yet the movement in rates has been unequal across durations. Long-term bond rates have risen sharply and so too have 1-year T-bill rates at auction. But short-term T-bill rates have stayed low. FX Last week the exchange rate in the Investors and Exporters Window (I&E Window) strengthened by 0.24% to close at N410.00/US$1. In the parallel, or street market, the Naira weakened by 0.62% to close at N485.00/US$1. The gap…

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CBN official reserves declined by US$280m to US$34.82bn in March 2021

CBN moves to harmonise exchange rates

By FBNQuest Research     The Central Bank of Nigeria (CBN) data show that Nigeria’s gross official reserves declined by USD280m to USD34.82bn in March. In the name of accuracy, we should adjust this figure downwards to allow for the pipeline of delayed external payments, which the IMF estimated late last year at up to USD3bn and which the CBN has since indicated as substantially lower. We do not view the current level of reserves as a cause for alarm because of three areas where the CBN could reinforce its…

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Dynamics Within the FX Market

Nigeria’s forex inflow suffers 54% decline in January

Dynamics Within the FX Market   By FBNQuest Research Today we turn our attention to Nigeria’s exchange-rate market. Over the past four years, the CBN’s fx reforms have assisted with improved liquidity. However, in light of the COVID-19 outbreak, there has been additional vulnerability to swings in oil prices as well as increased exit of foreign portfolio investors (FPIs) which have both adversely affected exchange rate stability. Demand for fx remains high and the supply is inadequate for regular uses. The CBN’s Investors and Exporters (I&E) window rate is currently…

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The Argument for No Change from the MPC

The Argument for No Change from the MPC

By FBNQuest Analysts The monetary policy committee (MPC) holds its latest meeting today and tomorrow. In the earlier days of the COVID-19 pandemic rate-setting bodies globally were in easing mode and eager to provide a monetary stimulus. Indeed the MPC cut its policy rate twice in 2020. The most common decision has since been ‘hold’ although a few in the EM universe such as Turkey have shifted to a tightening stance. A third rate cut would be a surprise this week, given the persistent rise in inflation for 18 successive…

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Headline Inflation Jumps to a 4-Year High, Could Rise Further

December inflation Border reopening

By FDS Analysts The consumer price index spiked further in February by 0.86% to 17.33%, marginally higher than FDC forecast (17.2%). This is the highest inflation level in the last 48 months. Consumer price inflation jumped sharply since September 2019 after the land borders were closed to curb smuggling and encourage local production. At the current level, headline inflation is almost 100% above the upper band of the CBN’s inflation target (9%). The inflation spiral this time is driven mainly by rapidly increasing ways and means advances (money supply saturation),…

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Nigeria’s gradual road to economic recovery

Nigeria’s gradual road to economic recovery

Nigeria’s gradual road to economic recovery   By Lukman Otunuga, Senior Research Analyst at FXTM Africa’s largest economy has displayed resilience over the past few months. From defending against the Covid-19 menace to battling untamed inflation and shouldering domestic risks. Initially, the economic outlook was bleak during 2020 after the economy sunk back into its second recession in less than five years. Lockdown restrictions caused significant disruptions in the value chain, halted most aspects of the economy while crippling the manufacturing sector. A growing sense of alarm and unease over…

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Nigeria to Appoint Fund Manager for US$37bn Infrastructure Fund

Economic council engages Buhari on three disturbing national issues

By CSL Analysts Earlier this month, President Muhammadu Buhari approved the establishment of a Public Private Partnership styled Infrastructure company named Infra-Co with an initial seed capital of N1tn expected to grow to N15tn in assets and capital over time. The proposed establishment will attract private sector participation in the nation’s quest to bridge its infrastructure deficit necessary for the growth across all sectors of the economy. According to media reports, the board of Infra-Co will be chaired by the Governor, Central Bank of Nigeria (CBN); Managing Director, Nigeria Sovereign Investment…

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FBNQuest Capital Nigeria 2021 Research Outlook: Tentative Emergence from the Shadow of COVID-19

MPC meeting

  FBNQuest Capital Nigeria 2021 Research Outlook: Tentative Emergence from the Shadow of COVID-19 By FBNQuest Capital Global recovery via millions and millions of arms The Federal Reserve has its policy rate at practically zero and will maintain its accommodative stance this year since its employment and inflation objectives are distant following the virus’s impact. The world economy will recover following the development of the vaccine. We believe this process in G7 economies and China will experience the desired impact by the third quarter. With the anticipated recovery in demand,…

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A cautious start to a busy week

A cautious start to a busy week

A cautious start to a busy week   By Hussein Sayed, FXTM Analyst Following a solid start to the year, investors are turning more cautious as data continues to be released, corporates present their outlook for 2021, President-Elect Joe Biden sets out his economic plan, and most importantly developments around Covid-19 continue. Asian stocks traded mixed today despite data showing that China’s economy bounced back strongly in the final quarter of 2020. The world’s second-largest economy reported 6.5% growth in Q4, well above estimates of 6.1%. Industrial production also beat…

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Analyst Insight: A Small Rise in the FGN’s Domestic Debt in Q3 2020

DMO: Nigeria’s debt to China’s EXIM Bank hits $3.714bn

Analyst Insight: A Small Rise in the FGN’s Domestic Debt in Q3 2020 FBNQuest Research   The FGN’s domestic debt stock amounted to NGN15.85trn (USD37.7bn at the recently adjusted NAFEX rate) at end-September, equivalent to 10.0% of 2019 GDP. It increased by NGN390bn over the quarter, and the stock of FGN bonds by NGN410bn. The DMO had a challenging remit to raise NGN1.6trn from domestic issuance as FGN deficit financing in 2020, and the bonds are by far the largest element in its programme. Its timely data update also shows…

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