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Inflation rate is projected to increase by 83 basis points (bps) year-on-year (y/y) to 27.54 in October.

The figure would represent a 1.9 per cent rise when compared to 26.72 per cent recorded in September.

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According to Cordros Capital Research, there are indications that food prices will temper in October due to the impact of the harvest season.

However, they noted that the downside risks that could limit food supplies remain intact.

“We attribute the higher prices in September to the troika impact of lingering currency pressures, PMS subsidy removal, and higher gas and diesel prices.

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“At the same time, we see no respite yet for the non-food inflation. The non-food basket (+56bps to 22.1 per cent y/y) remains under pressure. We see no respite yet for the non-food inflation. Overall, we see 1.9 per cent m/m headline inflation in October,” it added.

Meanwhile, the naira depreciated by 5.4 per cent to N808.27/dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM), with total turnover at the market (as of 19 October 2023) decreasing by 50.6 per cent Week to Date (WTD) to $348.91 million, as trades were consummated within the N700 – N1,000/$ band.

In the forwards market, the naira rates recorded depreciation across the 1-month (-2.1 per cent to N805.92/dollar), 3-month (-2 per cent to N824.2/dollar), 6-month (-1.7 per cent to N852.67/dollar) and 1-year (-2.2 per cent to N919.65/dollar) contracts.

Cordros Capital said that given the CBN’s unbanning of importers of all the 43 items previously restricted from the NAFEM in 2015, FX supply is still minimal at the official market faster than anticipated.

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The expert noted that importers have returned to the parallel market to fulfill their FX obligations. In addition, the incentives for holding the naira continue to be limited by the day, coupled with the panic-buying arising from the expectations of further currency pressures amidst limited FX supplies.

“Consequently, barring any significant FX inflows or convincing action by the policymakers to turn the tide, we expect the exchange rate pressures to linger in the short term,” it added.

FMDQ Foreign Exchange (FX) Spot and Derivatives turnover for the week ended October 20, 2023, was $430.08 million, a decrease of 37.1 per cent ($253.89 million) from $683.97 million reported for the week ended October 13, 2023. According to the exchange, the week-on-week (w/w) decrease in the total turnover was driven by the 39.06 per cent ($266.72 million) decrease in FX Sport turnover, despite 1,221.9 per cent ($12.83 million) increase in FX Derivatives turnover.

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It stated that the w/w increase in FX Derivatives turnover was solely driven by the 1,221.9 per cent ($12.83 million) increase in FX forwards turnover, while there was no activity in both Exchange-Traded FX Futures and Cleared Naira-Settled Non-Deliverable Forwards (NDFs) markets.

In the FX spot market, the total value of transactions for the week ended October 20, 2023, was $416.2 million, representing a decrease of 39.06 per cent ($266.72 million) from the value of transactions executed in the week ended October 13, 2023 ($682.92 million).

There were no trades executed in the Exchange-Traded FX Futures and Cleared Naira-Settled Non-Deliverable Forwards markets for the week ended October 20, 2023

For the week ended October 20, 2023, the average Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate was $/₦784.32, compared to $/₦772.92 recorded in the week ended October 13, 2023, representing a depreciation of the Naira against the dollar by 1.45 per cent ($/₦11.4).

On the equities sector of the Nigerian Exchange Limited (NGX), heavy transactions in the shares of United Bank for Africa Plc, Fidelity Bank Plc and Access Holdings Plc lifted the volume of shares traded as a total turnover of 1.5 billion shares worth N24.3 billion was recorded in 29,298 deals by investors on the floor of the exchange, in contrast to a total of 1.4 billion units, valued at N24 billion that changed hands in 29,683 deals on October 13, 2023.

Sectoral performance showed a mixed picture with losses in the insurance (-1 per cent), consumer goods (-0.5 per cent), and Industrial Goods (-0.1 per cent) indices and a gain in the banking (+3.5 per cent) index while the oil and gas index closed flat.

The financial services industry (measured by volume) led the activity chart with 1 billion shares valued at N12.7 billion traded in 13,667 deals; thus contributing 69.9 to the total equity turnover. The ICT Industry followed with 94.9 million units worth N1.4 billion in 1,982 deals.

The third place was the conglomerate’s industry, with a turnover of 80.6 million shares worth N526.4 million in 1,459 deals.

Specifically, trading in the top three equities namely United Bank for Africa, Fidelity Bank and Access Holdings (measured by volume) accounted for 447.1 million shares worth N6.5 billion in 4,913 deals, contributing 29.9 per cent to the total equity turnover volume.

On the price movement chart, the market closed the week on a downward note, following selloffs in Stanbic (-13.1 per cent) and Geregu (-7.2 per cent), causing the All-Share Index and market capitalisation to depreciate by 0.42 per cent to close the week at 66,915.41 and N36.764 trillion respectively.

Similarly, all other indices finished lower except NGX CG, NGX Premium, NGX Banking, NGX AFR Bank Value, NGX AFR Div. Yield, NGX MERI Value and NGX Sovereign Bond which appreciated by 0.47 per cent, 0.54.per cent, 3.52 per cent, 1.82 per cent, 3.24 per cent, 2.99 per cent and 3.08 per cent respectively while the NGX ASeM index closed flat.

Consequently, the month-to-date (MTD) and year-to-date (YTD) returns moderated to +0.8 per cent and +30.6 per cent, respectively.

Reacting to market performance last week, the Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, said with the recent moves by the Central Bank of Nigeria (CBN), which gives the 43 previously banned items access to FX at the official window, there is need for investors to consider investment in real estate backed stocks like Julius Berger, UPDC Reits and other companies that the demand is inelastic in nature or price.

According to him, the sector has been among the worst-performing asset classes over the past five years.

“Post Covid-19, stock market, commodities and others had done well, while real estate-backed stocks and REIT have under-performed.

However, he pointed out that the sector is a major spotlight with policies being churned out to boost performance in the sector, especially the lifting of the ban on the items.

“The ongoing geopolitical tension will continue to drive global and domestic market volatility, so investors and traders anywhere in the world should factor this uncertainty into their trading and investment plans.”

We expect the direction of market performance to be shaped by the ongoing Q3 earnings season as investors cherry-pick sound stocks.

“Overall, we reiterate the need for taking positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings,” he said.

Vetiva Dealing and Brokerage said: “We saw a slight pull-back in the banking sector, however, demand remains strong in UBA, with an intra-day high of ₦19.15. Going into the new week, we expect more mixed sessions, as investors tilt more towards fundamentally sound stocks, as we expect Q3 numbers to filter into the market.”

Further breakdown of last week’s transactions showed that a total of 7,100 units of Exchange Traded Products (ETPs), valued at N1.124 million were traded in 66 deals compared with a total of 13,290 units valued at N3.526 million transacted last week in 108 deals during the preceding week.

Also, 187,866 units of bonds, valued at N196.534 million were traded in 28 deals compared with a total of 52,703 units valued at N54.7 million transacted last week in 32 deals. 28 equities appreciated during the week lower than 38 equities in the previous week.

Guardian