By Andy Nssien
The Nigerian equities market extended its decline amidst mixed earnings performances and continued risk-off sentiments. Thus, after recording losses on 4 trading days during the week,the benchmark index,The Nigerian Stock Exchange All-Share Index dipped by 0.4% w/w (week on week) to 26,348.73 points, the lowest since 5th May 2017 –, with the MTD (month to date) and YTD (year to date) losses increasing to -4.6% and -16.2%, respectively.
Performance across the sectors was broadly weak, with the Industrial Goods (-1.5%), Insurance (-1.7%), Consumer Goods (-0.6%), Banking (-0.4%) and Oil & Gas (-0.3%) indices all closing in the red.
In the money market, system liquidity was boosted by inflows from FAAC (Federal Accounts Allocation Committee) disbursement to governments (NGN379.22 billion), bond maturities (NGN233.90 billion), OMO maturities (NGN366.06 billion), and retail FX refunds (c.NGN340 billion). However, outflows from two OMO auctions (NGN591.03 billion), Treasury bonds auction debit (NGN139.81 billion) and retail FX auction kept a lid on liquidity, leading to a 579 bps w/w expansion in the overnight (OVN) rate to 6.9%.
Trading in the Treasury bills market was bearish amidst an increase in OMO activities by the CBN. Consequently, the average yield rose by 33 bps w/w to settle at 12.8%. Sell pressures were spread across the entire curve, with the 20DTM (+128bps), 146DTM (+111bps), and 251DTM (+95bps) recording the most significant expansions. The market was characterised by a flurry of CBN directives this week – (1) restricting OMO auction bids to fully funded participants, and (2) restricting local individuals and corporates (including non-bank financial institutions) from buying OMO bills in both the primary and secondary markets.
In the bonds market, trading in the Treasury bonds secondary market was bullish as market players looked to (1) reinvest proceeds from the OCT-2019 bond which matured on Wednesday, and (2) cover lost bids from the primary market auction (PMA) which was oversubscribed. Consequently, the average yield across instruments pared by 10 bps to settle at 14.0%. Buying interest was concentrated at opposite ends of the curve, with the JUL-2021 (-54 bps) and APR-2049 (-26 bps) instruments recording the largest yield declines. At the PMA, the Debt Management Office (DMO) allotted a total of NGN139.81 billion (plus an additional NGN3.00 billion in non-competitive allotments) in bonds to investors. Demand was strong (bid-to-cover: 1.85x), following the bond maturity, and was largely skewed towards the 10-year offering (bid-to-cover: 2.40x). As a result, stop rates declined by 19bps on average, compared to the previous auction, across the three offered tenors.
In the foreign exchange market, amidst weakened foreign inflows and continued naira assets sell-offs by offshore investors, Nigeria’s FX reserves declined by USD23.20 million WTD to USD40.72 billion (24 Oct 2019) – the lowest level since 2nd Feb 2018. The CBN sustained its weekly FX intervention, selling USD210.00 million across the different segments of the FX market – USD100.00 million to the Wholesale segment, USD55.00 million to the SMEs segment, and USD55.00 million to the Invisibles segment. Consequently, the naira appreciated by 0.03% w/w to NGN362.11/USD at the I&E (Import and export} window but closed flat at NGN360.00/USD at the parallel market. Elsewhere, total turnover at the I&E window declined by 31.0% WTD to USD513.96 million, with trades executed within the NGN360.00 – 363.00/USD band.
In the Forwards market, the naira weakened across all contracts – 1-month (-0.1% to NGN365.36/USD), 3-month (-0.1% to NGN371.86/USD), 6-month (-0.3% to NGN382.31/USD) and 1-year (-0.4% to NGN408.77/USD).