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Breakfast Report - 01 August 2022

Nigeria's FX crunch persists as a demand-supply mismatch sends the Naira to new all-time lows in both the official and parallel market. Amid the decline, the official-parallel gap has expanded to 65% of the official exchange rate, significantly above the 40% gap that warranted the apex bank’s intervention in 2017. While the Naira reels under pressure in the unofficial market, we attribute the recent volatility to heightened speculation. From a fundamental standpoint, we expect slight depreciation in the official window and a reversion to mean when speculation subsides in the parallel market.

Equity:We saw investors take advantage of last week’s bearish run as most stocks with beaten down prices recovered due to renewed buy interest. We anticipate a mixed start to this week, as investors re-assess their positions given Friday’s positive turnaround.

Fixed Income: This week, we expect the market to trade in a tepid manner as FGN bonds investors await the country’s Q2’22 GDP figures. Meanwhile, we expect to see a last week's sentiment in the NTB market owing to the limited changes to the catalysts of activity in the space.