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Breakfast Report - 06 November 2023

Following the removal of fuel subsidies on the 29th of May 2023, Nigeria’s oil imports (petroleum products) nosedived by 89% to $151 million in June 2023, its lowest in 30 months. As a result of this decline, overall imports moderated by 62% m/m. This contributed to a substantial rise in trade surplus and consequently, boosted Nigeria’s current account position from a deficit position in Q1’23 (-$0.4 billion) to a surplus position in Q2’23 (+$2.9 billion). Thus, Nigeria’s current account balance-to-GDP rose to 2.78%, its highest outturn since Q3’18. The Nigerian Naira has remained under pressure despite recording huge current account gains from the removal of subsidy. We attribute the descent in the Naira to excess supply of cash, especially as the restructuring of Ways and Means Advances keeps money supply elevated and FX pressure entrenched. Factoring in the expected inflow of c.$10 billion into our reserve estimates, we expect reserves to close the year at $37 - $42 billion. We also expect inward remittances and travel to support inflows into the parallel market. Consequently, we expect both the official and parallel market rates to remain north of ₦800/$ in Q4’23.

Equity: For this week, we expect a slightly bearish market, as investors take profit on some of last week’s gainers.

Fixed Income: For this week, we expect mixed trading as some investors wait for clear policy direction from the previously postponed MPC meeting.