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Breakfast Report - 09 January 2023

To start the year, President Buhari signed the 2023 Appropriation Bill into law. The budget was increased by ₦1.32 trillion from the initial proposal of ₦20.51 trillion to ₦21.83 trillion. The budget breakdown showed that recurrent expenditure was maintained at ₦8.27 trillion while capital expenditure was increased by (+10% to 5.9 trillion) and debt service (+4.6% to 6.6 trillion). Provisions for Ministries, Departments and Agencies was also increased by ₦58.55 billion. The signed budget is based on an oil price benchmark of $75 per barrel (previously: $70 per barrel), while other parameters such as crude oil production and exchange rate were retained at 1.69 million bpd and 435.57/$ respectively. Other key changes include a ₦765.79 billion increase in the projected revenue to ₦10.49 trillion, and an unfunded deficit of ₦553.46 billion which could imply increased borrowing. This could increase fiscal sustainability concerns despite plans to eliminate subsidies in the second half of 2023.

Equity: We expect another mixed trading session this week, as investors take profit on recent gainers.

Fixed Income: Following CRR debits last week, the bonds market should witness a moderation in current bullish sentiments over the course of week. Meanwhile, we expect the NTB market to trade on a muted note, as investors trade cautiously ahead of the NTB primary market auction slated for Wednesday.

Commodities: Market activities on the AFEX Commodities Exchange returned mixed results this week. The price of maize increased by 16.20%, Soybeans by 3.93% and Paddy rice by 0.80%. The price of Sorghum, Cocoa and Cashew declined by -2.74%, -4.21% and -9.93%, respectively, while other commodities remained unchanged. Year-to-date, Maize, Paddy rice and Soybean returned 16.20%, 3.93%, and 0.80%, respectively. While Sorghum, Cocoa and Cashew returned -2.74%, -4.21% and -9.93%, respectively.