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Breakfast Report - 11 April 2022

• President Buhari announced this week that the budget deficit for 2022 Appropriation Act would be increased from N6.39 trillion to N7.35 trillion as a result of global and economic developments. The President stated that the N965.42 billion difference would be financed from domestic sources. While the debt-to-GDP ratio remains sustainable, we can anticipate an increase in debt servicing, which is already at high levels. As of November 2021, debt servicing stood at 76% of revenue, with the IMF projecting it to rise to 92% in 2022. While domestic debt protects the country from foreign exchange risks, domestic loans to the government could increase money supply and worsen already high inflation levels. Finally, the sustained dependence on borrowing for recurrent items could heighten debt sustainability risks in future.

 

• Equity: Just as expected, we saw investors take advantage of the price dip, hence the green close seen across broad. However, market still trended mostly bearish with a 11.80% reduction in weekly trade volumes. We expect to see a slight improvement in these numbers amid further mixed sessions spurred by bargain hunting activities.

 

• Fixed Income: Next week, the NTB market should trade on a muted note ahead of the NTB auction slated for Wednesday. Meanwhile, we expect the bonds market to trade on a bearish note, as market participants react to the Federal Government’s plan to borrow an additional ₦965 billion.