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Breakfast Report - 11 December 2023

 

Over the weekend, Moody’s upgraded Nigeria’s sovereign credit rating outlook from stable to positive, while retaining Nigeria’s local currency rating at B2 and its foreign currency rating at Caa1. Since Moody’s downgrade in January, Nigeria has implemented key policies to address issues raised earlier. The favourable change in outlook was driven by the possible reversal of the deterioration in Nigeria's fiscal and external position as a result of the authorities' reform efforts. According to the agency, the unification of foreign exchange windows and devaluation of the naira represent the first steps to addressing the country's foreign exchange shortages and support its external rebalancing. This - in addition to the removal of fuel subsidy, a long-standing reform, - has raised the prospects of a fiscal and external improvement in Nigeria’s credit profile. The agency however raised concerns over the extent of fiscal relief from subsidy removal, the uncertainties in oil production, and institutional constraints to fight inflation. The agency noted that it could only upgrade Nigeria’s credit rating if high inflation and government borrowings costs are contained. Should inflation continue to spiral out of control or funding access remains tighter, the agency could revise its outlook downwards from positive to stable. 

• Equity market: We saw a split in sectoral performance last week, with only the banking and consumer goods sectors closing in the green. We expect similar mixed sessions this week.
• Fixed Income: Today, we expect the liquidity levels to determine investors’ sentiments in the NTB market. Meanwhile, we expect a quiet session in the bond market as investors await today’s bond auctions.