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Breakfast Report - 13 July 2022

According to CBN data, Nigeria's external reserves fell 3.4% in H1 '22 to $39.16 billion. While the first half of the year saw inflows from Eurobond issuances and domestic borrowings, swelling demand continues to outstrip supply. FX demand has remained elevated due to rising import bills as food and energy prices surge, as well as the increased FX demand for election-related activities. Meanwhile, despite rising oil prices, supply remains constrained due to persistent oil theft and damage to oil infrastructure, thereby limiting output and Nigeria's FX-generating capacity. If FX demand continues to outpace supply, the naira could fall even further, particularly in the parallel market.

Equity: Market activity started off quiet last week, as we saw minimal trades in the first trading session of the month. We anticipate further mixed trading sessions this week as investors continue to trade cautiously amid some bargain hunting activities.

Fixed Income: This week, as we see no catalyst to sway market direction, we expect bearish sentiment to persist in the bonds market. Meanwhile, the NTB segment is likely to trade quietly as attention shifts to the upcoming PMA, where the CBN plans to offer ₦143.3 billion across the three tenors.