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Breakfast Report - 19 April 2021

The National Bureau of Statistics confirmed the nineteenth consecutive rise in headline inflation to 18.17% y/y in March. This is on the back of the continued pass-through impact of currency weakness and higher energy prices to commodity prices. For the tenth consecutive month, all segments that made up the index recorded higher inflation outcomes. Being the major driver, food inflation rose to a new all-time high of 22.95% y/y, reflecting the impact of pre-existing structural impediments and the side effects of the short-lived food blockade and fuel price hike. Core inflation, on the other hand, soared to 12.67%; exacerbated by currency depreciation and higher energy prices. In the ongoing month, we expect the uptrend in inflation to persist, with demand-pull inflation from the Naira 4 Dollar policy, as well as Easter and Ramadan festivities acting as new pressure points.

Equity: We expect this week’s activity to follow the same pattern observed in the last few sessions, with mild sell offs followed by rallies. We anticipate similar levels of activity in the market, with the banking sector likely to dominate trading once more. Despite this, we do not see any improvement in investor sentiment, as most remain on the sidelines in anticipation of first quarter earnings releases. However, we do recognize the possibility of external, unforeseen shocks driving increased activity.

Stock Watch: GUINNESS remained on the bid cart for the third consecutive day, rising 9.26% in Friday’s session to settle at ₦31.85. The Consumer Goods counter has gained 67.63% YTD and remains the best performing stock in the sector, which has lost 3.61% YTD.

Fixed Income: We expect the market to open the week on a mixed note, as we foresee investor focus shifting to this month’s bond auction. Meanwhile, we forecast similar sell-side actions in the OMO market, as investors are likely to remain swayed by developments in the global macro space.