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Breakfast Report - 19 April 2022

The Senate approved President Buhari's request to increase fuel subsidy to ₦4 trillion. The increase was driven by the spike in the landing cost of PMS, exacerbated by geopolitical tensions. This approved request substantiates our views that social dissent and election concerns could prevent the current administration from removing fuel subsidies in 2022. As such, with the retention of fuel subsidies, we will continue to trade off resources that could be allocated to productive capital projects. This could worsen Nigeria’s fiscal sustainability ratios, even as the country struggles to mobilize revenue and contain costs.

Equity: Despite Thursday’s profit taking in the banking sector, the NGXBNK closed as the week’s best performing sector with a 5.59% gain. We expect to see further profit taking in that space going into the new week amid last week’s record gain. We expect Q1 results of some companies to hit the market this week, and we anticipate this to drive market sentiments as well.

Fixed Income: To open the week, we expect the bonds market to trade in a similar pattern, due to a lack of catalysts to sway activity. Meanwhile, we anticipate bearish trading in the NTB segment, as investors react to the rate hike on the one-year paper.