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Breakfast Report - 22 March 2021

The National Bureau of Statistics confirmed that Nigeria recorded its eighteenth consecutive rise in headline inflation to a new 4 year high of 17.33% y/y in February. The outcome was unsurprising given the weaker state of the Naira and higher PMS price on a y/y basis. These were contributory to the simultaneous rise in all segments of the Consumer Price Index for the ninth consecutive month. Food inflation, touched a new all-time high of 21.79% y/y, propelled by lingering side-effects of security challenges in food-producing areas, high logistics costs and adverse weather conditions, as the impact of border reopening was largely muted. On the other hand, core inflation rose to 12.38% y/y, as currency depreciation and deregulation in the downstream sector continually stoke commodity prices. Going forward, we expect higher inflationary outcomes for the ongoing month, due to the spillover effects of the short-lived food blockade and fuel price hike, alongside pre-existing inflationary triggers.

Equity: The domestic bourse was characterized by mixed sentiment during the week, as sell pressure persisted on the back of weak economic indicators while cheap valuations and attractive dividend yields in the Banking space spurred some BUY interest towards the end of the week. With the expectation of further uptick in yields on short-dated instruments in the Fixed Income market, we anticipate further pressure in the equity market in the near term.

Stock Watch: Following its recently released earnings results, where its Revenue and PAT both improved by c.5% and c.2% respectively, as well as increasing its final dividend payout to ₦2.70 GUARANTY maintained Thursday's bullish performance.

Fixed Income: Given that both the MPC meetings and monthly bond auction are scheduled for next week, we expect the market to open the week on a quiet note, with most players waiting on the side-lines in anticipation of these two events. Meanwhile, we expect the OMO market to remain driven by oil prices and developments in the global macro space, while we foresee a quiet opening session, albeit with moderate selloffs in the NTB space.