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Breakfast Report - 23 October 2023

According to the Budget Office, the Federal Government of Nigeria earned ₦5.9 trillion from oil and non-oil sources and spent ₦13.9 trillion in 2022. Of this bill, recurrent expense was responsible for 79%, while the share of capital expenditure dropped to 14%. The rise in recurrent expenditure was driven primarily by interest on Ways & Means advances, and personnel costs. Ultimately, Nigeria’s fiscal deficit rose to 3.8% of GDP, 0.2% above the prior year (2021: 3.6% of GDP). In addition, debt service-to-revenue climbed further to 95% (2021: 90%). Overall, the fiscal record shows Nigeria earned less than it expected, spent less than it devoted to capital projects, and spent exactly its recurrent budget for 2022. Clear concerns from the records are the sustained trend of revenue under-performance, capital budget underperformance, rising debt vulnerability, and non-remittance into sinking funds meant for future debt repayments (considering the post-2024 debt maturity profile). Over the near to medium term, we believe Nigeria’s deficit may remain above the stipulated limit until key austerity measures are implemented to stem the tide.

Equity: Going into the new week, we expect more mixed sessions, as investors tilt more towards fundamentally sound stocks, as we expect Q3 numbers to filter into the market.

Fixed Income: We expect investors’ sentiments to remain cautious in the new week as they anticipate a new MPC date.