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Breakfast Report - 25 July 2022
- The Monetary Policy Committee (MPC) raised the benchmark rate by 100bps to 14%. The decision was based on sustained inflationary pressures. However, with fuel scarcity (a structural issue) being the dominant driver of inflation, monetary policy tools may be insufficient to keep inflation under control. Going forward, we see room for more rate hikes, as inflation could continue to trend upwards.
- Equity: Market sentiment was bearish all through last week, following Tuesday’s MPR hike with 4 consecutive negative closes. While this may bring about attractive entry points in some counters, we are likely to see tepid trading sessions this week as investors continue to trade cautiously. However, better than expected Q2 results this week may give the market the necessary positive boost.
- Fixed Income: This week, we anticipate increased activity in the bonds market, due to coupon inflows of ₦30 billion from the 10.00% FGN-JUL-2030 bond. Meanwhile, the NTB segment is expected to trade on a muted note due to weak demand, as investors continue to stay on the sidelines ahead of Wednesday's NTB auction, we expect the NTB and OMO segments to trade on a bearish note, given the constrained level of system liquidity.
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