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Breakfast Report - 26 September 2022

According to the Debt Management Office (DMO), Nigeria's debt stock increased by 2.98% q/q to $103.3 billion (₦42.8 trillion) in Q2’22. This was primarily driven by a 6.7% q/q uptick in FGN bond issuances which spurred a $3.2 billion (₦1.24 trillion) accumulation in overall domestic debt. Due to this increase in the official debt stock, Nigeria's official debt-to-GDP ratio now sits at 24.3% from 23.6% in Q1’22. Adjusting the official debt figure with ways and means advances, this brings the overall debt-to-GDP to 36.6%, much closer to the DMO's threshold of 40%. Given the high borrowing costs in the international debt market as well as stringent terms guiding sourcing from multilateral agencies, Nigeria’s activities have remained muted in the space. Hence external debt rose marginally by $96 million in Q2’22.  This brings the domestic-external debt mix to 61:39 from 60:40 in Q1, as the government leans on domestic debt amid tight global financing conditions.

Equity: Despite Friday’s improved activity, last week’s average volume was 112m units, a 20% decline from prior week’s 141.2m units, and we are likely to see another tepid start to this week’s trading as investors await the MPC’s response to the inflationary pressure.

Fixed Income: We expect the market to kick of the week on a quiet note, as investor focus shifts to the MPC decision slated for this week, meanwhile, liquidity levels will dictate activity across the NTB and OMO segments of the market.