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Breakfast Report: The Week Ahead

• This week saw the introduction of the Pan-African Payment and Settlement System (PAPSS). The system, developed by the AfTCTA in partnership with Afreximbank, was established to promote inter-African trade by accepting payments in local currencies while decreasing demand for USD, GBP, and EUR. While we feel that the PAPSS will be beneficial in attaining the set goals, CBN governor Emefiele has also claimed that the payment infrastructure could enhance inter-African trade from 15% to 35% in the next five years. However, because third-party currencies were previously used as the formal method of exchange, exchange rate data must be easily accessible, clear, and transparent so that countries know how much their currency is worth in another African currency. Other bottlenecks that limit the exchange of goods and services, such as poor infrastructure and port issues must also be addressed.
• Equity: Market traded mixed this week, compared to the bullish sentiment seen last week as the All-Share index only returned 137bps against the 266bps in prior week. We saw investors taking profit on previous gainers and we still expect market to trade mixed at the beginning of the new week amid improved activity levels.
• Fixed Income: Next week, we anticipate trading in both the NTB and bonds segments to be muted, as investors shift their attention to the first FGN bond auction for the year.