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Breakfast Report The Week Ahead

• Ending the year on a strong note, President Buhari signed the 2022 Appropriation Bill into law. The key changes are a higher oil price benchmark of $62/barrel and a higher planned expenditure of ₦17.126 trillion. With lofty assumptions, we see the fiscal deficit worsening in the new year, considering the upcoming general elections, maintenance of fuel subsidies, and oil production uncertainties. Furthermore, viral outbreaks may disrupt oil prices and worsen our fiscal sustainability ratios. On the other hand, a better-than-expected pick up in global oil demand could send crude prices to new all-time highs, supporting the revenue profile of the government.

 

• Equity: The equity market witnessed a largely mixed performance despite the impressive and resilient earnings posted across various sectors. The bearish sentiment in the market last year could be attributed to higher interest rates in the fixed income space compared to 2020, increased participation in alternative asset classes and reduced foreign portfolio investments due to the foreign exchange challenges. We expect similar factors to filter into the first quarter of 2022, given the lack of suitable catalysts to boost activity.

 

• Fixed Income: We anticipate a more active market in all three segments this week, as investors try to hit the ground running in the new year