Global Economy

USA: In August, US inflation continued its downward trend, rising by 2.5% year-over-year. This marks the slowest rate since February 2021, down from 2.9% in July. The moderation was largely attributed to falling prices for petrol, used cars, trucks, and other items, even as housing costs unexpectedly increased. This data, released by the Labor Department, is significant in the context of the ongoing presidential campaign, where rising living costs are a prominent issue. The easing inflation has bolstered expectations that the Federal Reserve will implement a 25 basis point rate cut at its upcoming meeting. However, the likelihood of a more substantial 50 basis point cut has diminished as a result.

 

 

Sub-Saharan African Economies

 

Japan: Japan’s economy grew at an annualized rate of 2.9% in the second quarter of 2024, according to revised data from the Cabinet Office. This marks a slight downward adjustment from the preliminary estimate of 3.1% and falls short of economists’ median forecast of 3.2%. The revision reflects weaker-than-expected corporate and household spending, suggesting a more challenging environment for consumption in the latter half of the year. In response, the Bank of Japan remains focused on transitioning away from its long-standing monetary stimulus program and considering further interest rate hikes. The updated figures show a 0.7% quarter-on-quarter expansion in price-adjusted terms, slightly below the previous estimate of 0.8%.

Egypt: Egypt’s urban inflation spiked to 26.2% in August 2024, surpassing market expectations and July’s 25.7%, driven by sharp increases in food, fuel, and energy costs. Food inflation hit 29%, while energy hikes included fuel prices rising 10-15% and electricity tariffs up by as much as 31%. On a monthly basis, inflation accelerated to 2.1% from July’s 0.4%, reflecting deepening price pressures. With inflation well above the central bank’s 5-9% target, the persistent surge raises concerns over economic stability and potential fiscal tightening measures.

Ghana: Ghana’s annual inflation eased for the fifth consecutive month in August 2024, dropping to 20.4%—the lowest in nearly two and a half years—from 20.9% in July. The decline was driven by a stable cedi and a fall in food inflation, which dropped to 19.1%, led by deflation in items like milk, oils, and fruits. However, non-food inflation rose to 21.5%. On a monthly basis, consumer prices decreased by 0.7%, marking the first drop in a year, following a 2.4% rise in July. Despite the slowdown, inflation remains well above the central bank’s 6-10% target range.

Rwanda: Rwanda’s inflation rate rose to 1.7% in August 2024, the highest in six months, driven by increased costs for housing, utilities, and clothing. Meanwhile, food prices continued to decline. Monthly inflation surged 1.4%, marking the steepest rise in six months.

Domestic Economy

Major updates during the week:

  • Nigeria’s trade surplus surged to NGN6.95 trillion in Q2’24, driven by increased exports and lower imports amid naira depreciation.
  • The CBN mandated that all PoS transactions go through approved Payment Terminal Service Aggregators (PTSAs) to enhance transaction monitoring and decentralize PoS routing. A 30-day deadline was imposed for compliance with these new guidelines.
  • Nigeria’s crude oil production increased to 1.35 million barrels per day (mbpd) in August, according to the NUPRC.

 

 

Nigerian equity market: Large-cap stocks lead NGX recovery amid mixed trading week

After a mixed trading week, the Nigerian Stock Exchange closed the week on a positive note, with the ASI gaining 1.06% week-over-week (WoW) to settle at 97,456.62 points. This pushed the year-to-date (YTD) performance to 30.34%. Buying interest in large-cap stocks like ACCESSCORP and MTNN drove this upward trend. Across sectors, performance was largely bullish, with Consumer Goods (1.47%), Insurance (1.59%), Industrial Goods (0.17%) Banking (5.12%), and Oil & Gas (2.00%) sectors closing in the green zone.

 

Nigerian fixed-income market: Negative system liquidity triggers sell-offs

This week, the Debt Management Office (DMO) maintained its cautious stance in the treasury bills market, issuing only the amount on offer despite receiving bids that were 3.5 times oversubscribed. The average stop rate declined further by 40 bps to 17.41%, driven by strong participation at the auction.

In the secondary market, bearish sentiment prevailed, particularly in mid-tenor instruments, leading to a 94 bps week-on-week (WoW) increase in the average yield to 20.66%. A similar trend was observed in the bond market, where the average yield rose by 15bps as market participants offloaded short-tenor instruments. The Nigerian Eurobond market experienced comparable selling pressure, pushing the average yield upward slightly by 4 bps WoW to 9.95%.

Looking ahead to the upcoming trading week, we expect a strong rally in the local market, fueled by substantial inflows, including N400 billion in debt servicing payments and the postponed supply at the auction.