Global Economy

China’s economy grew by 0.7% in Q2 ( vs 1.5% in Q1), marking the eighth consecutive quarter of growth but the slowest since Q2’23. This slowdown reflects domestic challenges such as extreme weather, weak consumer spending, high local government debt, and ongoing property market issues, compounded by rising tensions with the US and its allies. On an annual basis, GDP grew by 4.7%, the weakest in five quarters, indicating an uneven recovery. Industrial output rose by 5.3% in June, surpassing expectations, while retail sales increased by a weak 2%. Despite government efforts, the real estate sector continues to struggle, with home prices falling further in June and ongoing declines in property sales and investment in the first half of the year.

 

Sub-Saharan African Economies

 

 

Europe: UK’s annual inflation rate kept steady at 2% in June (same as May), and maintained levels last seen in 2021, despite forecasts predicting a slight dip to 1.9%. The primary driver for the inflation was the cost of restaurants and hotels, which rose by 6.2% vs 5.8% in the previous month. The BoE aims to maintain inflation at 2%. Earlier in the year, inflation was significantly higher, prompting the bank to keep rates at high levels to curb price increases. In its most recent meeting, the Bank chose to keep interest rates at 5.25% despite inflation aligning with its 2% target. However, we expect the Bank to implement its first rate cut in the next meeting. This forecast is based on the inflation rate being within the central bank’s target and the fact that the UK recently emerged from a recession. The Bank is likely to avoid measures that could hinder further economic growth.

Nigeria: Nigeria’s headline inflation soared to 34.19% in June 2024, the highest since March 1996, driven by the removal of fuel subsidies and a weakening currency. Food inflation hit a record 40.87%, with notable increases in bread, cereal, potatoes, and fish. Housing and utilities inflation rose to 30.3%, while beverages and tobacco increased to 24.1%. Core inflation, excluding farm produce and energy, reached a new high of 27.40%. Monthly consumer prices grew by 2.3% in June, following a 2.14% rise in May.

South Africa: The South African Reserve Bank kept the repo rate unchanged at a 15-year high of 8.25% for a seventh consecutive meeting in the July 2024 meeting, in line with market expectations. However, two policymakers preferred a reduction of 25 basis points. The central bank noted that restrictive policy remains appropriate to stabilize inflation at 4.5% and that an unchanged stance remained appropriate, given the inflation risks.

Ghana: Producer Prices in Ghana increased 25.90 percent in June of 2024 over the same month in the previous year. Producer Prices Change in Ghana averaged 16.79 percent from 2009 until 2024, reaching an all-time high of 78.10 percent in November of 2022 and a record low of 2.00 percent in July of 2017.

 

Domestic Economy

Major updates during the week:

  • Supreme Court grants financial autonomy to Local Governments.
  • Nigeria’s FX reserves hit a 14-month high of  $35.18 billion and this is the highest figure reported under the Tinubu administration.
  • The Nigerian Exchange suspended trading in 8 companies’ shares (Unity Bank, etc.) for failing to file 2023 financial statements. The suspension, effective July 8th, aims to enforce timely financial reporting.

 

Nigerian Equity Market: Mixed Start to Second Half of the Year

The Nigerian Stock Exchange (NGX) dipped slightly this week, closing at 100,022.03 points, a 0.04% decline from the previous week. This comes despite buying interest in blue-chip stocks like Zenith Bank (+5.63%) and GTBank (+6.29%). Losses in Dangote Sugar (-5.81%) and JBerger (-9.59%) offset these gains. Overall, market capitalization fell by N20.75 billion to N56.58 trillion. The Banking sector led the gainers (+3.87%), while Consumer Goods (-0.69%) led the decliners.

 

Nigerian Fixed-Income market: The Bears Territory

As market participants digest the recent inflation data and position ahead of the next monetary policy committee decision, the Nigerian secondary fixed-income market closed on a negative note. The average yield on treasury bill instruments surged significantly by 156 basis points due to selling interest in the short and mid-end. Specifically, there was notable selling interest on the 6th-Mar and 22nd May. In the bond market, a similar sentiment prevailed, with the average yield rising by 15 basis points week-on-week to 19.41%, driven by significant selling interest in the Feb-2034 bond, which was up 127 basis points. The Eurobond market also experienced a bearish week, with average yields increasing by 31 basis points due to significant selling interest across the Eurobond instruments week-on-week.

We expect relatively quiet trading in the coming week as market participants assess the stances of the CBN and DMO regarding the next MPC decision, as well as upcoming treasury bills and bond auctions.