Global Economy

USA: The U.S. central bank initiated a highly anticipated series of interest rate cuts, implementing a notable 50 basis point reduction. Federal Reserve Chair Jerome Powell stated that this move demonstrates the Fed’s commitment to maintaining low unemployment as inflation continues to ease. “We made a good strong start, and I am very pleased that we did,” Powell remarked at a press conference, expressing increased confidence that the country has moved past its high inflation challenges. The benchmark policy rate is now set in the 4.75%-5.00% range. This decision marked a significant moment, as it resulted in the first dissent from a Fed governor since 2005.

 

Sub-Saharan African Economies

Japan: The Bank of Japan opted to maintain its current interest rates, with Governor Kazuo Ueda indicating that the central bank is taking a cautious approach to global economic uncertainties. His dovish remarks suggest that there is no immediate rush to increase borrowing costs. This stance contributed to a decline in the yen, raising doubts among market participants about the likelihood of interest rate hikes later this year, which many had anticipated. Ueda noted that Japan’s economy is progressing in line with forecasts, highlighting that rising wages are boosting consumption and helping to keep inflation on track to sustainably reach the bank’s 2% target.

Nigeria: Nigeria’s headline inflation rate slowed for the second consecutive month to 32.2% in August 2024, down from 33.4% in July, marking the lowest in six months. Food inflation eased to 37.5% from 39.5%, driven by higher corn yields and a six-month duty-free window for corn and wheat imports. Price increases also moderated for housing and utilities (28.1% vs 29.4%), restaurants and hotels (29.3% vs 29.9%), and health (22.5% vs 23.2%). However, core inflation, excluding food and energy, edged up slightly to 27.6% from 27.5%. On a monthly basis, prices rose 2.22% compared to 2.28% in July.

Ghana: Ghana’s economy grew by 6.9% year-on-year in Q2 2024, the highest in five years, following a 4.8% rise in Q1. Growth was led by the industrial sector (9.3%), driven by a 23.6% surge in gold output, while services grew 5.8%, and agriculture expanded by 5.4%, despite a 26.2% contraction in cocoa. Quarterly GDP increased by 1.6%, up from 1.2% in the previous quarter. Ghana is emerging from a debt restructuring and is in its second year of an IMF program with strict austerity measures.

South Africa: The South African Reserve Bank cut its key interest rate by 25 bps to 8% on September 19, 2024, after seven meetings at 8.25%, marking the first reduction since 2020. Inflation eased to 4.4% in August, below the bank’s target range for the first time in three years. Inflation forecasts were lowered for 2024 (4.6%), 2025 (4%), and 2026 (4.4%). Economic growth projections were kept at 1.1% for 2024, with slight increases for 2025 (1.6%) and 2026 (1.8%).

 

 

 

Domestic Economy

Major updates during the week:

  • Nigeria’s inflation rate eased for the second consecutive month in August 2024, according to the National Bureau of Statistics (NBS), declining to 32.15% from 33.40% in July.
  • The CBN has imposed a new limit of $5,000.00 per approved transaction on BDC cash sales.
  • The Nigerian National Petroleum Company (NNPCL) increased petrol prices by approximately 11% to NGN950.22. Additionally, NNPCL announced that petrol sales from the Dangote Refinery would begin on October 1, 2024, potentially reducing Nigeria’s reliance on imported fuel.

 

 

Nigerian equity market: NGX continues its trend into bullish territory

The Nigerian equities market extended its bullish streak this week, with the NGXASI gaining 0.81% to close at 98,247.99 points. This positive performance pushed the year-to-date (YTD) return to 31.39%. Driving this upward trend was strong buying interest in GEREGU (+15.00%) and certain banking stocks like FIDELITYBK (+24.20%) and FCMB (+5.26%). While the Consumer Goods and Industrial Goods sectors experienced slight declines, the Insurance, Banking, and Oil & Gas sectors recorded gains, contributing to the overall market positivity.

Nigerian fixed-income market: Market liquidity spurred mixed sentiment

Trading activity this week was somewhat mixed across markets. In the treasury bills market, sentiments were divided, resulting in a 46 basis point week-on-week increase in the average yield to 20.88%. While there was notable selling pressure on certain maturities, such as the 23-Jan-2025 (yields up 247bps) and 22-May-2025 (yields up 241bps), we also observed buying interest in other instruments, reflecting varied appetite. Similarly, the bond market experienced mixed sentiment, with yields declining by 19bps on average to 18.66%, driven by strong buying interest in some mid-tenor bonds.

In the Eurobond market, recent monetary easing in the US spurred buying interest, leading to a 36bps drop in average yields to 9.60%.

Looking ahead to next week, we anticipate relatively quiet trading as market participants prepare for the upcoming monetary policy decisions and scheduled auctions.