Global Economy

USA: The U.S. economy expanded at a 3% annualized pace in the second quarter, surpassing Wall Street’s expectations. The Bureau of Economic Analysis’s third estimate for second quarter gross domestic product (GDP) remained consistent with the previous estimate, confirming the 3% annualized growth. Economists had anticipated a slightly lower growth rate of 2.9%. This latest figure highlights a significant rebound compared to the 1.4% annualized growth recorded in the first quarter, indicating a stronger economic performance in the second quarter.

 

 

Sub-Saharan African Economies

 

Japan: Japan’s stock markets experienced notable gains over the week, with the Nikkei 225 Index climbing 5.6% and the broader TOPIX Index increasing by 3.7%. The dovish commentary from the Bank of Japan (BoJ) contributed to a weaker yen, creating a favorable environment for the markets. Additionally, optimism surged following China’s stimulus announcements, which outlined various support measures aimed at addressing sluggish economic growth and a weak housing market. Given that a significant portion of Japanese exports is directed toward China, along with Japan’s sensitivity to Chinese economic indicators like the purchasing managers’ index, these stimulus measures have positively impacted many Japanese companies that are direct or indirect beneficiaries of the Chinese market.

Morocco: The National Bank of Morocco held its benchmark interest rate steady at 2.75% during its September 2024 meeting, following a 25 basis point cut in June. The decision reflects a moderation in inflation, driven by lower food prices and a slowdown in core inflation, which fell from 5.6% in 2023 to around 2%, where it is expected to remain for the next two years. Headline inflation is forecast to drop from 6.1% in 2023 to 1.3% in 2024, before rising to 2.5% in 2025. Economic growth is projected to slow to 2.8% in 2024 due to a 6.9% decline in agricultural output but is expected to recover to 4.4% by 2025, led by growth in non-agricultural sectors.

Ghana: The Bank of Ghana cut its benchmark interest rate by 200 basis points to 27% on September 27, 2024, marking the first reduction in eight months. The decision follows a continued decline in inflation, with annual consumer inflation falling to 20.4% in August, though still above the central bank’s target of 6%-10%. Inflation is expected to ease further, targeting 13%-17% by year-end and reaching the medium-term goal by late 2025. Governor Addison noted that improved macroeconomic conditions have created space for the rate cut.

Zimbabwe: Zimbabwe’s central bank raised its benchmark interest rate by 150 basis points to 35% on September 27, 2024, and devalued its gold-backed currency, ZiG, by 43% to combat inflation and address foreign currency demand. The ZiG, introduced to replace the Zimbabwean dollar, now accounts for 40% of transactions, while the rest are in US dollars, worsening the dollar shortage.

 

Domestic Economy

Major updates during the week:

  • The CBN raised the monetary policy rate by 50bps to 27.25%, marking the fifth consecutive hike this year. The cash reserve ratio for commercial and merchant banks was also increased to 50% and 16% respectively.
  • The Federal Executive Council approved the Economic Stabilization Bills, which aim to boost investment in the gas sector, strengthen the Naira, promote fiscal discipline, and create jobs.
  • Flour Mills of Nigeria’s majority shareholder seeks to acquire remaining shares, leading to a potential delisting from the NGX.

 

Nigerian equity market: NGX All-Share Index Gains 0.21% WoW Amid Sectoral Mixed Performance

This week, the NGX All-Share Index (ASI) rose by 0.21% WoW to 98,458.68pts, bringing the YTD gain to 31.68%. The bullish trend was driven by SEPLAT (+10.00% WoW), FLOURMILL (+22.89% WoW), and select banking stocks like FBNH (+2.36% WoW) and UBA (+8.65% WoW). Sectoral performance showed gains in Banking (+2.45% WoW), Oil and Gas (+3.28% WoW), and Insurance (+1.43% WoW), while Consumer Goods (-0.15% WoW) and Industrial (-0.04% WoW) sectors posted losses.

 

Nigerian fixed-income market: MPC rate hike spurred bearish sentiment

Earlier in the week, the DMO further expressed its aim to reduce debt costs by issuing ₦264.5 billion in bonds, despite receiving bids of ₦414.9 billion, at an average stop rate of 19.68% (down from 20.90%). However, following the CBN monetary policy committee’s 50 basis point rate hike and the issuance of OMO bills at a 32% yield, bearish sentiment spread across the market. At the treasury bill auction, the DMO issued ₦227.5 billion at an average rate of 18.17% (up from 17.41%). For proper context, the discount rate on the 364-day maturity increased to 20.00% (versus 18.59% at the previous auction). In the secondary market, yields rose by 113bps on average, with notable pressure on short-tenor instruments. Mild bearishness was also observed in the bond market. Conversely, Eurobonds saw slight buying interest, leading to a 3bps decline in yield.

Looking ahead, bearish sentiment is expected to continue due to tight system liquidity and the absence of fresh instrument supply.