Global Economy

USA: In July 2024, the U.S. PCE stayed the same at 2.5%, just below the expected 2.6%. Consumers continued to spend more money from a year ago in July, which suggests the economy is still doing well. The Commerce Department also reported that prices only rose slightly, helping to keep inflation in check. However, the unemployment rate increased to 4.3%, the highest it’s been in nearly three years, causing worries about a possible recession and leading some market players to consider a bigger interest rate cut when the Fed is expected to adjust its policies in September.

 

Sub-Saharan African Economies

 

Eurozone: Inflation in the Eurozone dropped to 2.2% in August 2024, the slowest rate since July 2021, according to Eurostat’s preliminary data, and close to the European Central Bank’s (ECB) 2% target. This decline, down from 2.6% in July, matched market expectations and marked progress after months of inflation staying above 2.5%. The slowdown was largely driven by a significant drop in energy costs, which fell by 3% compared to a 1.2% rise in July. Inflation also eased for non-energy industrial goods (0.4% vs. 0.7%). However, inflation rose slightly for services (4.2% vs. 4%) and food, alcohol, and tobacco (2.4% vs. 2.3%). This data reinforced expectations that the ECB might cut rates at its September meeting.

Nigeria: Nigeria’s economy grew by 3.19% year-on-year in Q2 2024, up from 2.98% in Q1, with a boost from a favourable base effect. The oil sector surged 10.15%, despite a slight dip in production quartere-on-quarter, while the non-oil sector maintained steady growth at 2.80%, led by services and telecommunications. The industrial and agricultural sectors also saw moderate gains. On a quarterly basis, GDP was nearly flat after a sharp decline in Q1.

Kenya: Kenya’s inflation rose to 4.4% in August 2024, up from 4.3% in July, driven by higher costs in key sectors. S&P Global Ratings downgraded Kenya’s credit rating to B- due to concerns over fiscal and debt challenges after the government reversed planned tax hikes. The government responded by revising its budget, cutting spending, and increasing local borrowing to address the fiscal deficit.

Rwanda: Rwanda’s producer prices fell 5.4% year-on-year in July 2024, marking the second consecutive month of decline and the steepest drop since records began in 2011. This was driven by a sharper decrease in manufacturing prices, despite smaller increases in mining and quarrying. However, key sectors like electricity, gas, water supply, and communication services remained unchanged. On a monthly basis, producer prices rose 0.8% in July, rebounding from a 4.4% decrease in June, marking the first increase in six months.

Domestic Economy

Major updates during the week:

  • Nigeria’s economy grew by 3.19% year-on-year in the second quarter of 2024, despite macroeconomic challenges and fiscal deficits.
  • Currency outside banks drops to N3.66 trillion in July, and this represents the biggest dip in 2024
  • The Nigerian government has approved a 50% electricity subsidy for all public hospitals and public tertiary institutions.
  • The NNPC has started exporting LNG to Japan and China using a Delivered Ex-Ship (DES) model, where the NNPC delivers the LNG to a specific port in these countries and covers the shipping and insurance costs.

Nigerian Equity Market: Nigerian Equities Market Rebounds, Gains 0.63% week-on-week.

The Nigerian equities market witnessed a positive week, with the NGXASI index rising by 0.63%. This uptick lifted the year-to-date performance to 29.16%. Gains in JBERGER, ETERNA, and OANDO played a key role in the market’s upward trajectory. All sectors closed in the green, but selloffs in TRANSPOWER, MTNNG, and UNICAP weighed on the market, the overall positive sentiment prevailed. Investors gained N348.34 billion, pushing the market capitalization to N55.47 trillion.

Nigerian Fixed-Income Market: The rally continues

At the close of trading activities this week, we observed significant buying interest in the treasury bills space as the average yield declined by 123bps week-on-week (WoW) to 21.21%. This was largely driven by buying interest on the short end of the curve as well as some mid tenor instruments like 27-Mar-2025 and 10-Apr-2025 whose yields declined by 383bps and 255bps WoW to 21.32% and 21.50%. This demand was sponsored by improved system liquidity. In the bosnd market, we witnessed similar sentiment as the average yield of the instruments fell by 67bps WoW to 18.96%. This buying interest was more seen on the short end of the curve where instrument like 23-Mar-2025 declined by 203bps WoW to 21.73%.

Following the release of the GDP data, buying interest was evidently seen in the Eurobond market with the yields declining by 41bps WoW on an average to 9.72%. At the next trading week, we expect to see mixed sentiment in the market.