Global Economy

USA: The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, remained steady in April, with core PCE, excluding food and energy, rising 0.2% as expected. However, annual core inflation ticked slightly higher to 2.8%. Headline PCE inflation also met forecasts at 2.7% YoY and 0.3% MoM. Rising energy prices were a key driver of the uptick in inflation (up 1.2%). Interestingly, despite a 0.3% rise in personal income, consumer spending grew at a slower pace of 0.2%, falling short of expectations and suggesting a potential slowdown.

 

 

 

Sub-Saharan African Economies

Europe: In a surprising turn for the Eurozone’s fight against inflation, preliminary data for May 2024 revealed an acceleration in price increases. Annual inflation jumped to 2.6%, exceeding expectations of 2.5% and marking the first rise in five months after two consecutive months at 2.4%.  Energy prices rebounded to 0.3% compared to a decline of 0.6% in April, while the service sector witnessed the sharpest rise, with inflation accelerating to 4.1% from 3.7%.

 

 

 

Ghana: In a bid to combat high inflation and a weakening currency, the Bank of Ghana held its benchmark interest rate at 29% for the third straight meeting on May 27th, 2024. This decision comes despite a dip in Ghana’s annual consumer inflation to 25% in April, from 25.8% (March). Despite this, inflation remains significantly above the central bank’s target range of 6%-10%, largely attributable to cedi’s continued depreciation. The Ghanaian currency has shed roughly 10% of its value against the US dollar since the last policy meeting in March.

South Africa: The South African Reserve Bank (SARB) opted to hold interest rates steady at 8.25% last week marking the sixth consecutive meeting where rates have remained at 15-year highs. Despite inflation falling for the second month in a row to 5.2% in April from 5.3% in March, it still sits above the central bank’s target of 4.5%.

Kenya: Kenya’s inflation rate edged up in May 2024, reaching 5.1% and marking a 1bp increase from the previous month, which saw the lowest inflation reading (5%) since October 2020. The rise in inflation is attributed primarily to food and non-alcoholic beverages, a category that makes up a significant portion (one-third) of Kenya’s inflation basket. Prices in this category rose to 6.2% in May, compared to 5.6% in April.

Domestic Economy

Major updates during the week:

  • Letters of credit issued in Q1’24 declined 62.77% YoY to US$204.47 million, reflecting a slowdown in import volumes likely due to persisting currency volatility.
  • Nigeria’s Broad Money Supply (M3) edged higher by 5.01% to NGN96.97trn and currency in circulation by 1.39% to 3.92trn.
  • NNPCL, ExxonMobil finally sign agreement to divest $1.28bn assets to Seplat Energy

 

 

Nigerian equity market: Stock Market Rebounds

The Nigerian stock market rebounded, closing the week up 1.73% at 99,300.38 points. This positive week erased prior losses and pushed May’s performance to a 1.09% gain. SEPLAT, DANGSUGAR, and NASCON led the surge, with financials and oil & gas sectors dominating activity. Market cap rose to N56.17 trillion, and the year-to-date return climbed to 32.80%.

 

 

Nigerian Fixed Income Market: A Quiet Bond Week

The Secondary treasury bills market closed the week bullish as the average yield declined by 16bps to settle at 21.72%. We observed buying interest across the curve particularly on the short-end 11-JULY as the average yield declined by 510bps.

In the bond market, it was a relatively quiet week as the average yield slightly advanced by 3bps to 18.70%. We observed significant selling interest on the FEB-2034 (yield up by 27bps). In summary, the Nigerian Fixed Income Market closed bullish with the average yield declining by 7bps to 20.20%, while the Nigerian Eurobond market took a bullish turn with the average yield falling by 11bps to settle at 9.86%.