Global Economy

USA: The U.S. unemployment rate increased to 4.3% in July from 4.1% the previous month, marking the highest level since October 2021 and surpassing market expectations of 4.1%. This increase from a 5-decade low of 3.4% in April 2023, suggests a likely interest rate cut by the Federal Reserve in September, with economists predicting a 50 basis point reduction. The labor market slowdown had been anticipated, reflected in sentiment surveys and a rise in unemployment benefits claims. The Fed’s rate hikes in 2022 and 2023 have reduced labor demand, with June’s hiring figures being the lowest in four years. The recent employment report, indicating the smallest annual wage increase in over three years, led institutions like Bank of America Securities to expect a rate cut as early as September, with Goldman Sachs predicting three rate cuts this year.

Sub-Saharan African Economies

 

U.K: The Bank of England lowered the bank rate by 25 basis points to 5% in its August meeting, aligning with market expectations. This marks the first reduction after a year at a 16-year high. The decision was “finely balanced,” with some members opting for unchanged rates amid a slowdown in UK inflation but rising service prices. The committee expects headline inflation to decline and inflation expectations to align with the target, noting that restrictive policy is likely to slow GDP growth and soften the labor market, justifying a less restrictive stance.

Kenya: Kenya’s annual inflation rate fell to 4.3% in July 2024, marking the softest rate since September 2020 and down from 4.6% in June, also below the central bank’s target midpoint of 5%. Prices for food and non-alcoholic beverages, which comprise a third of the inflation basket, remained steady at 5.6% from the previous month. Significant slowdowns in price increases were noted in transportation (4.0% vs 7.7%), clothing and footwear (3.6% vs 3.8%), and recreation, sport, and culture (4.5% vs 4.9%). Monthly, consumer prices decreased by 0.2% in July, following a 0.4% rise in the previous month.

Rwanda: Rwanda’s annual inflation rate eased slightly to 1.1% in June 2024, down from 1.3% in the previous month, with a further decline in prices for food and non-alcoholic beverages (-3.9% vs -3.5% in May). Additionally, a slowdown was observed in certain CPI items, including miscellaneous goods and services (3.7% vs 4.5% in May), restaurants and hotels (4% vs 4.4%), and transportation (22.9% vs 24.2%). On a monthly basis, consumer prices decreased by 0.6% in June, following a 1% decline in the previous month.

Ghana: On July 26th, 2024, the Bank of Ghana held its benchmark monetary policy rate steady at 29% for the third consecutive meeting, due to inflationary pressures stemming from currency strains. Governor Ernest Addison noted that recent developments have caused a slightly elevated inflation outlook for the year, with risks now tilted slightly to the upside. Although Ghana’s inflation eased to 22.8% in June from 23.1% in May, it remains significantly above the central bank’s target range of 6% to 10%.

Domestic Economy

Major updates during the week:

  • The Federal Government’s non-oil excess account savings surged 304.1%, rising from N1.36tn to N5.48tn.
  • Nigeria’s pension fund experienced a 1.27% increase in June, rising from N20.23 trillion to N20.48 trillion.
  • The African Development Bank has approved a $500 million loan to Nigeria to modernize its electricity infrastructure and promote cleaner energy sources.
  • Nigerian Senate doubles ways and means limit to 10% of previous year’s revenue for short-term funding, despite official denials of immediate use.

 

Nigerian equity market: Mixed Fortunes on the Nigerian Stock Exchange

Nigeria’s stock market experienced a setback this week. The NGXASI index dipped by 0.43%, closing at 97,745.73 points. This downturn pulled the year-to-date return down to 30.76%. While the Insurance and Oil & Gas sectors defied the trend, growing by 0.78% and 1.72% respectively, other sectors faced challenges. The Banking index fell by 2.17%, the Industrial index dipped by 0.03%, and the Consumer Goods index took a dive of 2.88%.

 

 

Nigerian fixed-income market: Selling pressures dominate the market

At the close of trading this week, we observed a bearish sentiment in the fixed-income market. The bond market saw an average yield increase of 32 basis points, reaching 19.77%, largely driven by selling interest across the market. Similarly, the treasury bill market closed slightly bearish with an average increase of 7 basis points. However, significant buying interest was noted for maturities on 10th April 2025, 27th March 2025, and 20th February 2025, with yields declining by 39, 37, and 27 basis points to 28.51%, 28.50%, and 28.50%, respectively. In the Eurobond market, selling interest across the curve led to an average yield rise of 31 basis points to 10.45% on a week-on-week basis.

Looking ahead to the next trading week, we anticipate mixed sentiments as market participants prepare for the upcoming treasury bills auction.