Global Economy

USA: U.S. employment grew less than expected in August as the jobless rate dropped to 4.2%, possibly indicating the labor market is stable and does not yet require a  50 basis point rate cut from the Federal Reserve this month. The Labor Department’s report released last Friday also showed strong wage growth, which could help support consumer spending and keep the economy from sliding into a recession for now. However, the labor market is slowing down, with 86,000 fewer jobs added in June and July than previously reported. After the report, several Federal Reserve officials signaled that the central bank might be ready to cut rates at its policy meeting in about two weeks, as higher borrowing costs are reducing overall economic demand.

 

 

Sub-Saharan African Economies

Eurozone: The eurozone’s economy grew by 0.2% in the second quarter of 2024, slightly lower than the earlier estimate of 0.3%, according to Eurostat’s latest report. The European Union as a whole also saw a similar slowdown. This marks a decline in growth compared to the first quarter, where both regions grew by 0.3%. Year-over-year, the eurozone’s GDP grew by 0.6%, while the EU’s GDP increased by 0.8%. Growth varied widely among member states: Poland led with 1.5% growth, followed by Greece at 1.1% and the Netherlands at 1.0%. Meanwhile, Ireland saw the biggest drop at -1.0%, with Latvia and Austria also declining. Germany’s economy shrank slightly by 0.1%, Italy and France had small gains of 0.2%, and Spain showed strong growth at 0.8%.

Egypt: The Central Bank of Egypt kept its interest rate at a record 27.25% on September 5th, reflecting caution amid changing economic conditions. Inflation eased to 25.7% in July due to lower food prices, while GDP growth slowed to 2.2% in Q1 2024, impacted by Red Sea trade disruptions. However, a gradual recovery is expected in Q2 2024, with growth anticipated in the 2024/25 fiscal year. Unemployment dropped to 6.5% in Q2 2024, driven by gains in agriculture. The Central Bank expects inflation to stay stable through Q4 2024, with a sharper decline likely in early 2025.

South Africa: South Africa’s gross foreign exchange reserves increased to a record $63.205 billion in August 2024, up from $62.269 billion in July. This rise was driven by higher gold reserves, SDRs, and foreign currency reserves. Additionally, the central bank’s forward position slightly increased to $0.527 billion from $0.521 billion in the previous month.

Rwanda: Rwanda’s producer prices fell by 5.4% year-on-year in July 2024, marking the second consecutive monthly decline and the steepest drop since 2011. This decrease was driven by a sharper fall in manufacturing prices, while other sectors like mining and quarrying saw softer price increases. On a monthly basis, however, producer prices rose by 0.8% in July, rebounding from a 4.4% drop in June.

 

Domestic Economy

Major updates during the week:

  • The CBN’s Purchasing Manager’s Index (PMI) survey showed Nigeria’s economy expanded in August, driven by services and agriculture, as the composite PMI rose to 50.2 points in August.
  • The Presidential Fiscal Policy and Tax Reforms Committee proposed tax reforms to boost Nigeria’s fiscal stability, including a VAT increase to 10% and tax system consolidation. It also proposed reducing personal income tax for high earners and corporate income tax to 25%
  • Dangote refinery has started producing petrol after successful test runs, but NNPCL has not started lifting petrol.

Nigerian equity market: Nigerian equity market reverses gains, closes in the red week-on-week.

The Nigerian equities market reversed last week’s gains, closing down 0.51%. The All-Share Index (ASI) settled at 96,433.53 points, bringing the year-to-date performance to 28.96%. This decline was primarily driven by profit-taking activities in large-cap stocks like MTNN (10.41%) and TRANSPOWER (9.99%).Most sectors closed lower, with Consumer Goods (1.20%), Insurance (0.20%), Industrial Goods (0.20%), and Banking (0.10%) sectors experiencing losses. Only the Oil and Gas sector closed up, gaining 1.50%. Market capitalization fell to N55.39 trillion from N55.47 trillion the previous week.

 

 

Nigerian fixed-income market: Investors show strong buying interest in local market

This week, the Debt Management Office (DMO) took a cautious approach in the treasury bills market, issuing the amount on offer despite receiving 4.8x bids. The stop rate fell sharply, with the 364-day tenor dropping by 196bps to 18.94%, driven by strong system liquidity.

Similar sentiment prevailed in the secondary market, where strong buying interest, especially in mid-tenor instruments, led to a 167 bps week-on-week (WoW) decline in the average yield to 19.66%. The bond market followed suit, with a 26 bps drop in the average yield as investors favored short-tenor instruments. In contrast, the Nigerian Eurobond market saw selling pressure, raising the average yield by 19 bps WoW to 9.91%.

Looking ahead to the coming trading week, we anticipate continued buying interest in the local market, driven by expected liquidity inflows for the month.