Global Economy

USA: The annual inflation rate in the U.S. fell for the third consecutive month, reaching 3% in June 202 — the lowest since June 2023. This marks a decline from 3.3% in May and falls short of the 3.1% forecast. Inflation eased for shelter (5.2% vs. 5.4%) and energy costs increased more slowly (1% vs. 3.7%), contributing significantly to the deceleration. MoM, the CPI unexpectedly fell by 0.1%, marking the first decline since 2020, against expectations of a 0.1% increase. Given this data, we anticipate the Federal Reserve, which employs a data-driven approach to monetary policy, will consider this information and potentially keep a rate cut on the table this year. However, we expect the Fed funds rate to be held steady at the next FOMC meeting.

 

 

Sub-Saharan African Economies

 

Europe: The UK economy grew by 0.4% in May, double the expected figure, driven by continued expansion in the services sector and a rebound in housebuilding. This MoM rise followed zero growth in April and exceeded the 0.2% forecast by economists polled by Reuters. The strong growth in May suggests that the quarterly expansion might surpass the Bank of England’s forecasts, potentially complicating its decision on whether to start cutting interest rates in August from their 16-year high of 5.25%. The economy has largely stagnated over the past two years due to the cost of living crisis. In the first quarter, GDP per head was still 1%, below the fourth quarter of 2019. However, the economy has bounced back from last year’s technical recession, with a strong 0.7% growth in the first quarter—the fastest expansion in the G7 group of advanced economies.

 

Egypt: Egypt’s annual inflation rate eased to 27.5% in June from 28.1% in May, marking the fourth consecutive month of decline, according to the country’s statistics agency. This downward trend, which began in September 2023 when inflation peaked at a record high of 38%, is attributed to Cairo’s adoption of an inflation-targeting model and a flexible exchange rate. Despite the progress, challenges remain.

Angola: Angola’s annual inflation rate rose for the 14th consecutive month to 31% in June 2024, the highest level since May 2017. This persistent price increase reflects the ongoing weakness of the kwanza and the impact of last year’s removal of fuel subsidies. On a monthly basis, consumer prices increased by 2.07% in June, the smallest rise since July 2023, following a 2.49% increase in May.

Rwanda: Rwanda’s annual inflation rate eased slightly to 1.1% in June 2024, down from 1.3% in May. This decrease was driven by further declines in prices for food and non-alcoholic beverages (-3.9% vs -3.5% in May) and a slowdown in certain CPI items, including miscellaneous goods and services (3.7% vs 4.5%), 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 May. billion from $9.45 billion.

 

Domestic Economy

Major updates during the week:

  • Supreme Court grants financial autonomy to Local Governments.
  • Nigeria’s FX reserves hit a 14-month high of  $35.18 billion and this is the highest figure reported under the Tinubu administration.
  • The Nigerian Exchange suspended trading in 8 companies’ shares (Unity Bank, etc.) for failing to file 2023 financial statements. The suspension, effective July 8th, aims to enforce timely financial reporting.
  • Nigeria’s crude oil production increased by 1.57% to 1.27mpd in June 2024 (vs. 1.25% recorded in May 2024).

Nigerian Equity Market: Mixed Fortunes for Nigerian equities as losses outweigh gains

The Nigerian Equity Market experienced a downturn this week, as the ASI shed 0.35% week-on-week to close at 99,671.28 points,  bringing the year-to-date return to 33.30%. Sectoral performance was largely negative, with only the Oil and Gas and Industrial Goods indices managing to edge higher. ETERNA and CONOIL were the standout performers in the Oil and Gas sector, surging 18.42% and 8.26% respectively, propelling the index up 1.38% for the week. The Industrial Goods index also closed marginally higher by 0.05%. Conversely, the Consumer Goods, Insurance, and Banking indices faced downward pressure, recording losses of 0.09%, 0.36%, and 2.08% week-on-week, respectively.

 

Nigerian Fixed-Income market: Market players chased the bills bag

This week’s Primary Market Auction saw strong interest in 364-day bills, with bids reaching up to 24%. The DMO sold N207.3 billion of bills (more than the N166.1 billion offered) across three maturities. This resulted in a lower bid-to-cover ratio of 1.49x and an increase in the stop rate for the longest maturity to 21.24%, while the rates for other maturities stayed the same. Consequently, there was a slight increase in demand for long-tenor bills and a sell-off in existing mid-term bills, leading to a negative week close with an average market yield of 23.33%.  Similarly, the bond market closed in the red following selloffs across the curve with the average yield edging higher to 19.26%.

The Nigerian Eurobonds gained more buying interest during the week across all the instruments as the average yield declined by 33bps to 9.76%.