Cautious trading takes center stage at NGX ahead of MPC meeting


NGX records 24.3% year-to-date returns as index hits 53,100.21 points

Uba Group

Uba Group


Despite the rout across the global equities market, the rally in the Nigerian equities market remained unscathed as intense bargain hunting activities in cyclical stocks pushed the All-Share Index higher by 4.3 percent week on week (w/w) to close at 53,100.21 points. Notably, strong buying interest in International Breweries Plc (+30.4%), OKOMUOIL (+26.5%), FLOUR MILLS (+20.1%), MTNN (+15.0%), WAPCO (+14.2%), NB (+10.0%), and SEPLAT (+8.3%) drove the benchmark index higher, its fifth-consecutive weekly gain.

Accordingly, the MTD and YTD returns for the index increased to +7.0 percent and +24.3 percent, respectively.

Likewise, activity level mirrored the upbeat performance, as volume traded rose by 13.6 percent w/w while value traded rose by 38.7 percent w/w.

Performance across sectors was mixed, as the Oil and Gas (+6.9%), Consumer Goods (+5.4%) and Industrial Goods (+2.3%) indices recorded gains, while the Insurance (-1.9%) index declined. The Banking index closed flat.

In the near term, stock analysts think the bears are likely to book profit across most counters given the five-week bullish run in the market. “Thus, we see more of a “choppy theme” as cautious trading takes center stage ahead of the MPC meeting scheduled later in the month. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”

In line with expectations, the overnight (OVN) rate, in the money market, expanded by 424bps w/w, to 9.2 percent, as funding pressures for CRR debits, CBN’s weekly OMO (N30.00 billion), FX auctions and NTB net issuance (N10.39 billion) outpaced the sole inflow from OMO maturities (N38.08 billion). We highlight that system liquidity still remained healthy as the net liquidity position averaged N264.92 billion.

Analysts expect the outflows for this week’s auctions (OMO and FGN bond) and arbitrary CRR debits, if any, to offset the inflows from OMO maturities (N35.00 billion) and FGN bond coupon payments (N8.50 billion). Thus, we expect the OVN to trend northwards.

The Treasury bills secondary market sustained last week’s bullish sentiments following the liquidity-driven demand for bills at the secondary market. Thus, the average yield across all instruments contracted by 7bps to 3.7 percent.

Across the segments, the average yields contracted by 5bps and 7bps to 4.0 percent and 3.6 percent at the OMO and NTB secondary markets, respectively.

At the OMO auction this week, the CBN fully allotted N50.00 billion worth of OMO bills to participants and maintained stop rates across the three tenors – 103DTM: 7.0 percent, 180DTM: 8.5 percent and 355DTM: 10.1 percent – as with prior auctions.

Elsewhere, at the NTB PMA, demand continued to outweigh supply, as there was an oversubscription of 2.7x on NGN127.47 billion worth of bills on offer.

As a result, the auction closed with the CBN allotting N1.02 billion of the 91-day, NGN2.83 billion of the 182 – day and N134.01 billion of the 364-day – at respective stop rates of 1.74% (unchanged), 3.00% (unchanged), and 4.70 percent (previously 4.79%).

With system liquidity expected to tighten in the coming week, Cordros Research says it anticipates an increase in the average yield on T-bills from current levels.

Proceedings in the Treasury bills secondary market turned bullish last week as investors cherry-picked instruments with attractive yields across the bond curve.

Consequently, the average yield dipped by 3bps to 11.2 percent. Across the benchmark curve, the average yield contracted at the short (-1bp), and long (-6bps) ends as investors took a keen interest in the JAN-2026 (-26bps) and APR-2037 (-33bps) bonds, respectively.


This week, it is expected that the outcome of the May 2022 FGN auction holding on Monday (May 16) will influence the direction of yields in the bonds secondary market.

At the auction, the DMO will be offering instruments worth N150.00 billion through re-openings of the 13.53% FGN MAR 2025, 12.5000% FGN APR 2032 and 13.0000% FGN JAN 2042 bonds.
In the medium term, we maintain our stance of uptick in yields as the FGN’s borrowing plan for 2022FY points to elevated supply.

Nigeria’s FX reserves dipped by USD234.81 million w/w to USD39.07 billion (11 May 2022) in the review period. Across the FX windows, the naira depreciated by 0.5 percent and 1.7 percent to N419.00/USD and N599.00/USD, at the I&E window and parallel market, respectively.

At the IEW, total turnover (as of 12 May 2022) increased by 60.2% WTD to USD575.81 million, with trades consummated within the N410.84 – NGN453.25/USD band.

In the Forwards market, the naira was flat at the 1-month (N418.27/USD) and 3-months (N424.04/USD) contracts, but depreciated at the 6-months (-0.4% to N434.65/USD) and 1-year (-0.6% to N452.03USD) contracts.