Global Market

In the United States, unemployment rate fell to an 18-year low of 3.8% in May driven by Nonfarm payrolls which rose 223,000 in the same month. Reflecting the stronger growth in the labor market, personal spending gained 0.6% in April (vs. March’s revised 0.5%). A host of important economic data was released during the week. In Canada, the economy rose 1.3% YoY in Q1 18 (vs. 1.7% in Q4 17) following a slowdown in household spending (+1.1% YoY) and softer non- petroleum exports during the period—owing to ongoing concerns about steel tariffs and potential NAFTA changes. In Brazil, the economy rose 1.2% YoY in Q1 18 (vs. 1.3% in Q1 17). Over in India, the economy accelerated for the third consecutive quarter, rising 7.7% YoY. Also, the Swiss economy strengthened in Q1 18 with real GDP of 2.2% YoY – edging above 2% for the first time since Q2 16 – following a 3.6% rebound in equipment and software investment in the quarter.

Domestic Market

In the month of May, Purchasing Manager Index survey carried out by the central bank revealed that Manufacturing and Non-Manufacturing PMI expanded to 56.5 (April:56.9) and 57.3 (April 57.5) index points respectively. However, the index grew at a slower rate when compared to the prior month. Elsewhere, Nigerian Pension assets grew 5.7% to N7.9 trillion in Q1 18 driven by an increase in monthly contributions as well as positive market returns. The asset break down revealed increased allocation to FGN securities (+5.6 QoQ to N5.6 trillion – specifically treasury bills (+41% QoQ to N1.7 trillion)). Asides FG securities, there was in- creased appetite for the Equities (+9.3% QoQ to N734 billion) and Corporate bond in the period (+47% to N390 billion).

Equities

NGSEINDX continued its losing streak for the fifth consecutive week, shedding 6.38% WoW to end the week at a 6-month low of 36,816.29ppts. ETERNA (+20.11%) led the advancers, followed closely by MBENEFIT (+8.57%), DANGSUGAR (+5.76%) and FLOURMILL (+5.42%) while INTBREW (-22.39%), WAPCO (-16.05%), FO (-13.64%) and NB (-10.75%) led the decliners. On a sectorial level, all sectors closed in the negative territory save the Personal Care (+2.72%) sector. The Brewers (-11.45%) topped the losers chart followed by Cement (-8.73%) and Food (-6.93%) sectors.

Has the FX Reserve hit a snag?

Since September 2017, the Nigerian foreign reserve maintained a steady daily accre- tion with the reserve reaching a high of $47.9 billion on the 10th of May 2018 from a low of $31.8 billion on 11th of September 2017. Surprisingly, recent data from the CBN revealed a gradual drawdown in the reserve. For context, between 10th and 30th of May, the reserve has been drawn-down by $243 million to $47.6 billion. The draw- down in the reserve is largely connected to the increased sales by the apex bank at the IEW. Going by available data from IEW, the CBN increased its sales at the window to $128 million in May, from $65.3 million in April, in a bid to cover the sudden slump in inflows at the window which created a net demand position.

Fixed Income Market

Last week, average fixed income yields spiked 46bps to 12.95%. This was largely driven by flashes of sell off in the fixed income market as well as CBN’s OMO sales owing to buoyant liquidity from N 300 billion worth of bond maturities amidst other inflows. CBN sold over N600 billion worth of OMO bills at stop rates of 11.055 and 12.15% for the 100 and 230-day paper respectively.