E-Financial
Market sentiment influenced by trade developments; Nigerian inflation rebounds in April
By Lukman Otunuga, FXTM Research Analyst,
It is coincidental how Nigeria’s inflation rate accelerated in April, only a month after the central bank unexpectedly reduced interest rates for the first time in more than three years.
With the impacts of the rate cut in March having a delayed effect and unlikely to be reflected any time soon, the 13.7% rise in inflation was based around rising food prices. Should inflation return with a vengeance in the coming months, businesses and consumers may feel the heat – ultimately impacting economic growth. All in all, it remains too early to come to any meaningful conclusion over whether inflation is set to rise, given how this has been the first increase in three months.
The next major risk event for the Nigerian economy will be the GDP report for Q1 which should offer critical insight into the health of the nation during the first quarter of 2019. A figure that exceeds the 2.1% year-over-year expectations should boost confidence over the health of the Nigerian economy.
Markets influenced by ongoing trade tensions
Investor sentiment has swung back and forth this week due to the persistent uncertainty and ever-changing jigsaw puzzle that is being mapped out around global trade developments.
Stock markets were mostly mixed on Thursday amid the contrasting signals that are being delivered to investors in regards to US-China trade tensions. While there is hope on one side of the table that there will be a handshake between the US and Chinese authorities at the G20 next month to smoothen the recent escalation, this is being met with news that the US government will ban Huawei’s access to the US markets over national security concerns.
The conflicting signals over trade are likely to simply spark more uncertainty and confusion in the market, and investors will continue to scatter and reassess their appetite towards taking on risk as a result.
Market sentiment is poised to remain fragile over the next month in the lead-up to the meeting between Presidents Trump and Xi Jinping at the G20 summit late June. Will the world’s two largest economies ever find a middle ground on trade or a tension destined to intensify further throughout the year? This is a question nobody has the answer for. And this is why investors are nervous, especially following the spectacular swerve that has occurred over the past two weeks.
Whatever the outcome of the hotly anticipated Xi-Trump meeting, it will certainly have a lasting impact on market sentiment for the second half of the year.
Euro unable to hang on to gains
Investors who were looking for a quick opportunity to push the Euro higher were given the thumbs up yesterday following reports that President Trump could delay auto tariffs by six months.
However, the Euro’s upside gains are limited with prices trading around the 1.12 level against the Dollar as of writing. Even though the first estimates on the Eurozone and Germany’s Q1 GDP prints met market expectations, the continent’s growth outlook is expected to remain challenged by external factors in the form of trade tensions.
With the outlook for the Euro fundamentally bearish amid growth concerns and the European Central Bank (ECB) adopting a cautious stance, the EURUSD is positioned for further downside. A solid weekly close below the 1.120 level is likely to signal a move towards 1.113 and 1.100, respectively.
Commodity spotlight – Gold
Disappointing economic data from the United States and China added to the negative mood yesterday, which in turn was a welcome development for safe-haven assets.
Gold bulls remain supported by trade uncertainty and concerns over slowing economic growth and this continues to be reflected in the metal’s valuation. Prices have the potential to test the psychological $1300 level again in the coming days as market caution accelerates the flight to safety.
Focusing on the technical picture, the precious metal is bullish on the daily charts. A solid weekly close above $1300 should invite a move higher towards $1310 and $1324, respectively. With the catalysts that can significantly reverse the ongoing flight-to-safety in the near term being limited, Gold bulls remain in the driver’s seat.
Julius Arhebun, the Head of Agency Banking a Nigeria’s leading payment service bank, MoneyMaster, has disclosed that the promotion of financial inclusion is one of the core mandates of the service.
He said this recently as the bank introduced a new 100MB data offer for every transaction made in the offer, which is available for Glo customers using the bank’s USSD banking code, *995#. The initiative is meant to incentivize the unbanked and underbanked population to ease the creation of their own mobile wallet via its USSD banking platform.
According to him, the offer builds on the various financial education “we have been providing online and across our various customer touchpoints”.
He added that “with this new 100MB offer, we want to encourage Nigerians in the unbanked and underbanked pools to be financially included by having at least a mobile wallet. The account number of this mobile wallet is derived from their mobile number, and can be easily recalled”.
MoneyMaster PSB is a leading provider of innovative digital financial products and services that transform lives and contribute to sustainable living.
The PSB has the mission to deepen financial inclusion and has been instrumental in providing financial technology services to bridge the gap between the banked, underbanked and unbanked population.
The payment service bank recently unveiled a 10 percent data bonus for existing and new customers who are on the Glo network for recharges of N1000 or more. The offer has been adjudged one of the best in the country based on the volume of data on offer to customers. The data purchases have a 30-day validity while unused data can be rolled over upon next plan subscription.
The National Pension Commission (PenCom) and the Pension Operators Association of Nigeria (PenOp) are taking steps to integrate workers who are not currently contributing to the Contributory Pension Scheme (CPS) into the Micro Pension Plan (MPP).
The initiative targets workers without any form of pension coverage, including those who have left previous employers under the CPS but wish to join the MPP.
The MPP is designed to allow self-employed individuals and those working in companies with fewer than three employees to contribute towards a pension for their retirement or in cases of incapacitation. Additionally, pension operators are developing incentives to make the MPP more appealing to potential contributors.
At the micro pension plan industry stakeholders’ engagement forum held in Lagos recently, organized by PenCom and PenOp, the Acting Director-General of PenCom, Omolola Oloworaran, highlighted the critical role of the MPP.
She said the event’s theme: “Reimagining Micro Pension Plan: Balancing Service, Policy, and Health” accurately captures the essence of the MPP as a transformative tool for improving the lives of Nigerians.
To maximise the impact of the MPP, PenCom is embarking on several initiatives like market segmentation, rebranding, advanced technology, incentives and others.
Oloworaran pointed out that with over 77.5 million workers in Nigeria’s informal sector, even a small increase in MPP participation could unlock billions of naira in savings, positively impacting individuals and the wider economy.
In his presentation on the “Overview of the Micro Pension Plan,” Babatunde Alayande, head of the micro pensions department at PenCom, emphasised the importance of providing incentives to make the MPP more attractive and accessible to its target market.
Okhueleigbe John, head of the micro pension unit at Stanbic IBTC Pension, stressed the need for tailored policies to promote the growth of the MPP. He also advocated more financial literacy, public-private partnerships, and innovative funding strategies to drive incentives for the scheme. Additionally, he called for a review of the pricing structure of micro pensions to make them more appealing to investors.
Dr. Shem Ouma of Kenya APSA also provided valuable insights, recommending that operators incorporate built-in benefits, ensure flexible payment systems for contributors, and leverage technology to drive the MPP forward.
NGX has seen a record foreign investor transaction activity, with a 156% YoY increase reaching N744.34. Foreign investors’ transactions on the Nigerian Exchange Limited (NGX) reached a total of N744.34 billion in the first 10 months of 2024, which was an increase by 156 percent Year-on-Year (YoY) when compared to the N291.38 billion recorded in the first 10 months of 2023.
The N744.34 billion foreign investors’ transactions recorded was another all-time high for the Nigerian bourse.
The latest NGX’s “Domestic & Foreign Portfolio Participation in Equity Trading,” for October 2024, revealed that foreign investors contributed about 16.65 percent out of the total transactions of N4.47 trillion reported in the 10 months under review.
The report revealed that foreign investors’ inflow and outflow stood at N344.30 billion and N400.04 billion, respectively.
The CBN recently implemented some reforms in the foreign exchange market aimed at enhancing transparency, compliance, and market stability. These reforms were part of the CBN’s broader strategy to create a fairer, more stable FX market and support economic growth through better monetary policies.
In tandem with these reforms, the CBN has also implemented aggressive Monetary Policy Rate (MPR) hikes, with the goal of curbing inflation and stabilising the naira, a move supported by the International Monetary Fund (IMF).
Domestic investors made up of retail and institutional investors transacted an estimated N3,726.63 trillion worth of stocks in the period under review.
The breakdown showed that domestic retail in 10 months of 2024 transacted N1.909.99 trillion as against N935.78 billion recorded in 10 months of 2023, while domestic institutional transacted N1.816.64trillion in 10 months of 2024 from N1.706.23 trillion in 10 months of 2023.
According to the report, the total transactions at the nation’s bourse increased marginally by 1.97percent from N493.01 billion (about $307.84 million) in September 2024, to N502.73 billion (about $300.05 million) in October6 2024.
“The performance of the current month when compared to the performance in October 2023 (N220.94 billion) revealed that total transactions significantly increased by 127.54per cent.
“In October 2024, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 82 per cent,” the report stated.
“A further analysis of the total transactions executed between the current and prior month (September 2024) revealed that total domestic transactions increased by 0.81per cent from N451.60 billion in September 2024 to N455.27 billion in October 2024.
“Similarly, total foreign transactions increased by 14.61 percent from N41.41 billion (about $25.86 million) to N47.46 billion (about $28.33 million) between September 2024 and October 2024.”
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