Welcome to this week’s edition of our stock market newsletter!
Green White Green Recap
Macro Update
Is Nigeria in a Debt Spiral?
The federal government of Nigeria spent a whopping N8.94 trillion on debt servicing in the first nine months of 2024, taking up 47% of its total spending for the period.
This is a sharp 56.8% increase compared to the N5.69 trillion spent during the same time in 2023, according to the Central Bank of Nigeria’s quarterly report.
Here’s the kicker: debt servicing in 2024 gobbled up 147% of the government’s revenue, up from 132% in 2023. While the government managed to retain N6.08 trillion in revenue, it wasn’t enough to cover debt payments, signalling a growing reliance on borrowing to fund both day-to-day operations and debt repayments.
Key takeaways:
- Persistent reliance on borrowing could lead to credit rating risks.
- Rising debt servicing costs could prompt tighter monetary policy from the Central Bank of Nigeria, influencing interest rates and investment decisions.
FX Update:
Naira closed the week at N1,542/$1
The naira faced continued pressure in the foreign exchange markets this week, closing at N1,542.03/$1 on the official market. In the parallel market, it traded at a significantly higher range of N1,645.00/$1 to N1,647.00/$1.
Meanwhile, external reserves went down by 0.20% from $40.88 billion recorded in the previous week to $40.80 billion.
Key takeaway:
- Long-term investors should look past the volatility in the currency and focus on consistently investing regardless of the exchange rate level.
Remember to save dollar-based goals in dollars, which can be done with apps like Ladda.
Equities Update:
The Nigeria Exchange (NGX) All-Share Index (ASI) ended the week with a week-to-date gain of 1.80%, pushing its year-to-date returns to an impressive +2.45% in naira terms.
Sector Highlights (Week-on-Week):
Performance across sectors was a bit of a mixed bag, with three out of four sectors showing a loss.
The Industrial Goods sector made a loss of 0.26%.
The Consumer Goods sector made a loss of 0.34%, and the Banking sector gained 1.94% .
Conversely, the Oil and Gas sector made a loss of 0.34%
Key takeaways:
- Long-term investors may benefit from US exposure, particularly the S&P 500, which delivered 25% in 2024.
- Until Nigeria’s macroeconomic conditions stabilise, diversifying into US markets makes sense.
Fixed Income Update:
General Decline in Treasury Bills
Here’s what’s happening with treasury bills and bonds:
Short-Term Treasury Bills:
- The 91-day treasury bill yield went down from 25.75% to 21.47%.
- The 182-day treasury bill yield went down from 25.18% to 22.29%.
364-day Treasury Bills are on the Rise:
- The 365-day treasury bill yield went down from 27.22% to 22.15%.
Bond yields climbed to an average of 19.27% from 19.19%.
Key takeaways:
- While we noticed a decline in treasury bill yields last week, it is still a good option for short-term savings goals.
- You can invest in treasury bills to save for your short-term goal on rent, schools, fees, etc. through Ladda, a fintech app that helps you save at high returns.
For your long-term goals, we do not recommend naira treasury bills and bonds.
Star-Spangled Banner Recap
S&P 500 and Global Indices Face Declines Amid Rising Yields
The S&P 500 ended the week with a 0.48% decline. bringing its year-to-date return to around -0.93%. The downturn may be attributed to profit-taking, and tax-related selling. This trend is mirrored in other global markets. The FTSE 100, for instance, declined by approximately 0.86% over the same period. Similarly, the MSCI World Index, which measures global equities, fell by about 0.09%.
Key takeaway:
- Despite the uncertainty, and a shift in investor sentiment, the S&P 500 gained 25% in 2024, reflecting the strong US economy. The US equities market offers a strong diversification option for investors.
Remember to always save for your dollar goals in dollars. You can do this with us on Ladda—a fintech app that helps you save at high returns.
We hope you find this edition insightful, and as always, stay focused on your financial goals!
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