In the previous month, the Nigerian domestic equities market reached a remarkable 15-year high, witnessing the All-Share Index (ASI) rising by 3.4 per cent on a month-on-month (m/m) basis. This surge occurred while grappling with foreign exchange (forex) imbalances.
August saw the Nigerian equities market continue its upward trajectory, driven by a renewed sense of enthusiasm among investors. This optimism was fueled by the pursuit of gains, spurred on by market-stimulating corporate actions and interim dividend payments.
As a result, the NGX-ASI surged by 3.4 per cent m/m to reach 66,548.99 points, marking its highest level since March 5, 2008. The market capitalization also increased by N1.4 billion, reaching a total of N36.4 trillion.
Despite this impressive performance in the equities market, the Central Bank of Nigeria’s foreign exchange reserves remained steady at $33.2 billion, as month-to-month outflows were balanced by an accretion of $333 million.
Interestingly, the official and parallel market exchange rates showed disparities, even in light of the $3 billion NNPCL loan deal.
In August, crude oil prices recorded a monthly gain due to a drawdown in US crude inventories (which declined by 10.6 million barrels) and production cuts by the Organization of Petroleum Exporting Countries and its allies (OPEC+). These factors overshadowed concerns about weaker demand, particularly in China. Consequently, the average Brent crude oil price rose by 6.9 per cent m/m to $84.64 per barrel.
System liquidity experienced a contraction of N49.6 million on a month-on-month basis, settling at N360.9 billion. This was a result of several Primary Market Auctions (PMA) totaling N437.0 billion and the resumption of Open Market Operation (OMO) issuance, with N150.0 billion worth of papers issued. In the same period, the OPR and OVN rates increased by 0.9 percentage points and 1.2 percentage points, respectively, reaching 1.9 per cent and 2.6 per cent.
During August, the Debt Management Office (DMO) conducted a bond auction, reopening the 5-year, 9-year, 14-year, and 29-year instruments. A total of N360.0 billion was offered for APR 2029 (₦90.0 billion), JUN 2033 (₦90.0 billion), JUN 2038 (₦90.0 billion), and JUN 2053 (₦90.0 billion) at stop rates of 13.9 per cent, 15.0 per cent, 15.2 per cent, and 15.9 per cent, respectively. These rates were higher than the previous auction rates of 12.5 per cent, 13.6 per cent, 14.1 per cent, and 14.3 per cent.
This report highlights the impressive performance of the Nigerian equities market in the face of forex imbalances, providing insights into various economic factors influencing the financial landscape.
