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Treasury Newsletter – January 21, 2022

Oil prices hit $88, Highest in 7 Years Brent crude oil prices rose to its highest since October 2014 after it hit $88.4 on Tuesday...

Oil prices hit $88, Highest in 7 Years

Brent crude oil prices rose to its highest since October 2014 after it hit $88.4 on Tuesday as drone attacks on targets in the United Arab Emirates stoked fears across the region. At $88 oil prices are firmly back to the pre-Buhari regime when the economy was robust and selling north of 1.8 million barrels per day. Incidentally, this marked the end of an oil boom era for Nigeria and the start of a protracted period of a fall in oil revenues, multiple devaluations and recessions and an accumulation of debt not seen since the return to democracy in 1999.

Inflation Rises to 15.63% in December 2021

Inflation has become a bugbear for the Nigerian economy in the last two years but from the end of the first quarter (Q1) 2021, the average consumer price level fell in nine consecutive months until its recent December 2021 reversal that saw inflation rates rise again. In the latest CPI report released by the National Bureau of Statistics on Monday, Nigeria’s Inflation rate increased for the first time in nine months, as the headline consumer price index rose by 15.63% y-o-y (Year-On-Year).

Commodity Market Report

Last week, all grain commodities closed in the green territory, returning gains to investors on the Exchange. Prices are not looking to halt the upward trend soon as demand pressure and hoarding activities of traders prevail. Sorghum led the performers’ chart closing 11.26% on a week-on-week basis. Cashew followed closely with a 10.40% performance during the same period. Cocoa, however, declined 4.69%.

FX Market

The value of the Nigerian naira depreciated by 1.5 percent as banks shifted personal travel allowance (PTA) and business travel allowance (BTA) rates from N413 to N419 per dollar. PTA and BTA are currency exchange schemes specifically set up for Nigerians travelling abroad for personal or business reasons. Each traveller can get up to $4000 every quarter to lessen FX disparity at parallel and official markets.

Treasury Bills

Last week, the Nigerian Treasury Bills (“NT-Bills”) secondary market maintained its bullish run as investors anticipated the Primary Market Auction (“PMA”) that held last Wednesday (12-Jan-2022). As the week progressed, tepid sentiments were maintained with minimal trading activities despite buoyant system liquidity (N63.2bn long as of Friday). Consequently, average yield contracted 4bps W-o-W (Week-On-Week) to settle at 4.39% from 4.43% the previous week.

FGN Bonds

The domestic bonds secondary market recorded a bullish run last week as FGN bonds market players reacted to the release of the Q1:2022 FGN Bond issuance calendar by the Debt Management Office (“DMO”) where a new maturity (2042s) will be offered in the market. Consequently, average yield shed 7bps W-o-W to settle at 11.51% from 11.59% the previous week.

 

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