FCSL WEEKLY MARKET REPORT_ 22ND JANUARY, 2021

Global Economy –Rundown:
The European Central Bank remained dovish, as it maintained its marginal lending rate at 0.00%, 0.25%, and -0.50%, these rates are expected to remain low until inflation is seen to have converged to a level close to, but below 2% within its projected horizon. Also, ECB seeks to continue with the Pandemic emergency purchase Programme to sustain favorable financing conditions, as it seeks to ensure ample liquidity level of the region. The Bank expresses its intention to continue reinvesting the principal payments from maturing securities, which complement the objective of sufficient liquidity, it also intends to continue with asset programme at a monthly pace of €20 billion. This position of the ECB is laudable however, the fiscal stimulus programme of the region is expected to respond evenly with considerable accommodative stand, while the potential downside effect of excessive reliance on Monetary easing is the potential risk it poses for future long-term growth.
Domestic Economy –Rundown:
The Fitch rating agency has warned that the Government’s consistent reliance on monetary funding through Ways and Means facility was not sustainable. The agency asserted that the Government directly borrowed 1.9% of the GDP from the CBN to fund its fiscal deficit in 2020, which was propelled by the fragile state of the economy, and at the last count of the agency, the government estimated balance of WMF as of December 2019 was N9.8trillion. The presumed risks of macroeconomic stability that may arise from consistent monetary funding of the government deficits are impaired credibility of policymakers and efficiency of price stability functions of the Apex bank. In our views, the country’s debt burden should be of concern to the Apex bank authority and FGN, as this must be efficiently managed to avoid debt servicing overload considering the fragile state of the economy.
Currency:
The Naira appreciated marginally by 0.13% at the I&E FX window to settled at N394.17.00/USD, while at the parallel market, Naira contracted in value to N477/USD.
Equities
The equities market week-on-week performance dipped by 0.42%, and the YTD ASI growth contracted to 1.82%. The sector performance of the NSE indices contracted for the week, as the average change of the NSE Indices was (0.57)%, based on the indices monitored, which was driven by decline recorded from NSE Banking index.
Fixed Income:
The system liquidity at the end of the week firmed up, although the rate ended in an opposite direction despite the liquidity level, as open buyback rate and overnight rates surge to 10.00% and 10.50% respectively.
T-Bills secondary market activities remained bullish as the average yield decreased by 2bps to 0.47% for the week, as market yields dipped across the short- and long-term maturity.
The Bond secondary market activities returned bearish, as the average yield for the week increased by 44bps to 7.67%. The Primary Bond auction for the week witnessed N122.36billion worth of bond sold between the maturities of 10years, 15years, and 25years at the marginal rate of 7.980%, 8.740%, and 8.950% respectively.

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