Nigeria Records Largest Trade Balance Since 2017 on the Back of Poorer Consumers
Investment Research Weekly Market Commentary | Mar 10, 2025
Welcome to this week’s edition of our stock market newsletter!
Green White Green Recap
Macro Update
Nigeria Records Largest Trade Balance Since 2017 on the Back of Poorer Consumers
Nigeria’s total trade in goods grew by 106.6% to a record N138tn in 2024. Imports grew by 96.3% to N60.6tn and exports increased by 115.3% to N77.4tn in the same year.
While a strong growth in trade would ordinarily indicate positive economic momentum, this is not the case for Nigeria in 2024. The 41.4% devaluation in the Naira-USD exchange rate during the year masks the significant destruction of consumer purchasing power when trade is reported in naira.
In dollar terms, imports fell by 12.3% to $40bn, the weakest since imports of $35.4bn during the COVID-19 crisis in 2020. Exports fared slightly better, falling by a moderate 3.8% to $51.1bn. As exports remained larger than imports, the trade balance grew to $11.1bn from $7.5bn , the largest since 2018.
While such a strong trade balance is desirable, it is only a sign of strength when both exports and imports are rising. What 2024 trade data show is that Nigerian consumers have been made poorer to bring the external sector back into balance.
Key Takeaways:
The strong expansion in trade balance has been supportive of the relative stability in the exchange rate since the massive depreciation in Q1 2024.
Nigerian consumers will face a long road to recovery, with current government policies not providing optimism.
As investors, this lack of confidence in government policies is also why we are skeptical about long-term exposure to Nigeria when this should be an ideal time for that.
FX Update
Naira/USD Closed the Week at N1,517.24/$1
The Naira/USD exchange rate was under pressure last week, ending its streak of three consecutive weeks of gains.
In the official market, the naira closed at ₦1,517.24/$1 on March 7, depreciating by 1.6% from ₦1,492/$1 on February 28. Similarly, in the parallel market, the exchange rate depreciated by 3.2% to ₦1,550/$1 from ₦1,500/$1.
Nigeria’s external reserves continue to decline, reaching $38.3 billion as of March 06, 2025.
Key Takeaways:
In the past three weeks, we said the gains in naira were unsustainable and we continue to hold that opinion, especially as a declining reserve level reduces the CBN’s ability to intervene in the foreign exchange market.
Long-term investors are encouraged to invest in dollar-denominated assets.
Remember to save dollar-based goals in dollars, which can be done with apps like Ladda.
Equities Update
All-Ahare Index(ASI) Decreased by 0.04%
The Nigerian Exchange (NGX) All-Share Index (ASI) ended the week with a loss of 1.19%, reducing its year-to-date returns to 3.51%.
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 recorded a slight loss of 0.01%, improving from the 0.51% loss in the previous week.
The Oil and Gas sector posted a 0.19% loss, from a 0.60% gain from the previous week.
The Banking sector recorded a 2.87% loss, showing an improvement from the 3.08% loss in the previous week.
Lastly, the Consumer Goods sector recorded a 1.72% loss, overturning the 0.36% gain from the previous week.
Key Takeaway:
The Nigerian stock market remains under pressure. Investors are advised to stay cautious, and manage risks through diversification outside Nigeria.
Fixed Income Update
Moderation in Yields in the Fixed Income Market
Last week, there was a broad based moderation in yields in the treasury bills market:
91-day bills: Yields dropped significantly, from 19.39% to 17.49.
182-day bills: Yields also decreased, from 19.83% to 18.35%.
364-day bills: Yields on the longer-term 364-day bills decreased, from 21.51% to 20.96%.
In summary, treasury bill yields have declined. However, they remain a good option for investors with short-term savings goals.
Bond Market
Bond yields climbed slightly to an average of 18.37% from 18.36%.
Key Takeaways:
Investing in treasury bills 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
Tech Sector Volatility
The "Magnificent Seven"—Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla—have recently entered correction territory, sparking concerns of a potential tech bubble similar to the late 1990s dot-com era.
The S&P 500 declined by 3.32% this week, reflecting investor concerns about the economy, and bringing its year-to-date return to -1.89%. The FTSE 100 in the UK also lost, falling by 1.47%. However, the MSCI World Index, which tracks global equities, saw a modest gain of 0.25%.
Key Takeaways:
With the exception of the US, stock markets in the rest of the world are having a strong year so far. With President Trump’s policies raising trade and global security tensions, we expect advanced countries to see more volatility in their stock market.
We continue to advise a strong exposure to the US with some diversification to the rest of the world.
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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