Nigeria's Inflation Rate Rises to 34.80% in December 2024
Investment Research Weekly Market Commentary | Jan 20, 2025
Welcome to this week’s edition of our stock market newsletter!
Green White Green Recap
Macro Update
Nigeria's Inflation Rate Rises to 34.80% in December 2024
The National Bureau of Statistics (NBS) reports that Nigeria's headline inflation rate increased to 34.80% in December 2024, up from 34.60% in November, due to heightened festive demand. However, the month-on-month (MoM) inflation rate slowed slightly to 2.44%, down from 2.64% in November.
Food inflation surged to 39.84% YoY, driven by rising prices of staples like potatoes and yams, but declined MoM to 2.66% from 2.98%.
Core inflation reached 29.28% YoY, driven by persistent price pressures from seasonal demand and rising energy costs, including higher electricity tariffs, fuel prices, and transportation expenses, significantly increasing production and distribution costs.
Key takeaways:
Inflationary pressures remain strong and are likely to persist in 2025. While we are likely to see a gradual moderation purely due to statistical effects (inflation rises slower when already high), it will be above historical average.
Investors should remain careful about saving and investing in naira, unless it’s for very short-term purposes.
FX Update:
Naira/USD Closed the Week at N1,546/$1
The exchange rate depreciated from N1,542.03 on January 10, 2025 to N1546.72/$1 on January 17, 2025 on the official market. In the parallel market, it traded at a significantly higher range of N1,660/$1 to N1,665/$1.
Meanwhile, external reserves moderated by 0.98% from $40.75 billion recorded in the previous week to $40.35 billion.
Key takeaways:
The external reserves remain stable, signalling weak sales by the CBN and soft dollar inflows. Unless foreign investments and oil & gas exports recover, the reserves are unlikely to grow much from this level.
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 Nigerian Exchange (NGX) All-Share Index (ASI) ended the week with a loss of 2.94%, pushing its year-to-date returns to -0.56% 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 huge loss of 8.20%.
The Oil and Gas sector and the Banking sector made a loss of 0.78% and 0.46% respectively.
Conversely, the Consumer Goods sector made a gain of 1.33%
Key takeaways:
Long-term investors may benefit from US exposure, particularly the S&P 500, which has delivered a 2.18% year-to-date dollar return.
Until Nigeria’s macroeconomic conditions stabilise, diversifying into US markets may be advantageous.
Fixed Income Update:
Mixed Trend in the Money Market
Here’s what’s happening with treasury bills and bonds:
Short-Term Treasury Bills:
The 91-day treasury bill yield went down from 22.67% to 22.21%.
The 182-day treasury bill yield went down from 25.05% to 24.93%.
364-day Treasury Bills are on the Rise:
The 365-day treasury bill yield went up from 27.08% to 27.16%.
Bond yields climbed to an average of 19.35% from 19.27%.
Key takeaways
While there is a mixed trend in treasury bill yields, 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
Global Markets Rally as S&P 500 Records Best Week Since November Election
The S&P 500 soared by 4% this week, recording its strongest weekly gain since the November election and bringing its year-to-date return to approximately 2.18%. This rally reflects renewed optimism among investors ahead of President Trump’s inauguration on Monday.
The positive momentum extended to global markets as well, with the FTSE 100 rising by about 3.11% and the MSCI World Index, which tracks global equities, increasing by approximately 0.83%.
Key takeaways:
Despite the renewed optimism, there is still a lot of uncertainty around the economy with a Trump Presidency, which could reshape the current trade and political order.
While we wait for his policies to unfold, we continue to recommend an exposure to the US economy due to its resilience.
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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