The Nigerian financial market experienced significant developments last week, with the Central Bank of Nigeria (CBN) cutting the benchmark interest rate from 26.5% to 23%. This move made holding cash less rewarding, while rising US bond yields made dollar assets more competitive. As a result, investors are advised to pay attention to these competing forces alongside the stock market rally. The rate cut decision was made on Tuesday, and it is essential to note that businesses should not assume their loan rates will fall by the same amount.
The CBN's rate cut drew strong demand for one-year Treasury bills, with Wednesday's auction attracting ₦4.09 trillion in bids for ₦400 billion of 364-day bills. Despite the stop rate falling to 15.89%, investors showed a strong preference for securing longer returns as the income available on new bills declined. Shorter tenors were undersubscribed, indicating a shift in investor sentiment towards longer-term investments.
The Nigerian stock market gained despite a dip on Friday, with the All-Share Index rising 0.92% over the week to 252,113.41 points. Friday's 0.01% decline ended eleven consecutive sessions of gains, although 39 stocks advanced against 27 losers. The index's slight retreat concealed a positive day for more individual stocks, with some energy stocks delivering sharply different returns.
Energy stocks, such as Seplat and TotalEnergies Marketing Nigeria, experienced different performances, with Seplat gaining about 7.3% and TotalEnergies Marketing Nigeria losing 10%. This disparity highlights that crude-price headlines alone cannot explain what investors should expect from either company, as they face different costs and earnings drivers.
Nigeria regained its FTSE Russell Frontier market status on September 21, implementing an earlier announcement. This change improves eligibility for relevant investment mandates, but evidence of actual foreign purchases is still needed before attributing market gains to fresh overseas inflows. Meanwhile, trading in Sterling Financial Holdings was suspended from September 23 for reconciliation ahead of reconstructed shares being listed.
The Naira held steady, with incomplete turnover data, as the reported weighted-average rate was ₦1,329.51 per dollar, against ₦1,329.80 on Monday. However, a published weekly turnover comparison excluded Friday's NFEM figure, supporting a picture of stable pricing but not establishing a complete five-day change in trading activity. US bond yields increased competition for capital, with the US 30-year Treasury yield approaching 5.5% during the week, its highest since 2004.
Oil prices retreated before the weekend, with Brent settling at $104.32, down 2.1% that day, while WTI closed at $92.41. Reported US-Iran talks helped prices retreat, without establishing a peace agreement. For Nigerian producers and fuel-dependent businesses, both supply disruptions and diplomatic developments remain potential sources of abrupt price changes. Additionally, AI's contract boom came with a spending bill, as Akamai announced Anthropic's $11.6 billion, seven-year commitment alongside estimated related capital spending of $5.5 billion.
Key points
- The CBN's rate cut made holding cash less rewarding, while rising US bond yields made dollar assets more competitive.
- Nigeria regained its FTSE Russell Frontier market status, improving eligibility for relevant investment mandates.
- The Naira held steady, with incomplete turnover data, amid stable pricing.
