In November 2024, inflation rose in major economies, such as the U.S., Eurozone, and UK, prompting dovish monetary policy adjustments. In Nigeria, oil production reached 1.33 million barrels per day. The non-oil sector struggled with high borrowing costs and inflation at 33.88%. The Nigerian government is advancing ambitious fiscal plans, including a ₦49.70 trillion budget for 2025. The equities market showed signs of recovery amid general volatility. Read for the latest updates on global and Nigeria’s economy, including inflation rate, monetary policies, and market trends for November 16-22, 2024
In November, inflation trends reversed across major economies, with U.S., Eurozone, and UK inflation increasing due to rising food prices, energy costs, and domestic demand pressures.
Despite this, monetary authorities maintained a dovish stance, cutting rates by 25 basis points.
Global economies showed diverse growth patterns in Q3:2024, with the U.S. economy growing by 2.80% year over year, the UK by 0.10%, and China’s GDP growing 4.60% year over year.
UK inflation rose to 2.30% YoY in October 2024, driven by higher energy costs, particularly household gas and electricity. This increase is expected to persist in the near term and influence the Bank of England’s decision in its upcoming meeting.
The October report of the International Energy Agency (IEA) showed global oil production rose by 0.30% to 102.97 mbpd, driven by Libya’s market return and delayed OPEC+ cuts. During renewed geopolitical tension, Brent Crude and WTI prices increased by 1.20% MoM and 3.20% MoM, respectively.
Nigerian Economy
In Nigeria, oil production averaged 1.33mbpd in Q3:2024, a 9.92% YoY increase from 1.21mbpd in Q3:2023. This growth was supported by higher output from the Utapete field, the reopening of terminals, and government efforts to enhance production and combat oil infrastructure vandalism. The oil sector is expected to experience modest growth in Q4:2024.
However, the non-oil sector faces macroeconomic headwinds, including high borrowing costs, inflationary pressures, and a weakening Naira. These factors constrain expansion, particularly in manufacturing and telecommunications.
Nigeria’s federal government plans to privatise the Ajaokuta Steel Company Limited and its Itakpe Iron Ore Mine to revitalise operations and reduce the nation’s reliance on steel imports. The privatisation is seen as a critical step towards leveraging Nigeria’s mineral resources for sustainable growth and reducing dependence on crude as a major source of government revenue.
The Purchasing Managers’ Index (PMI) reading for Q3:2024 shows a marked improvement in the non-oil sector compared to Q2:2024. Moderate growth is expected in the non-oil sector, supported by financial services and insurance, to offset weaker output in manufacturing and telecommunications.
Exchange & Budget
The Monetary Policy Committee (MPC) is set to re-evaluate monetary policy amid persistent inflationary pressures and exchange rate volatility. Nigeria’s headline inflation is currently at 33.88%, while core inflation has surged to 28.37%.
The gap between parallel and official exchange rates has widened, indicating increased arbitrage activity and stronger demand pressures. Liquidity conditions remain tight, and the U.S. Federal Reserve’s monetary easing continues to influence capital flows and external financing conditions for emerging markets like Nigeria.
Oil prices remain volatile, and the MPC may consider a modest rate hike to stabilise inflation expectations. The Federal Government has secured significant multilateral loans to drive sectoral development and enhance living standards, but these plans may exacerbate Nigeria’s debt burden.
To stimulate economic activity, the government has introduced tax exemptions on pharmaceutical products, energy inputs, and infrastructure projects, but these measures may reduce government revenues and widen the burgeoning fiscal deficit.
The proposed ₦49.70 trillion 2025 budget highlights the government’s expansive fiscal plans, allocating ₦15.81 trillion for debt servicing, ₦14.21 trillion for recurrent expenditures, and ₦16.48 trillion for capital projects. The Committee will likely maintain its hawkish stance, prioritising price stability and addressing the country’s fiscal deficit.
Money Market
The Central Bank of Nigeria (CBN) has tightened liquidity, resulting in a low of ₦492.95 billion as of November 21, 2024. This has reduced available capital, tightening the situation. T-bill rates have remained relatively subdued at earlier auctions but have seen a significant uptick in the last two. Investors have preferred longer-dated instruments, with the CBN recently releasing the T-Bills auction calendar for December, which may exert upward pressure on yields. For fixed-income market participants, with the CBN allotment of ₦3.34 trillion in OMO bills further.
The rising interest rate environment and moderate oil price recovery have further influenced bond pricing, with foreign investors staying on the sidelines and domestic investors seeking to hedge against inflation through long-duration bonds. The elevated yield environment is pivotal in attracting foreign investments to the fixed-income market.
Equities Market
Equity market sentiment has reverted amid policy dynamics, with the Nigerian All-Share Index (NGXASI) declining by 0.92% to close at 97,651.23pts. This brings the year-to-date return to 30.60%, down from 31.81% recorded in September. This decline was primarily driven by selling pressure on key banking stocks and large-cap industrial tickers.
However, November has been characterised by improving sentiment, with the market recording an uptick of +0.33% MtD as of the 20th.
The Nigerian equities market maintained its positive performance, with the NGXASI advanced by +0.16% YoW, bringing YtD performance to 30.83%. The market’s performance was largely bullish across sectors, with NGXINS, NGXCNSMRGDS, NGXINDUSTR, NGXOILGAS, and MERI-TELCO closing in the green zone.
Conclusion
In November, CBN’s Monetary Policy Committee (MPC) is expected to focus on price stability and exchange management due to the persistent upward trend in headline inflation. They may consider a modest rate hike to stabilise inflation expectations and ensure rates remain attractive to boost capital inflows. The committee is expected to maintain its hawkish stance due to elevated fiscal spending, stimulus, and anticipated debt levels for the coming year.
The current elevated yield environment attracts foreign investments to the fixed-income market. Still, narrowing the negative real rate of returns could reinforce the MPC’s inclination towards a hawkish policy stance, prioritising its inflation-targeting mandate over equity market considerations.
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