Global economic growth forecasts adjusted amid inflation concerns, Nigeria’s growth forecast revised to 2.9%. Explore insights into the US, South Africa, and Nigeria’s economic trends, stock market performance, and pension reforms.
In October 2024, business activity in the United States increased due to strong demand and easing price pressures. This growth was evident in both services and manufacturing sectors, with average prices declining to 51.60 and input prices moderating slightly to 58.10. The outlook for economic activity remains cautious due to ongoing inflationary trends and softening demand, aligning with IMF forecasts of a slowdown in Japan’s economic growth from 1.70% in 2023 to 0.30% in 2024.
South Africa‘s annual inflation rate fell for the fourth consecutive month to 3.80% in September 2024, driven by significant price reductions in transport and housing. This sustained downtrend in inflation supports the expectation for further monetary easing by the South African Reserve Bank in the near term.
The 2025 global growth forecast has been adjusted downward from 3.3% to 3.2%, primarily due to anticipated slower growth in China, a major driver of global demand. Emerging Asia is expected to lead the expansion, with semiconductor and electronics sectors thriving on the back of robust investments in artificial intelligence and other advanced technologies. China’s slowing property sector is a critical concern, with implications that extend well beyond its borders. Rising protectionism could exacerbate these risks, leading to heightened trade tensions, reduced market efficiencies, and disruptions across global supply chains.
Emerging and developing economies are expected to experience a more subdued growth trajectory than their advanced counterparts. The IMF’s growth forecast for this group was revised downward by ten basis points to 4.2% for 2024. Inflation is expected to moderate to 5.8% in 2024, down from 6.7% in 2023, and further decline to 4.3% by 2025.
Nigerian Economy
The International Monetary Fund (IMF) revised Nigeria’s 2024 economic growth forecast to 2.90%, down from 3.10% in July and 3.30% in April. This adjustment is attributed to ongoing challenges, including insecurity in oil-producing regions, severe flooding, escalating food insecurity, and weaker-than-expected economic performance in the year’s first half.
The International Monetary Fund’s World Economic Outlook for October 2024 provides a nuanced view of the global economic landscape despite a recovery marked by significant challenges. The IMF projects a steady 3.2% year-on-year growth in 2024 and 2025, but this stability masks pronounced disparities between regions and countries. Critical threats include escalating policy uncertainties, extreme weather events, and the potential intensification of regional conflicts, leading to a downward revision in growth projections for the Middle East, Central Asia, and Sub-Saharan Africa.
Money Market
The primary market auction for T-bills saw a total of N374.67 billion offered across three maturities, with a total subscription of N489.84 billion. Subscription-to-offer and bid-to-cover declined to 1.31x and 1.31, respectively. Stop rates for 91-day, 182-day, and 364-day maturities remained unchanged at 17.00% and 17.50%, respectively. The 364-day maturity rate increased by 79bps to 20.65%. In the secondary market, treasury bills and bond yields increased by 76bps and 1bps to 23.13% and 19.31%, respectively.
The Eurobond market experienced bearish performances due to higher yields across the curve, with an average yield of 9.58%. The steepening trend was observed as shorter yields rose faster than longer maturities, attributed to investors seeking higher yields and profit-taking activities. Expect modest investor activity next week due to attractive maturities potentially spurring buy-ins.
Stock Market
The Nigerian stock market experienced a bullish run this week, with investors pocketing a total gain of N835 billion due to favorable sentiment and strong liquidity inflows. The surge was primarily driven by heightened buying interest in financial and oil & gas stocks as liquidity continued to flow steadily into the market. This capital injection lifted the market capitalization above N60 trillion, pushing the index’s year-to-date return to a robust 33.0%. Trading activity markedly increased, with momentum surging to high levels across various stocks.
The weekly trade value spiked by 16.3% to N85.95 billion, while traded volumes reversed last week’s decline, jumping by 48.03% to 2.14 billion shares executed across 41,217 deals. Sectoral performance was overwhelmingly positive, with gains seen across all major indices except the NGX Consumer Goods Index, which declined by 0.84% due to price pressures on DANGSUGAR, FTNCOCOA, NNFM, and INTERNATIONAL BREWERIES. The NGX Banking Index emerged as the week’s top performer, posting a 7.86% week-on-week increase.
The NGXASI advanced by 1.41% YoY to reach 99,448.91, bringing the YTD performance to 32.99%. This was attributed to gains on oil & gas tickers SEPLAT and OANDO and banking stocks ACCESSCORP and FBNH. Across sectors, NGXBNK, NGXINS, NGXOILGAS, and NGXINDUSTR closed positively, while the NGXCNSMRGDS index closed negatively. Top gainers for the week were EUNISELL, UBA, UNILEVER, ABBEYBDS, CORONATION, and OANDO, while DANGSUGAR, JOHNHOLT, NSLTECH, REGALINS, SCOA, and INTBREW topped the losers’ chart.
Pensions
The National Pension Commission (NPC) has directed all Licensed Pension Fund Administrators (LPFAs) to stop further investments in commercial papers with non-bank capital market operators acting as issuing and placing agents. The Federal Government has mandated that starting November 1, 2024, the Nigerian National Petroleum Corporation Limited (NNPCL) and domestic Liquefied Petroleum Gas (LPG) producers must either halt the export of domestically produced cooking gas or import an equivalent volume of LPG to balance local supply if they choose to export.
Conclusion
The October 2024 WEO presents a balanced global economy characterized by resilience but also facing geopolitical tensions, climate risks, and regional economic imbalances. As international leaders and policymakers respond to these dynamics, a targeted approach to monetary policy is crucial for sustained growth and stability in the coming years.
Positive quarterly corporate earnings reports have boosted market sentiment in banking, industrial goods, and consumer goods sectors, driving the benchmark index closer to the 100,000-point psychological threshold. The current rally is expected to persist, with cautious profit-taking activities potentially creating dips. Investors anticipate further gains as macroeconomic data releases and corporate earnings reports influence short-term trading dynamics.
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