Nigeria | NGX

Last week, the domestic equity market maintained its bearish tilt as investors continued to take profit from the bourse in light of weaker sentiments and absence of risk-on triggers. Interestingly, large-cap stocks saw decent sell pressures as BUAFOODS (-3.1% w/w), NESTLE (-2.8%) and MTNN (-0.5%) recorded declines. As a result, the benchmark NGX-All Share Index (NGX-ASI) lost 67bps w/w to print at 46,964.2 points. In addition, YTD return moderated further to settle at 9.9%, with market capitalization printing at N25.3tn. The activity level in the local bourse reflected the overall bearish performance of the local bourse as average volume and average value traded fell 52.0% and 19.6% w /w to print at 235.3mn units and N3.3bn respectively. Also, investor sentiment as measured by market breadth remained weak at 0.5x as 24 stocks appreciated while 44 equities fell.

Access Bank's FY 2021 AUDITED numbers showed a 23.0% y/y growth in Interest Income. Q/q, Interest Income declined 13.5%. The Q/q decline was due to a significant decline in Interest Income on investment securities. Average yield on the bank's assets moderated to 8.6% in FY 2021, from 9.7% in FY 2020. Net Loans were up 29.3% y/y. Interest Expense, on the other hand, was up 32.7% y/y and 16.2% q/q as cost of funds increased gradually through the year. Overall, Net Interest Income was up 14.6% y/y but declined 50.1% in Q4 compared with Q3. Customer Deposits were up 24.5% in December 2021 compared with December 2020. Overall, Net Interest Margins (NIM) declined to 4.3% in FY 2021 from 4.9% in FY 2020.

Nigeria reels from sustained FX illiquidity, with repatriation-related demand largely undermined by unorthodox policy measures. This multi-year FX impasse has resulted in notable responses from Deposit Money Banks (DMBs) and the Central Bank of Nigeria (CBN) in recent months. In particular, DMBs have moved to adopt some or all of the following measures: 1) temporary suspension of international ATM withdrawals and POS payments and 2) the downward review of spending limits on cross-border payments (See figure 1). In our view, these reactions may have been linked to a likely reduction in CBN dollar supply, despite the apex bank's earlier reassurances of its determination to meet genuine dollar demand (through the banks) after the halt of sales to BDCs in July 2021.

GTCO's FY 2021 AUDITED numbers showed an 11.3% y/y decline in Interest Income to N266.9bn, mainly on the back of a decline in yields on fixed income instruments. This came in 3.0% below our estimate of N275.2bn. Q/q, however, Interest Income grew marginally, up 4.2% in Q4 compared to Q3. Net Loans and Advances to Customers grew moderately, up 8.4% in December 2021, compared with December 2020. On the other hand, Interest Expense declined 1.7% y/y to N46. 3bn (4% above our estimate) but increased 8.7% in Q4 compared with Q3. We had modelled a gradual increase in cost of funds through the year and forecast funding cost of 1.8% for FY 2022 from 0.67% in June 2021. Customer Deposits grew strongly in Q4, bringing total deposit growth up 14.3% y/y compared with 6.7% in September 2020. Overall, Net Interest Income was down 13.0% y/y but was up 3.2% in Q4 compared to Q3.

UBA's FY 2021 AUDITED numbers showed a moderate 10.8% y/y growth in Interest Income to N474.3bn (Net loans to customers grew 4.9% y/y). Interest Expense, on the other hand, was down 6.4% y/y but was up 8.1% q/q. The q/q growth reflects the gradual increase in funding costs through 2021. Overall, cost of funds was down to 2.2% in FY 2021 compared with 2.9% in 2020. Customer Deposits were up 12.2% y/y. Net Interest Income was up 22.1% y/y to N316.1bn in December 2021 from N259.5bn in December 2020, broadly in line with our estimates.

Following months of tension, Russian President Vladimir Putin ordered what he termed a "special military operation" against Ukraine on Thursday, 24 February 2022. A full-scale invasion followed, and Ukrainian President Volodymyr Zelenskyy has vowed that his country would defend itself. Based on media reports, Russia now has at least 50% of its estimated 150,000-strong invasion forces in Ukraine. If the war gets prolonged, how does Nigeria stand to gain or lose? Brent oil price passed US$100/bbl. for the first time since 2014 following the announcement of the invasion. From the prospect of continued increase in oil prices to increase in prices of major commodities like wheat and to the movement of funds from equities and fixed income market into the commodities market, Nigeria, an import-dependent country, stands to see significant effects from a prolongation of the crisis. In this report, we postulate our views.