Outlook

Nigerian financial markets were mixed in May: bearish sentiments persisted in the T-bill and FGN bond markets. Stability was the theme in the foreign exchange market, while the Nigerian equity market continued on its upward trajectory.

In addition, the economic outlook appears to be improving, as GDP grew by 3.11% y/y in Q1 2022 (Q4 2021: 3.98 y/y%), its sixth consecutive quarter of growth, led by the non-oil economy. The rise reflected gains associated with the CBN interventions in the agriculture sector, increased mobile services usage, increased economic activities post-lockdowns, and improved credit to the private sector. On the other hand, the oil sector contracted by 26.04% y/y, the eighth consecutive quarterly decline and worst on record, following persistent production challenges.

Elsewhere, the Monetary Policy Committee meeting of the CBN in late May concluded with a surprise decision to hike the Monetary Policy Rate by 150bps to 13.00% pa. The Committee decided to hike interest rates after carefully considering the need to strike a delicate balance between containing inflationary pressures whilst supporting economic recovery and mitigating capital flow reversals associated with global central banks' normalisation of monetary policy.

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