Overview

Naira interest rates were generally stable in June, with the Central Bank of Nigeria determined to keep rates high to combat inflation. Having opined last month that Treasury bill rates are likely to stay at these levels for several months, we now think that the interest rate regime is likely to hold until the end of the year. One reason for this is that inflation is proving stubborn, with prices rising by 33.95% year-on-year for May (April: 33.69%), so the authorities may have insufficient evidence over the coming months to justify rate cuts.

The Nigerian equity market traded in a very narrow range during June, as if holding steady ahead of rights issues by the major listed banks. Taking their combined capital-raising ambitions through rights issues, the market is being asked a lot: but we think the rights issues will succeed in general, given low valuations (steep discounts to book value) and the ability of the largest shareholders to subscribe.

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