The Nigerian stock market ran bullish in the previous week, as the benchmark index, ASI recorded its biggest weekly gain in 2022, jumping by 4.25% to close at 53,098.46 points as of May 13, 2022.
Local investors ensured that the market rallied as the market capitalization gained over N1.1 trillion to stand at N28.63 trillion, with stocks like McNichols, Royal Exchange, and Champion Breweries leading the gainers’ list. Meanwhile, investors in the digital asset space recorded significant losses to huge selloffs during the week.
The week saw a shocking downtrend in the crypto market as Terra, a token on the Luna blockchain, crashed selling at less than 2 cents and causing a ripple effect on other crypto assets throughout the week.
On the macro level, Nigeria’s exchange rate depreciated further across all markets. The naira grew weaker at the official market, falling by 0.48% during the week to close at N419 to a dollar (I&E window).
At the peer-to-peer market, the exchange rate fell sharply during the week, trading as high as N607 to a dollar on Thursday before recovering below the N600/$1 threshold while at the black market, the naira traded at an average of N590 to a dollar, based on information from BDC (Bureau De Change) operators.
The nation’s external reserve, which includes assets held by the Central Bank of Nigeria in foreign currencies, continued its setback, losing $326.2 million during the week to close at $39 billion.
Meanwhile, information from the National Bureau of Statistics showed that Nigeria’s household consumption expenditure rose by 11% in 2021 to N108.5 trillion compared to the N97.7 trillion spent in 2020. This implies that Nigerians spent more on household consumption in 2021 when compared to the previous year. This is not surprising, considering that the Nigerian economy recorded a 1.9% contraction in 2020, falling into recession due to the effect of the covid-19 pandemic as the Federal Government ordered movement restrictions across the country in a bid to contain the virus.
Outlook
The National Bureau of Statistics (NBS) is set to release the Consumer Price Index (CPI) report for April 2022. The CPI report shows the level of inflationary pressure in the country and by extension reveals the status of the purchasing power of Nigerians (i.e the value of their earnings). In simple terms, when there is inflation in the economy, it means that your N5,000 today would not be able to buy as much as it did in the previous month. In technical terms, this means that the value of your money has been eroded.
Recall that the inflation figure for March 2022 was 15.92%, which was higher than the rate recorded in the previous month. This uptick was largely driven by an increase in the price of food items according to the NBS.
Food is a major component of the consumer basket in Nigeria, as households in the country spend about 56% of their expenditure on food. This means that an uptick in the price of food items will effectively affect every other area of consumer spending.
Why this is important
As an entrepreneur and business owner in Nigeria, it is of utmost importance to track the performance or movement of the various metrics relating to the economy as this influences business decisions and provides an idea of what is to come in terms of consumer reaction, possible policies and fiscal direction.
