In normal and volatile times, it is always important to maintain an investment portfolio that is diversified across currencies. We normally recommend that at least 20% of an investor’s portfolio should be in foreign currency. An investor’s objective could be to hedge against a potential devaluation of the Naira or earn real returns on investments, given limited high-yielding local currency investment options. The Legacy USD Bond Fund (LUBF) can assist investors in achieving both goals. The LUBF is a mutual fund registered with the Securities and Exchange Commission, Nigeria. The Fund’s primary objective is to generate stable income over the long term. With a minimum of US$1,318.80, investors will gain exposure to Sovereign and Corporate US Dollar Eurobonds issued by the Nigerian government and Nigerian corporates. Also, once an investment has been made, the investor can monitor the value of the investment by clicking here. Please see Product Focus below for further details.

Nigeria records a trade surplus of 1.89trn in 3Q 2023.

Based on a recent report from the National Bureau of Statistics (NBS), Nigeria recorded a trade surplus of N1.89trn in the third quarter of 2023, which is higher than the N1.25trn recorded in the preceding quarter. Total trade was N18.8tn, an increase of 54.66% and 53.16% over the N12.74tn and N12.28tn recorded in 2Q 2023 and 3Q 2022 respectively. Total exports grew to N10.35tn, up by 60.78% compared to the amount recorded in the second quarter of 2023 (N6.43tn) and up by 74.36% when compared to the corresponding quarter in 2022 (N5.93tn). Similarly, total imports amounted to N8.46tn, increasing by 47.70% compared to the value recorded in 2Q 2023 (N5.73tn) and by 33.33% when compared to the value recorded in 3Q 2022 (N6.34tn).

Crude oil is Nigeria's major export product, representing 82.5% (8.54trn) of the country's total exports in 3Q 2023. This is followed by "Natural gas, liquefied" at N1.02 trillion (9.82% of total export) and Urea at N109.68 billion (1.06% of total export). Spain received the highest exports from Nigeria, 12.31% of the country's total exports. This was followed by India with N1.01tn representing 9.81% of the country's total exports, and the Netherlands with ₦988.66 billion and 9.56% of total exports. Our top 5 import trading partners accounting for over 57.18% of the nation's imports were China, Belgium, India, Malta, and the United States. The little contribution of non-oil products to total exports still revealed the nation’s over-reliance on crude oil for export earnings. We reiterate the need to diversify export proceeds away from oil.

The NBS noted that the significant rise in exports and imports in the third quarter of 2023 compared to the preceding and corresponding quarters was largely driven by an increase in trade activities within the period, but we believe the impact of the devaluation on crude export proceeds was a major contributor to the q/q growth in exports given that the devaluation would have only impacted June numbers in 2Q. Crude oil production averaged 1.43mbpd in 3Q 2023, marginally higher than an average of 1.39mbpd recorded in 2Q 2023 while average crude oil price was US$89.19/bbl in 3Q compared with US$75.70/bbl in 2Q 2023. We maintain our year-end projections that the current account (CA) balance will remain positive, riding on the gains from an improved export condition. We believe that the devaluation of the currency will be a disincentive for import activities as imports become more expensive.

• FX: Last week, the Naira traded at ₦789.68US$ from ₦833.36US$ in the interbank market.
• Bonds: In the secondary market for Federal Government of Nigeria (FGN) bonds, yields decreased across most maturities. The yield on the 3-year FGN bond declined by 106 basis points to close at 14.17%, and that on the 30-year FGN bond declined by 4 basis points to 17.68%. Indicative yields on US Dollar Eurobonds issued by Nigerian entities were between 8.97% and 15.31%, depending on maturity.
• Oil: The price of Brent lost 3.76%, from the previous week’s closing price of US$81.96bbl to US$78.88bbl.
• Equities: Last week, the NGX All-Share Index gained 0.27%. The November 2023 YTD return was 39.35%. The Consumer Goods sector declined by 0.47%, on average. NESTLE gained 9.52%, and UACNlost 14.80%. For the Brewers, GUINNESS gained 4.46% and NB lost 2.50%. The Industrial Goods sectorlost 1.23%%, on average WAPCO gained 0.17% and DANGCEM lost 2.44%. The NGX Banking sector gained 1.94%, on average FBNH gained 10.75%% and STANBIC lost 4.54%. In the Agriculture sector, PRESCO and OKOMU remained unchanged.