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 to achieve 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$1,824.45, 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.

Modest expansion in private sector credit

The Central Bank of Nigeria (CBN) has sustained efforts to push more credit to the economy. Based on the recently released money and credit statistics, lending to the private sector was up 0.7% m/m, reaching another high of N35.5tn in January 2022 from N35.2tn as of December 2021. Y/y, private sector credit was also up by 15.7% from N30.6tn in January 2021. Likewise, credit to the government improved, up 7.1% m/m and 16.0% y/y to N14.3tn from N13.3tn in December 2021 and N12.3tn in January 2021.

Elsewhere, in the last MPC statement released by the apex bank, the Non-Performing Loan (NPL) ratio of commercial banks was 4.94% as of December 2021, coming below the regulatory benchmark of 5.0% due to sound regulatory oversight by the CBN. Specifically, the apex bank gave forbearance, allowing banks to restructure loans to a few sectors severely affected by the coronavirus pandemic. The forbearance was extended for another year after the initial expiration in 2021. Fortunately, the increase in oil prices in the past year proved supportive, as many of the restructured loans to the oil and gas sector were reported to be meeting the new terms. In our view, the current rally in crude oil prices bodes well for the companies in the oil and gas upstream sector and gives the apex bank sufficient justification not to extend its forbearance measures beyond March 2022. Likewise, other sectors such as agriculture and manufacturing, which took a huge proportion of the credit, have reasonably recovered from the pandemic.

The m/m and y/y expansion in private sector credit reflect the CBN’s continued efforts to revive the ailing economy. The CBN has been relatively successful at supporting output recovery. Moreso, in 2021, the apex bank maintained the benchmark Monetary Policy Rate (MPR) at 11.5%, avoiding any further tightening that could stifle credit growth. That said, the current relatively low yields on investment securities will continue to force many banks to increase lending to the real sector of the economy. Overall, we expect an improvement in loan growth over 2021. We forecast average loan growth of 15% for Tier one banks in 2022.

• FX: Last week, the Naira traded at ₦415.84/US$ from ₦415.86/US$, in the interbank market.
• Bonds: In the secondary market for Federal Government of Nigeria (FGN) bonds, yield decreased across most maturities. The yields on the 3-yr FGN bond decreased by 69 basis points to 7.49%, while that on the 30-yr FGN bond was unchanged at 12.78%. Indicative yields on US Dollar Eurobonds issued by Nigerian entities were between 2.08% and 10.17%, depending on maturity.
• Oil:The price of Brent increased by 20.61%, from the previous week’s closing price of US$97.93bbl to US$118.11bbl.
• Equities: Last week, the NSE All-Share index lost 0.14%. The March 2022 Year-to-date return was 10.64%. The Consumer Goods sector declined by 1.28%, on average. PZ Cussons increased by 2.86%, while Dangote Sugar decreased by 7.65%. For the Brewers, Guinness fell by 4.41%, while Nigerian Breweries was unchanged. The Industrial Goods sector declined by 2.92%, on average. There was no gainer. Lafarge Africa lost 8.75%. The NSE Banking sector shed 2.77%, on average. Stanbic inched higher by 0.43%, while UBA declined by 5.17%. In the Agriculture sector, Presco and Okomu rose by 0.48% and 5.63%, respectively.