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Saturday, February 29, 2020 08:00 AM / Proshare Content
Nigeria: Economic Dashboard @ 280220
Editor's Pick
Source: Cordros Weekly Economic and Market Report -February 28, 2020
Global Economy
Japan's industrial production slipped for the fourth
consecutive month, as output contracted by 2.5% y/y in January 2020. We
highlight that weakened global trade sentiment continues to take a toll on the
country's external sector, as shipments pared by 3.7% y/y. Also, with
projections that the impact of the sale tax hike on consumption will start to
fade, producers appeared optimistic, as inventories - the largest subcomponent - expanded by 3.8% y/y. From a month ago, output expanded by 0.8%. For February,
we expect the trend to remain unchanged as the impact of the fast-rising spread
of coronavirus portends a downside to growth and trading activities.
Nevertheless, we expect the low base of the corresponding period in the prior
year to drive a marginal growth.
According to the Federal Labour Office, German
unemployment unexpectedly fell for a second month, highlighting the resilience
of the labour market to a manufacturing slump and new threats from the
coronavirus outbreak. The number of people out of work dropped by 10,000 in
February to 2.26 million, defying economist predictions for a 4,500 increase.
The jobless rate held at 5.0%, near a record low. The labour market is
expected to remain resilient as some support could be on the way to protect the
economy against further external shocks. If the constitutional mechanism that
restricts the country's debt levels is temporarily suspended, an avenue for
additional fiscal stimulus could be opened up. Extra spending could add to more
than EUR160 billion already allocated through 2023 in areas such as
infrastructure and transportation to keep the economy competitive.
Global markets
Coronavirus panic sent global equities markets
crashing, compounding their worst week since the 2008 global financial crisis.
US (DJIA: -11.1%; S&P: -10.8%) and European (Euro Stoxx: -11.6%; FTSE 100:
-10.8%) shares tumbled into correction territory, as investor fears heightened
over just how much damage the fast-spreading COVID-19 virus will wreak on the
global economy. In Asia, Japanese (Nikkei 225: -9.6%) stocks suffered their
largest weekly decline in four years, while Chinese (CSI 300: -5.0%) stocks suffered
their largest weekly fall since last April. Emerging markets (MSCI EM: -4.9%)
and Frontier markets (MSCI FM: -2.6%) were not immune to the selloffs, with
significant losses in China (-5.0%) and Vietnam (-5.5%) weighing down the
respective indices.
Nigeria
Economy
The National Bureau of Statistics (NBS) published GDP
data, showing that Nigeria's economic growth momentum remained broadly positive
in Q4-2019, as GDP grew by 2.6% y/y (vs. 2.3% y/y in Q3-19), the highest
quarterly figure since Q3-2015. For 2019FY, economic activities expanded by
2.3% y/y (vs. 1.2% y/y in 2018FY). While the non-oil sector (2.3%y/y vs. 1.9%
y/y in Q3-19) continued to show resilience, the oil sector expanded, albeit at
a slower pace of (+6.4% y/y) when compared to the prior quarter (+6.5% y/y).
For Q1-20, we project a marginal growth in the oil sector, on account of (1)
high base from the corresponding period in the prior year and (2) our
expectation of compliance with OPEC's production allocation to Nigeria. Thus,
we project crude oil production at 2.03mb/d, which translates to a growth
estimate of 0.8% y/y. The non-oil sector growth is expected to remain positive,
albeit at a slower pace of 2.1% y/y. Overall, we project growth of 2.1% y/y for
Q1-2020.
According to the November 2019 Monthly Financial and
Operations Report by the NNPC, Nigeria's crude production (oil and condensates)
declined by 0.8% m/m to 2.05 mb/d in October 2019 - 10.9% lower than the 2019
budget estimate of 2.30mb/d. The production decline was attributed to shutdowns
of the Trans-Forcados and Bonny NCTL due to leaks, oil loss, and pipeline
repairs. Meanwhile, petrol subsidy expenses (under-recovery) settled at
NGN608.46 billion as of August 2019 - 6.1% below the total amount expended in
2018 (NGN648.27 billion). At this run-rate, we estimate that under-recovery
would have topped NGN900 billion in 2019. Clearly, the recent crash in oil
price, occasioned by the rising cases of coronavirus, is negative for Nigeria's
public finances as more than 70% of FX earnings are from crude oil sales.
However, lower oil price-induced reduction in subsidy payments should slightly
help limit the impact.
Capital markets
Equities
Nigerian stocks suffered their biggest weekly loss
since April 2019 with investors exiting on increasing regulatory risk in the
banking sector, a slump in oil prices, and as the first case of the Coronavirus
was reported in the country. Consequently, the benchmark index declined by 4.3%
w/w to 26,216.46 points, driven primarily by selloffs in GUARANTY (-14.8%),
MTNN (-5.2%) and NB (-16.4%), and bringing the YTD return (-4.3%) deep into
negative territory for the first time in 2020. Month-to-date, the market
returned -8.1%, the worst monthly loss since January 2016. Analysing the
performance by sectors, the Banking (-11.8%), Insurance (-8.2%), Consumer Goods
(-3.8%), and Oil & Gas (-2.1%) indices all declined. The Industrial Goods
(+1.1%) index was the sole gainer on interest in BUACEMENT (+1.92%).
Amidst continued weak market sentiments, we advise
investors to trade cautiously, taking positions in fundamentally justified
stocks.
Money market & fixed income
Money market
The overnight (OVN) rate expanded by 12.59 ppts, w/w,
to 16.42%. The system was awash with liquidity for most of the week following
inflows from OMO maturities (NGN927.75 billion) and FAAC disbursements
(NGN356.06 billion). However, outflows from OMO (NGN480.00 billion) auction and
CRR debits (c. NGN700 billion) at the end of the week drove the OVN higher w/w.
We expect a contraction in the OVN rate to contract in
the coming week, supported by a boost to system liquidity from OMO inflows
worth NGN232.26 billion on Thursday.
Treasury bills
Activities in the Treasury bills market were bullish
as the average yield across instruments contracted by 92bps to 8.5% on the back
of liquidity-driven demand in the OMO space. The average yield in the OMO
segment of the market contracted by 133bps to 10.6% while the average yield in
the NTB market expanded by 14 bps to 4.0%. At the week's NTB primary auction,
the CBN fully allotted NGN104.12 billion worth of bills - NGN20.37 billion of
the 91-day, NGN31.75 billion of the 182-day and NGN52.00 billion of the 364-day - at respective stop rates of 3.00% (previously 3.00%), 4.00% (previously
4.00%), and 5.70% (previously 6.54%).
We expect the bullish trend to continue in the
Treasury bills market, supported by relatively healthy liquidity.
Bonds
Trading in the FGN bond secondary market was similarly
bullish, as market players looked to re-invest maturities from short-term
instruments at relatively attractive yields. Consequently, the average yield
across instruments contracted by 69bps to close at 9.2%. Yields across the
short (-92bps), mid (-58bps), and long (-28bps) segments of the curve all
contracted due to buying interest in the MAR-2024 (-131bps), FEB-2028 (-70bps),
and JUL-2034 (-53bps) bonds.
We expect sustained demand next week across the bond
yield curve supported by excess system liquidity.
Foreign Exchange
Nigeria's FX reserves declined by USD442.1 million WTD to USD36.33 billion (27th Feb 2019), as the CBN maintained its support for the currency via its weekly FX interventions; USD210.00 million was sold across the different segments of the FX market - USD100.00 million to the Wholesale segment, USD55.00 million to the SMEs segment, and USD55.00 million to the Invisibles segment. Nonetheless, the naira depreciated by 0.3% w/w to NGN365.25/USD at the I&E window but closed flat at NGN360/USD in the parallel market. In the Forwards market, the naira depreciated across the 1-month (-0.2% to NGN367.19/USD) and 3-month (-0.2% to NGN371.38/USD) contracts, but appreciated at the 6-month (+0.2% to NGN377.91/USD) contract. Meanwhile, the 1- year contract was flat at NGN398.88/USD.
Looking ahead, we expect the still healthy foreign reserves to support the CBN's currency defence over H1-20. Further out, the blend of tighter cash inflows, faster pace of capital repatriation, and possible resurgence of speculative attacks on the naira will force the CBN to throw in the towel in our opinion.
Monday, March
02, 2020
The National Bureau of Statistics will on this day release the Daily Energy Generated and Sent out
Q4 2019, Foreign Trade in Goods Statistics (Q4 2019 and Full Year 2019) &
Petroleum Products Imports and Truck out Statistics Q4 2019)
Tuesday,
March 03, 2020
The Nigeria Stock Exchange will on this day
hold a STRATEGIC MEETING at the
Civic Centre, Ozumba Mbadiwe, Victoria Island while the Joint Minds International (JMI) will hold a One-Day
Seminar on Finance Act 2020 with the theme: Finance Act 2020 and
Ease of Doing Business in Nigeria at Muson Center, Ikoyi, Lagos.
Wednesday, March 04,
2020
Vitafoam Nigeria Plc will on this day hold its Annual General Meeting at the Lagos
Sheraton Hotel, Mobalaji Bank Anthony Way, Ikeja, Lagos
Thursday, March 05,
2020
The Convention on
Business Integrity (CBi) under its Business Action Against Corruption Project will on this
day hold its Regulatory Conversations 6.0 (#RC6.0) with the theme "National Identity Number Matter Arising & Implications to Nations
Building" at the Grand Banquet Hall, Civic Centre - Ozumba
Mbadiwe Road, Opposite 1004, Victoria Island Lagos, while AIICO Insurance Plc will on the same day hold its Annual General Meeting at the
MUSON Center, Onikan, Lagos.
The Neimeth International Pharmaceutical Plc will on this day hold its Annual General
Meeting at NECA House,
Plot A2, Hakeem Balogun Street, Alausa Ikeja Lagos while the Agile Nigeria Conference will hold on the same with the theme: Accelerate your Delivery
at the Renaissance Lagos Ikeja Hotel, Lagos.
KPMG and Deliotte will on this day hold
its 2020 Annual Symposium with the theme: Nigerian Tax Laws: Matters Arising at LCCI Exhibition Centre,
10 Nunudeen Olowopopo Road CBD Alausa Ikeja Lagos.
Friday, March 06,
2020
The National Bureau of Statistics will on this
day release the Federation Account Allocation Committee (FAAC) January
2019 Disbursement & Road Transport Data (q4, 2019) while the Connect Nigeria Business Fair 2020 at Tafawa Balewa Square, Lagos Island, Lagos.
Doing Business 2.0 by Africulture GBC Limited will hold on this day with the theme: Business
Development: Offline & Online Integration while Sales Leadership Conference will
hold on the same day with the theme: Driving Revenue Leadership &
Value Muson Center Marina Exit Lagos.
The Open Law Innovation Network will on this day hosts The Global Legal Hackathon with the
theme: The Law and Technology Forum 1.0 in Lagos Nigeria while the
Nigeria Stock Exchange will on the same day hold the 2020 International Women Day
Symposium with the theme: Each for Equal at NSE House, Marina.
Saturday, March 07,
2020
The Nigeria Export Workshop 9.0 (N.E.W) will hold on this day at Lagos Chamber of
Commerce, Ikeja PLOT 10 Dr. Nurudeen Olowopopo Drive, beside Marwa/Mko Garden
Ikeja, Lagos.
Check out our Events Calendar for event details and follow us on Web, TV, APP and Social Media for updates as the week unfolds. Yours to Serve!
Contact for Details:
For further information, enquiry or submission of information, kindly email market@proshareng.com and research@proshareng.com Tel: 0700PROSHARE (070077674273). Call us NOW!
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