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Saturday,
November 30, 2019 08:00 AM / Proshare Content
Nigeria: Economic Dashboard @ 291119
Editor's Pick
Source:
Cordros Weekly Economic and Market Report - November 29, 2019
Global Economy
This
week, the US' GDP growth was revised to 2.1% y/y, which is stronger than the
prior estimate of 1.9% y/y. We highlight that the upward adjustment largely
stemmed from inventory investments (-2.7% y/y; previously: -3.0% y/y), business
investments (-2.7% y/y; previously: -3.0% y/y), and personal consumption
expenditure. The impact of the foregoing offset the downward revision of
government spending. Despite the upward revision, the overall growth story in
the US remains largely tepid after starting the year on a strong footing (+3.1%
y/y). For the rest of the year, growth is expected to slow further, mostly on
account of the deteriorating external sector pressured by the Sino-US trade
conflict. Should this persist beyond 2019, our prognosis is that the US Fed
will remain hard-pressed to maintain its accommodative policy stance.
Although
Eurozone inflation increased in November (+30bps to 1.0% y/y), it remains a
long way off the ECB CPI target of 2.0%. After moderating in the prior month
(October: -10bps), November inflation reading matched the price growth outturn
in August 2019, following faster increases in the price of food and services.
Similarly, core inflation (Ex. Food and Energy) gathered pace in the same
period, accelerating to 1.3% y/y, from 1.1% in October. Clearly, years of
monetary stimulus packages, together with a negative benchmark rate have done
little to bolster price growth in the bloc. In our view, the elusive
inflationary target should leave the ECB on a tightrope in its next policy
meeting in December 2019. However, we expect the committee to leave the
benchmark rate unchanged.
Global Equities
President
Trump's indication that both the US and China are close to signing a
first-level trade deal bolstered global equity sentiments for much of the week.
To add, the upward revision of the US' Q3-19 GDP further helped strengthen risk
appetite. While the US (DJIA: +1.0%; S&P: +1.4%) market was closed on
Thursday due to the Thanksgiving holiday in the US, it was positive at the end
of the first three sessions of the week. Meanwhile, stronger labour market
figures and faster CPI growth supported the accumulation of risk assets in
Eurozone area (Euro Stoxx: +0.6%; FTSE 100: +1.0%). Elsewhere, sentiments were
mixed in Asia (Nikkei 225: +0.8%; CSI 300: -0.6%), while the positive outturn
in India (+1.1%) and poor performance in Vietnam (-0.7%) supported and dragged
the emerging (MSCI EM: +0.2%) and frontier market (MSCI FM: -0.1%) indies
respectively.
Nigeria
Economy
In
line with our expectation, the Monetary Policy Committee (MPC) elected to keep
all monetary policy parameters at current levels. Shaping the thought of
the committee were; (1) the improving domestic growth, (2) inflation - with the
committee brushing off the recent uptick, believing it's only an initial
reaction to the border closure and thus temporary, and (3) the recent surge in
private sector credit, with the committee underscoring the effectiveness of
recent LDR policies which has seen credit to the private sector increase by
NGN1.10 trillion between June and October 2019. Also, in a bid to boost
domestic agricultural production and bridge the demand-supply gap, the
committee has developed a "Commodity Development Initiative" to finance 10
commodities across the agricultural value chain. Looking ahead, given the (1)
potential of impact on the currency of continued depletion in the foreign
reserves, amidst weakened capital inflows and increased repatriation of
capital, and (2) our expectation for an uptick in inflation, we see limited
scope for a rate adjustment over the short term.
According
to the data released by the National Bureau of Statistics (NBS), capital
importation into the country declined by 7.8% q/q to USD5.37 billion in Q3-19.
The breakdown provided revealed that FDI remained weak, moderating by 10.2% q/q - the fourth consecutive quarter of decline. The weakness of FDI further
underscores the need for practical economic policies and structural reforms to
support growth in key industries. Elsewhere, FPI inflows pared by 30.1% q/q, driven
by softening inflows into the bonds (-71.04% q/q), money market (-26.73% q/q),
and equities (-27.91% q/q). In our view, given global growth concerns,
unimpressive domestic macroeconomic landscape, and persistent policy revisions
that impact confidence in the market, foreign inflows may remain tepid of the
short to medium term.
Domestic
Equities
The
market seems to not have fully shaken off the policy-induced rally from a few
weeks ago, as the All-share index advanced by 0.04% to settle the YTD return at
-14.09%. The market closed positive on 3 of 5 days in the trading week, even as
the volume and value of trades declined precipitously by 18.0% and 23.6%,
respectively. Analysing the performance by sectors, the Consumer Goods sector
supported the performance of the market, after the index gained 4.69%, with the
Industrial Goods index (+0.35%) recording the only other positive performance.
On the flip side, the Banking (-0.68%), Insurance (-0.07%) and Oil & Gas
(-0.43%) indices all recorded losses.
In
our view, despite the marginally positive performance of the market during the
week, the market seems to once again be losing impetus. Consequently, we expect
the market to shed points in the coming week, absent a policy-driven catalyst.
Nonetheless, the case for the market to record some gains over the short to
medium term remains compelling, even as the valuation picture becomes less
compelling.
Money market
Liquidity
in the money market remained robust, averaging NGN344.55 billion during the
week. The overnight (OVN) rate rose by a marginal 7 bps w/w to 4.5% as CBN
partially mopped up NGN353.60 billion in OMO maturities, selling a total of
NGN281.45 billion via OMO auction.
In
the coming week, OMO maturities (NGN344.88 billion) will bolster system
liquidity. Barring any liquidity mop-up by the CBN, we expect a contraction in
the overnight lending rate.
Treasury bills
Trading
in the Treasury bills market remained bullish this week with the average yield
across instruments paring by 67 bps to 11.2%. As with the prior week, most of
the activities were localized to the NTB secondary market, where local
corporates and individuals are the major players. The average yield on NTBs in
the secondary market declined by 136bps to 7.3% as market players looked to
cover lost bids from the NTB primary market auction (PMA) which was
oversubscribed. Yields on OMO bills also pared, declining by 28bps to 13.1% as
eligible market participants looked to invest excess maturities. At the NTB
PMA, instruments worth NGN150.60 billion - NGN20.37 billion of the 91DTM,
NGN19.16 billion of the 182DTM, and NGN111.07 billion of the 364DTM - at
respective stop rates of 6.50% (previously 7.80% auction), 7.20% (previously
9.00% auction) and 8.37% (previously 10.0%).
We
expect trading volumes to start to temper in the NTB market, as the average
yield trends towards the single-digit level. However, the average OMO yield is
expected to remain around the same level, moderately paring in the coming week.
Overall, we expect overall volumes in the market to pare and market
participants to take positions in Treasury bonds as has been witnessed over the
past few weeks.
Bond
Activity
in the bond market was similarly bullish, with demand spurred by the outcome of
the MPC meeting, where the committee reaffirmed the apex bank's policy stance
on the exclusion of local investors from the OMO market. Consequently, average
yield compressed by 27bps to 11.9%. The FEB-2020 bond (-190 bps) recorded the
largest decline in yield, while the APR-2037 bond (+4bps) recorded the largest
increase.
The
recent restrictions to trading in the Treasury bills market have continued to
drive volumes in the Treasury bonds market, as investors have continued to seek
out higher-yielding instruments. We expect this pattern to continue over the
coming week, and so expect the average Treasury bonds yield to pare.
Foreign exchange
Nigeria's
FX reserves continued to pare this week, declining by USD95.98 million WTD (27
Nov 2019) to USD39.83 billion. Meanwhile, the CBN sustained its weekly FX
interventions, selling USD210.00 million 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 0.18% WTD to NGN362.75/USD at the I&E window but
closed flat at NGN360.00/USD at the parallel market. Elsewhere, total turnover
at the I&E window decreased by 34.09% WTD to USD644.77 million, with trades
consummated within the NGN357.00 - 363.00/USD band. In the Forwards market, the
naira weakened across all contracts - 1-month (-0.1% to NGN366.18/USD), 3-month
(-0.3% to NGN373.15/USD), 6-month (-0.2% to NGN383.05/USD) and 1-year (-1.4% to
NGN397.71.70/USD).
Despite
the rate of decline in FX reserves orchestrating fears of possible currency
devaluation, our model suggests that the CBN's has enough ammunition to sustain
its naira defense over 2019 and H1-20.
Monday,
December 02, 2019
The Nigerian Content Development and Monitoring Board will on this day begin its 9th
Practical Nigeria Forum at NCDMB headquarters, Yenagoa, Bayelsa State
while the 234 Finance Mentor Matchup Challenge will hold on
the same day at the Lagos Oriental Hotel.
The National Bureau of Statistics will on this day release the National Agriculture Sample Survey
2018/1019.
Tuesday, December 03, 2019
The Bonds, Loans
and Sukuk Nigeria will on this day hold its Annual Credit Market Event at Eko
Hotel and Suites Lagos while the SME
International Week and Trade Fair will begin on the same day at the National
Theatre Iganmu, Lagos.
Business day will on
this day hold its CEO FORUM with
the theme "Nigeria at Crossroads the
Private Sector Opportunities" at Lagos Continental Hotel Victoria
Island Lagos.
The Chartered Institute of Transport Administration
of Nigeria will on this day begin its 2019
National Transport Summit and Annual General Meeting with the theme "Unlocking
the Potentials of Transportation for Sustainable Development" at Shehu Musa Yar' Adua
Centre Abuja while the National Bureau of Statistics will release the Nigerian Capital Importation (Q3 2019).
Wednesday, December 04, 2019
The Solar Future Nigeria will on this day begin its 2-day Conference
at Eko Hotel and Suites, Victoria Island, Lagos while the Cement Company
of Northern Nigeria Plc will hold its Annual General Meeting at the Transcorp
Hilton Hotel, 1 Aguiyi Ironsi Street, Maitama, Abuja.
The
Nigeria-British Chamber of
Commerce will on this day hold the First Edition of
the NBCC Sharing Experiences Series themed "Building
Institutions" at Oriental Hotel 3, Lekki- Epe Expressway
Victoria Island, Lagos while the National Bureau of Statistics will on this day release the Pension Asset and Membership Data (Q3
2019).
The Nigerian Economic Summit Group will on this day hold a forum on Gender Inclusion.
Thursday, December 05, 2019
The 7th Human Resources
Bootcamp Conference will begin on this day with the
theme Thrive; Digital and Inclusive at the Twin Waters
Entertainment Centre, Water Corporation Road, Oniru, Victoria Island, Lagos.
Friday, December 06, 2019
Africa Future Summit will hold on this day at the Kuramo Waters Close,
Victoria Island, Lagos while Ellah Lakes Plc will hold its Annual General Meeting at Constantial
Hotel, 26 Airport Road, Benin City, Edo State.
The
Nigeria Tech Summit will hold on this day at the YMCA Complex, 77,
Awolowo Road, Ikoyi, 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!
Latest Reports This Past Week
1. Pension Fund Asset Under Management
Stood At N9.58trn As At Q3 2019 - NBS
2. Average Price of 1kg of Rice
Increased By 2.55% YoY to N382.57 in October 2019 - NBS
3. Average Fare For Intercity Journey
Increased By 0.59% To N1,636.86 MoM in October 2019 - NBS
4. 5.09bn Litres of PMS Imported Into
Nigeria in Q3 2019 - NBS
5. FAAC Disburses N693.52bn in October
2019 - NBS
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