Saturday,
September 21, 2019 09:00 AM / Proshare Content
Nigeria: Economic Dashboard @ 200919

Editor's Pick
Source:
Cordros Weekly Economic and Market Report –September 20, 2019
Global economy
This week, global central bankers continued to
strike a dovish undertone in an effort to tackle a global macroeconomic
slowdown occasioned by the negative impact of Sino-US trade war, together with
geopolitical crises within the Eurozone and the Middle East. While both the
Bank of Japan (BOJ) and the Bank of England (BOE) left benchmark interest rates
unchanged, the US Fed delivered its second policy rate cut of the year (-25 bps
to a range of 1.75% to 2.00%). The Fed's justification for the rate cut wasn't
entirely different from the July statement, citing the need to support the
benign growth outlook and muted inflationary movements. Looking ahead,
with leading macroeconomic indicators pointing towards a further slowdown in
global growth, bias is for the global monetary policy landscape to remain
accommodative in the near term.
Elsewhere, data from the US commerce department
showed that the US current account deficit improved in Q2-19. Pointedly, the
deficit picture now accounts for 2.4% of GDP, down from 2.6% in the previous
quarter and the record high 6.3% of GDP in Q4-15. Against the negative impact
of global trade protectionism, the US trade deficit worsened in the period as
export (-1.1% q/q) underperformed relative to import (+0.3% q/q). Meanwhile, the
sturdy income receipts were enough to offset the disappointing trade balance,
setting the stage for a 5.9% q/q moderation in the current account
deficit. While the trade war between the US and its largest trading partners
look set to continue to cast shadow on trade balance, we see gains from income
and services providing the needed breather to the overall current account
pictures.
Global markets
Global equities across our coverage universe
were mixed, albeit with a bearish tilt, as worries about a possible global
slowdown still linger. Also, renewed tensions in the Middle East, after an air
attack knocked out a Saudi Arabian oil supply hub last weekend also unnerved
investors. At the twilight of the week, stimulus measures by major central
banks improved sentiments but were unable to offset earlier losses.
Consequently, US (DJIA: -0.5%; S&P: +0.0%) and European (FTSE: -0.4%, Euro
Stoxx: 0.0%) equities were on track to close the week in flat-to-negative
territory. Asian (CSI 300: -0.9%; Nikkei: +0.4%) indices were mixed as China's
stance on overall monetary easing was seen as cautious by investors, with
policymakers remaining reluctant to join a global stimulus wave. Sentiments in
Emerging Markets (MSCI EM: -1.0%) and Frontier Markets (MSCI FM: -1.2%) were
weak, following losses across China and Kuwait (-3.9%), respectively.
Nigeria
Economy
Faced with choice of holding or loosening policy
rate, the Nigeria's monetary policy committee unanimously elected to maintain
status quo by leaving all policy parameters unchanged. The MPR, CRR, and
Liquidity Ratio remained at 13.5%, 22.5%, and 30%, respectively. To our mind,
of all factors competing for attention, heightened capital flights, with its
attendant negative impact on inflation and currency, was at the crux of the
committee's decision. Going forward, against the elevated maturity
profile in Q4 19 (NGN4.1 trillion), together with the shaky crude oil price
outlook, both of which could potentially disrupt the CBN's mandate of currency
and price stability, we see a lower chance of a rate cut through the rest of
the year.
In our July inflation report, we had argued that
the impact of increased farm-produce supplies, due to the green harvest season,
would result in a further deceleration in food prices, and by extension,
headline inflation. In line with our expectations, the headline inflation for
the month of August dipped by 6 bps to 11.02% y/y, the lowest reading since
January 2016. For evidence, the food prices moderated by -22 bps to 13.17% y/y,
following tapered prices across farm produce (-3 bps), processed food (-392
bps) and imported food (-57 bps). Similarly, the core inflation tapered (-12 bps
to 8.68% y/y), following sizeable decline across Alcoholic Beverages, Tobacco,
and Kola (-11 bps) and Clothing and Footwear (-6 bps). For the month
of September, while we expect the impact of the main harvest season, to exert
downward pressure on food prices, we, however, highlight, (1) the partial
border closure, (2) banditry activities, and (3) weather conditions, as notable
upside risks to food inflation. Meanwhile, we see no risk to core inflation in
the near term. Overall, we expect headline inflation to remain flat at 11.02%
y/y for September (0.84% m/m).
Capital markets
Equities
Amidst continued risk off sentiments and the
absence of positive market catalysts, trading in the Nigerian equities market
was volatile, with the ASI alternating between gains and losses through each
trading session this week. Ultimately, the market closed lower week-on-week
(-0.3% to 27,698.69 points) as significant selloffs of market heavyweight,
AIRTELAFRI (-19.0%), offset gains in STANBIC (+22.4%), GUARANTY (+5.3%) and
MTNN (+0.7%), and dragged the YTD loss to 11.87%. Analysing by sectors, the
Insurance (+4.8%), Consumer Goods (+2.2%), Banking (+1.8%) and Oil & Gas
(+0.5%) all recorded gains, while the Industrial Goods (+0.0%), index closed
flat.
Over the coming week, we expect the market to remain
pressured given global risk-off sentiments and weak domestic participation.
Nonetheless, we note that valuations remain attractive while price
deterioration has resulted in expected dividend yields on some stocks rising significantly
to levels on par with yields on Treasury bills. Hence, we advise that long-term
investors consider appropriately timed investments.
Money market & fixed income
Money market
In line with our expectations, the overnight
(OVN) rate remained moderate during the week in line with liquidity dynamics in
the market. However, given the boost to liquidity over the prior week, the OVN
rate settled 617.1ppts lower week-on-week. On the first trading day, the rate
settled 11.6ppts higher at 36.7% as system liquidity became strained. However,
as maturities filtered into the market from the 17th, the rate moderated, first
by 18.1ppts to 18.3%, and then by 2.7ppts to 15.6% on the 18th. However, on the
penultimate trading day of the week, the rate increased by 2.5ppts to settle at
18.1%, as an OMO held by the CBN drained system liquidity.
In the coming week, maturities worth NGN440.17 billion are
expected to hit the system on the 23rd (NGN18.12 billion Treasury bond coupon
from the 13.53 23-MAR-2025 instrument) and 26th (NGN422.05 billion from OMO
maturities). Consequently, we expect the OVN rate to spike at the start of the
week given the negative liquidity position of the market (NGN176.06 billion),
but pare as liquidity conditions improve.
Treasury bills
Activities in the Treasury bills market were
seemingly bearish as the average yield pared by 23bps to settle at 13.6%. In
line with our expectations, the CBN held PMA and OMO auctions to manage system
liquidity. At the CBN held a Treasury bills PMA during the week on the 20th,
when instruments worth NGN179.75 billion were offered to investors. The auction
was oversubscribed and fully allotted for the three tenors on offer - NGN3.00
billion of the 91DTM bill (Bid-to-offer: 1.49x), NGN8.39 billion of the 182DTM
bill (Bid-to-offer: 1.47x), and NGN168.36 billion of the 364DTM bill
(Bid-to-offer: 2.14x) - at respective stop rates of 11.10% (previously 11.10%),
11.80% (previously 11.80%) and 13.30% (previously 12.89%). Also, the CBN
offered instruments worth NGN300.00 billion at the OMO auction, with only the
364-day instrument recording oversubscription and full allotment - NGN1.03
billion of the 91DTM bill (Bid-to-Offer: 0.02x), NGN0.05 billion of the 182DTM
bill (Bid-to-Offer: 0.001x), NGN4941.40 billion of the 364DTM bill
(Bid-to-offer: 2.46x).
We expect increased demand in the secondary market as
investors look to re-invest OMO maturities.
Bond
The trend of trading switched in the bonds
market during the week, as investor demand resulted in yields declining 9 bps.
There were yield declines recorded across the market, save for 6 instruments
which recorded yield expansions. The 12.1493 18-JUL-2034 instrument recorded
the largest decline (-27bps), while the 16.00 29-JUN-2019 instrument recorded
the largest increase (+65bps). The DMO will be holding a primary market
Treasury bonds auction next week, on the 25th of September, when three
instruments, all through re-openings, will be auctioned to investors - 12.75%
FGN APR 2023, 14.55% FGN APR 2029, and 14.80% FGN APR 2049.
We expect trading to have a bearish tilt in the coming week,
as investors position for the primary bonds auction.
Foreign exchange
Following the unrelenting naira assets sell-offs
by offshore investors, the Nigeria's FX reserves declined by USD30 million WTD
to USD42.46 billion (September 18, 2019). Meanwhile, in the absence of
CBN's weekly FX interventions, the naira depreciated by 0.1% w/w to
NGN362.39/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
40.4% WTD to USD687.49 million, with trades executed within the NGN357.50-
363.00/USD band. In the Forwards market, the naira contracted across the
1-month (-0.1% to NGN365.60/USD), 3-month (-0.1% to NGN372.55/USD) and 6- month
(-0.3% to 384.02/USD) contracts. Conversely, 1- year contract was unchanged. At
the commodities market this week, oil price maintained its elevated level from
last week, closing the week at +7.7% w/w to USD64.87bbl.
Despite the continuous depletion of reserves amidst sell-offs
from off-shore investors, we see no risk to naira devaluation in 2019, as we
believe the CBN has more than enough ammunition to sustain its naira defense.
On balance, we expect the naira to remain resilient in the short to
medium-term.

Monday,
September 23, 2019
The Ai Institutional Investment Leaders' Roundtable 2019, in Association
with the 2nd CFA Annual Climate and ESG Asset Owner Summit will hold
on this day at New York, CFA Society New York
while the African Association of Agricultural Economists Conference will hold on the same
day at Sheraton Abuja Hotel, Abuja.
Tuesday, September 24, 2019
The Convention
of Business Integrity will
on this day hold the 4th Regulatory
Conversation at the Incubator Victoria
Island Lagos, while Investing Impact Capital In Africa Alternatives will hold on the same day with the theme: Maximising risk-adjusted returns and impact at 301 Avenue of the
Americas.
The Institute of Directors Nigeria will on this day hold
a Masterclass for Independent
Directors in Lagos Nigeria, while The Chartered Institute of Bankers Nigeria will on the same day
hold the 12th Annual Banking and
Finance Conference with the theme: The Future of the Nigerian Banking
Industry - 360 degree" at Congress Hall, Transcorp Hilton Hotel, Abuja.
The Palm Africa Expo will hold on this day at
International Conference Center Annex, Garki Abuja while, the CIIA Council Meeting will hold on the same
day in Ikoyi Lagos State.
Power Nigeria will hold on this day
with the theme: Energizing Nigeria
at Landmark Center Victoria Island Lagos while, the African Waste Management Exhibition &
Conference (AFRICAN WASTE MANAGEMENT EXPO) will hold on the same day at Landmark Centre,
Lagos.
The IMTC Africa 2019 will hold on this day
with the theme: Explore the
Rapidly Evolving X-Border Finacial Service & Fintech Industry in Africa
at Eko Hotels &
Suites, Lagos, Nigeria.
Wednesday, September 25, 2019
The National Bureau of Statistics will on this day
release the Federation Account Allocation Committee
(FAAC) August 2019 Disbursement), while the Logistics, Transport And Port Management
Conference (LTP Nigeria) by DU & T Consulting will hold on the same
day at Eko
Hotels & Suites, Lagos.
Thursday, September 26, 2019
The Institute of Directors Nigeria, will on this day hold the 2019 Annual Director's Conference
with the theme: African Continental
Free trade Africa Agreement (AFCFTA) at Congress Hall, Transcorp Hilton
Hotel, Abuja, while the Nigerian- South Africa Chamber of Commerce will on the same day hold its September Breakfast Meeting at Orchid
Hall, Eko Hotel and Suites, Plot 1415, Adetokunbo Ademola Street, Victoria
Island, Lagos.
Honeywell Flour Mills Plc will on this day hold
its Annual General Meeting at Civic
Centre, Ozumba Mbadiwe Street, Victoria Island, Lagos, while the Academy Press Plc will on the same day hold its Annual General Meeting at 28/32, Industrial Avenue, Ilupeju Industrial
Estate, Lagos.
The University Press Plc will on this day hold
its Annual General Meeting at
Kakanfo Conference Centre, 1, Nihinlola Street, Joyce B. Road, Off Ring Road,
Ibadan, while e-Tranzact International Plc will on the same day
hold its Annual General Meeting at
The Colonades, Alfred Rewane Road, Ikoyi Lagos.
The Nigeria British Chamber of Commerce will on this day hold
its 3rd Quarter Members Evening
with the theme: Beyond Financing SMES:
Innovation and Collaboration at The Grand Junction, Landmark Tower,
Victoria Island Lagos, while the Lagos Business School will on the same day
hold the LBS Building a Successful and
Sustainable Business at Sheraton,
Ikeja Lagos.
Friday, September 27, 2019
The Annual Young Entrepreneurs Summit &
Awards/Exhibition will hold on this day in Abuja,
while the Fintech & Blockchain Summit will hold on the same
day in Ikoyi, Lagos State.
Saturday, September 28, 2019
The 2nd edition of Jos Tech & Funders Breakfast
Meetup will hold on this day at nHub Nigeria, Jos Plateau

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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