Interest Rate Hike in US, Hold in Nigeria: What Next? – FSDH Market Outlook

Proshare

Saturday, October 06, 2018  15.59PM  / FSDH

 

Here is the monthly Economic and Financial Market Outlook Report for the month of October 2018 from FSDH for your information.

 

The major highlights of the report:

 

Domestic Scene:

  • The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) maintained all the policy rates at its meeting in September, in line with the expectations of FSDH Research
  • The MPC however expressed concerns on some of the pressure points in the economy including high liquidity, rising inflation rate, foreign exchange demand pressure, weak credit growth and sluggish economic growth
  • FSDH Research expects monetary policy response in the form of an increase in the issuance of Open Market operations (OMO) to mop up liquidity
  • The yields on the Nigerian Treasury Bills (NTBs) and Federal Government Bonds may increase. This will prevent capital flight, encourage Foreign Portfolio Investment (FPI). This response presents investment opportunities in Nigeria
  • We expect an increase in CRR in Q4 if there is elevated liquidity in the financial market
  • FSDH Research warns that the Federal Government of Nigeria (FGN) needs to urgently implement policies that will grow and diversify the revenue base of the country to avoid imminent debt crisis
  • Our analysis of the ratio of the interest payment on domestic debt relative to the FGN allocation from the Federal Account Allocation Committee (FAAC) shows that the FGN is spending too much of its revenue to pay interest on loans
  • This leaves the government with little resources to spend on critical sectors of the economy that could support strong growth and maintain a healthy economy to generate revenue
  • The inflation rate rose to 11.23% in August 2018, from 11.14% recorded in July
  • FSDH Research forecasts that inflation rate will trend upwards in September 2018 on account of high food prices largely due to the drop in food supply
  • The persistent demand for foreign exchange in the face of declining inflows, led to a consistent drawdown in the external reserves in September
  • The CBN may be able to maintain short-term stability in the foreign exchange market if the current rising crude oil price is sustained and Nigeria is able to produce and find buyers for all its crude oil
  • We have observed an upward trend in the yield on Nigerian Treasury Bills (NTBs) to attract more foreign inflows into Nigeria. The current yields on the NTBs should also attract more foreign investors and reduce capital flight as foreign investors’ rollover their maturing NTB investments
  • FSDH Research notes that most share prices are in oversold positions and these stocks may soon start to attract domestic bargain-hunting investors

 


Proshare Nigeria Pvt. Ltd.

 

 

International Scene:

  • The Federal Open Market Committee (FOMC) of the US Federal Reserve increased the Federal Funds Rate by 0.25% to a range of 2% to 2.25% on 26 September 2018
  • This development will increase the borrowing cost on any new Dollar denominated loan and provide buying opportunity for the FGN Eurobond as yields increase
  • FSDH Research predicts the FOMC will still announce another rate increase before the end of the year as economic developments support a hike in interest rate

 

 

Kindly  click here and download FSDH’s strategy report for the month of October 2018.

 

 

Proshare Nigeria Pvt. Ltd.


 

Related News

1.       What To Expect From The Markets This Week - 081018

2.      Monetary Policy And Risk Management At A Time Of Low Inflation And Low Unemployment

3.      MPC: Winter Is Coming For The Nigerian Economy

4.      MPC Treads Cautiously As Economic And Political Environment Remains Cumbersome

5.      CBN Communiqué No. 120 of the MPC Meeting – Sep 24-25, 2018

6.      Nigeria Holds Rate at Record High as Price Pressures Mount

7.      Pre-MPC Commentary - Hold Predicted Even Amid Higher Inflation

8.     MPC Preview - Threading the Needle

9.      The History of Nationalised Banks

10.  Considerations and Policy Options - A Hold Decision Appropriate Despite New Pressure Points

11.   MPC Members Moving Towards Tightening

12.  Nigeria to Host 2018 Mid-Year Statutory Meetings of West African Monetary Agency

13.  S&P To Lower ETI Ratings If Significant Increase in Double Leverage Above 120% Is Noticed

14.  Moody’s Set to Downgrade KCB, Co-op and Equity Ratings

15.   Nigeria-Based Zenith Bank ''B and B'' And ''ngA and ngA-1'' Ratings Affirmed; Outlook Stable

16.  Nigeria ''B and B'' And ''ngA and ngA-1'' Ratings Affirmed; Outlook Stable

17.   H2 2018 Consumer Goods Outlook - Topline To Remain Volume Driven

18.  Agro Allied Sector H2 2018 Outlook: Smuggling to Weigh on Earnings

19.  Nigeria’s H1 2018 Macro Review and H2 2018 Outlook

20. Unconventional Monetary Policy Requires Complementary Fiscal Measures

READ MORE:
Related News
SCROLL TO TOP