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

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.

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