Weekly Economic and Financial Commentary – WE 26 July 2019


Saturday, July 27, 2019  / 08:00AM / By ARM Research 


Global Economy

The preliminary estimate for US GDP growth was released today showing expansion in US economy  albeit, at a slower rate at 2.1% YoY in Q2 19, from 3.1% in Q119 – ahead of market consensus of 1.8%. Growth over the quarter stemmed largely from the rise in PCE (+4.3%) and increase in government consumption (+5%). However, this was pared by the steep declines in gross private domestic investment (-5.5%) and exports (-5.2%), as well as the uptick in imports by 0.1%. The drag on economic growth mirrored impact of lingering US-China rifts and the general slowdown in the global economy. Elsewhere, European Central Bank (ECB) voted to leave financing operations, marginal lending facility and deposit facility at 0%, 0.25% and -0.40% respectively earlier in the week. However, the ECB stroke a dovish tone, citing that room for monetary easing policy easing via rate cuts and Quantitative could be in the offing.  


Domestic Economy 

At the conclusion of the Monetary Policy Committee (MPC) meeting on Tuesday, the monetary authority left all monetary parameters unchanged, highlighting the need to observe the impact of previous policies aimed at boosting credit to the private sector . The committee also expressed its desire to balance between liquidity surfeit in the system and stimulating economic growth. Elsewhere, the Nigerian National Petroleum Corporation (NNPC) released its financials for the month of May 2019, which showed a 13.05% MoM increase in operating profit to N6.3 billion. Parsing through the numbers, the growth in operating profit reflects marked improvement in the downstream segment which posted a profit of N4.8 billion  (compared to a loss in April: N1.68 billion) as well as a moderate improvement (+11% MoM to N8.2 billion) in its Gas segment operations (Nigerian Gas Company and Nigerian Gas Marketing Company). On other fronts, hinged on prospects for improved FG revenues from higher crude oil prices, IMF revised Nigeria’s growth forecast for 2019 upward by 2bps to 2.3% from its prior projections in April.



This week, Nigerian bourse closed flat from the previous week, with the NSE ASI closing at 27,918.59 pts.  Losses observed in the Banking (-0.49%), Brewers (-0.20%), Telecom (-0.52%), and Insurance Sectors (-0.83%) were muted by gains in the Cement (+0.25%), Personal Care (+0.28%), Food (+2.27%) and Oil & Gas Sectors (+0.84%). Dissecting the sectoral performances revealed losses in GUARANTY (-1.04%), ETI (-6.11%), INTBREW (-18.30%), MTNN (-0.78%) and AIICO (-6.25%), while WAPCO (+1.12%), PZ (+3.45%), NESTLE (+4.00%), UACN (+8.33%), and SEPLAT (+2.08%) led the gains


Fixed Income

Over the week, average fixed income yields rose 22bps WoW to 12.45% spurred by elevation at the short end of the curve. At the short end, following selloff across varying short dated instrument, average NTB yields rose 62bps WoW to 11.47%. Contrarily, at the long end of the curve, amidst massive demand at this week’s FGN bond auction (2x oversubscribed)  average PMA stop rates dipped 800 bps MoM to 13.7%. This paved way for buy sentiments to prevail in the secondary market with secondary market bond yields closing the week 18bps lower to 13.43%.


Take-Away For The Week

Trend in  Nigeria’s Under Recovery 

This week, we feature trend in Nigeria's under recovery (PMS subsidy) over the last one year. 


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Research 234 (1) 2701653  research@armsecurities.com.ng

Nigeria: Economic Dashboard @ 260719  

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