Weekly Economic and Financial Commentary – WE 12 July 2019


Saturday, July 13, 2019  / 10:00AM / By ARM Research 


Global Economy

In U.S, CPI data for the month of June revealed that consumer prices expanded by 1.6% YoY, a moderation from 1.8% recorded in the prior month. The outturn reflects a decline in energy prices, offsetting an increase in food prices. For us, subdued inflation in the U.S coupled with concerns on economic growth further strengthens the case for a rate cut later this month. Elsewhere in China, trade data for the month of June revealed a 1.3% YoY decline in exports – following the tariff hike by US from 10% to 25% which took effect in May. Imports at the other hand declined at a faster pace (-7.3% YoY, driving the country’s trade surplus higher to $50.98billion (May: $41.65 billion). Also, China’s producer price index flatlined in June (May 19: 0.6%) on the back of lower oil prices and weak global demand, fueling concerns about deflation in the economy.   


Domestic Economy 

Earlier this week, President Muhammadu Buhari signed the African continental free trade area (AfCFTA) agreement which came into force on May 30th, 2019, making Nigeria the 53rd country to join the agreement. The agreement aims to achieve a single continental market for goods and services, which will progressively eliminate tariffs on intra-African trade. That said, Nigeria will be unable to benefit from the preferential trade transactions offered by the agreement until the instruments of ratification has been deposited (together with 27 other countries).  Elsewhere, the Central Bank of Nigeria issued a new guideline to the commercial banks on accessing the CBN standing deposit facility (SDF). With the new framework, the allowable daily deposit through the SDF that will be remunerated at the applicable MPR minus 500bps (8.5%) is now capped at N2 billion (previously: N7.5 billion). Additionally, excess funds above the new cap would not be remunerated. The new structure reaffirms CBN’s drive to stimulate economic growth via increased lending to the real sector.



Early this week, the NSE listed the second telecommunication company - Airtel Africa Plc - on its mainboard, listing 3,758,151,504 ordinary shares at an offer price of N363 per ordinary. However, the stock closed the week 11% lower than its listing price at N323.50, reflecting weak investor sentiments. At the end of the week, the Nigerian all share index lost -2.41% to close at 28,566.76 points, while the market capitalization increased by N1.02 trillion due to additional shares from the above stated listing. On sectoral performance, all sectors of the index closed the week in the negative territory, save Banking sector which gained 0.09%.  A further probe into the sectors revealed selloff across various stocks such as NB: -3.97%, DANGCEM: 2.26%, PZ: -10.14%, DANGSUGA: -7.83% and NESTLE: -8.92%. 


Fixed Income

It was a relatively quiet week in the fixed income scene with no auction in the primary market. However, average yields in the secondary market dipped by 34bps WoW to 12.63% with both ends of the curve suffering declines over the course of the week. At the short end, NTB yields were down 51bps to finish at 11.49% representing the lowest weekly close this year. The decline this week was spearheaded by a 118bps drop in the 182-day paper. At the long end, average bond yields printed at 13.77%, a 17bps drop WoW, driven by increased demand for the Feb 2020 instrument.  



Take-Away For The Week

Trend in Nigeria’s total debt stock


This week, we feature the trend in Nigeria's total debt stock over the past two years which shows Nigeria's debt stock has increased 30% over the period from N19trillion in Q1 17 to N25 trillion in Q1 19. Furthermore, in line with the DMO's rebalancing objectives -- aimed at reducing the cost of debt -- the proportion of external debt stock (+86%  to N7.9 trillion)  has increased from 22% to 32%, while the proportion of domestic debt (+14% to N17 trillion) has declined accordingly. 


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

Nigeria: Economic Dashboard @ 120719  


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