Economic Summary & Global Dynamics


Friday, April 10, 2015 9:12 AM / FDC

March Highlights

        Elections were mostly peaceful

        Results reflected political momentum

        Interest rates remained relatively flat at an average of 12- 15% p.a.

        Average power output from the grid down 5.71% to 3,300mw

        Oil price average was $55.11pb, marginally lower than in February

        GDP growth for Q1 expected to show weakness at 5.26%


        Reduced agric output from North East and central areas

        Weaker consumer and government demand

        Resulting from 30% revenue decline

        FBN PMI for March is down to 55.2 from 56.2 in February

        Second consecutive modest change in PMI reading

      Re-stocking after the election postponement

      Inventory levels declined to 53


      Inflation increased to 8.4%, the 3rd consecutive notch

      Money supply (M2) growth when annualized was -10.23%

      Nominal government revenue shared was up 4.38% to N522.05bn

      Effect of 18% devaluation in March

      External Reserves level declined to $29.79bn

      Discounted for a forward book, net external reserves is approximately $23bn


      CBN has defended the naira with $4.7bn this year

      External reserves import and payments cover now 4.8months

      Excess crude account stagnant at $2bn

      Naira appreciated 13% to N197/$ due to election sentiment and elimination of the fear premium

      Fundamentals remain unchanged and currency will depreciate again

      Increase in dollar supply from election inducements

      MPC left policy unchanged at the March meeting


      CBN frowns at dollarization of economy

      The stock market rallied 4.51% before election to N10.3trn

      Post-election rally brought cumulative gain for 10 days to 22% on April 2

      2015 proposed budget expenditure slashed by 7.76%

      Benchmark oil price cut to $52pb

      Electricity tariff slashed 50%


      Retail sales increased in March especially groceries and food items

      Massive purchases a few days to election - bunker mentality

      5% decline in white products

      Fridges, DVDs and TVs

      Decline also in fabrics and clothing

      Electronically-paid transactions up 31% from 28%

      Cash-to-card ratio now 69:31 (72:28 January)


Credit Ratings & External View

      S&P’s downgraded the Nigerian credit rating to B+ junk status and outlook, stable

      Refers to escalating political risk and dwindling oil revenues

      Fitch affirmed Nigeria’s long term foreign and local currency issuers default rating at BB-

      Lowered the outlook from stable to negative

      Rationale for the outlook revision: medium term political uncertainties

      Erosion of fiscal and external buffers in the face of lower oil prices

      Likely weakening of economic performance


Global Dynamics

      IMF is to publish its world economic outlook at the spring meetings

      We expect a trimming of global growth estimates

      Because of deflationary pressures in Europe

      The Asian Infrastructure Investment Bank is a rival to the World Bank

      More than 40 countries including Britain, Germany, Switzerland, France and Russia have signed up


      Larry Summers says it is the moment the U.S. lost its role as the global underwriter

      U.S. Jobs report shows only 126,000 jobs were created in March

      Down from an average of 324,000 in Q4 2014

      In February the revised job growth was 197,000

      The sudden downturn could complicate the Fed Reserves’ plan to increase interest rates this summer


      World’s big oil companies are expecting to post the worst quarterly results in Q1’15

      In Q4’14 when the average oil price was $77pb, caused carnage

      Many have slashed spending and are cutting jobs

      Royal Dutch Shell and French giant Total SA, are offering shareholders dividends in shares

      The British economy grew faster than estimated at 2.8% in 2014


      Good news for the Tories one month before election which is too close to call

      Bank of England has published the criteria for stress testing seven big banks

      The banks must show that they have adequate capital to withstand hypothetical shocks

      The new tests places greater emphasis on exogenous shocks especially an oil price of $38pb


      Japan recorded zero-inflation in February

      Raising fears that Japan may slip back into deflation despite Abenomics

      Consumer prices in the euro-zone fell by 0.1% year-on-year

      The fourth consecutive month of deflation

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