Weekly Economic and Financial Commentary – WE 19 July 2019


Saturday, July 20, 2019  / 07:30AM / By ARM Research 


Global Economy

China’s economy grew 6.2% YoY in the second quarter of the year – 20 bps lower than the previous quarter (6.4%), marking the slowest growth in 27 years. This was largely driven by slowdown in Fixed Asset Investment (-50bps QoQ to 5.8%) and Industrial Production (Q2 19: 5.6% vs 8.5% in Q1 19). No doubt, the ongoing trade war with the US is clearly taking a toll on the economy as trade data showed declines in exports (-1.3% YoY) and a faster decline in imports (-7.3% YoY). Regardless, releases on industrial production, retail sales, and fixed asset investments all came in quite positive, exceeding market’s expectation and soothing concerns regarding growth in the Asian giant. In the Eurozone, annual inflation in June was revised higher to 1.3% YoY from preliminary estimate of 1.2% (May: 1.2%). The uptick was driven by increased cost of food, alcohol & tobacco (+10 bps to 1.6% YoY) which offset the slower increase in energy (-210 bps to 1.7%) prices. Notably, consumer prices in major countries Among member countries, Romania (3.9%), Hungary (3.4%) and Latvia (3.1%) recorded the highest inflation.  


Domestic Economy 

Headline Inflation for the month of June dipped by 18bps to 11.22% relative to the prior month. Food inflation spearheaded the moderation, declining by 24bps to 13.50% YoY due to softening farm produce – a fallout of increased market supplies observed during the month. Also, core inflation declined by 18bps in June to 8.84% YoY, reflecting slowdown in PMS prices. Elsewhere, approximately three (3) months after the approval of the new minimum wage by the National assembly, President Muhammadu Buhari ordered the immediate implementation of the minimum wage to all federal civil servants earning less than N30,000 monthly, while those earning above the benchmark will get their salaries adjusted after negotiations with the unions.



For the second consecutive week, the NSEASI ended the week negative, declining 2.27% WoW to close at 27,919.5 points. This takes YTD losses to -11.17% and Market capitalization to N13.6 trillion. Further breakdown reveals sectoral losses across board save brewers and food industry which closed in the positive territory. Dissecting the sectoral performances revealed losses in DANGCEM (-1.73%), GUARANTY (-2.34%), STANBIC (-5.00%), FBNH (-5.0%), SEPLAT (-9.43%), ACCESS (-4.48%) and MTNN (-1.27%).


Fixed Income

Averaged fixed income yields touched their lowest point this year, sliding 40bps WoW to 12.23%. This was largely driven by activities at the short end of the curve. Firstly, FG continued its apathy for short dated debt as this week’s auction saw rollover of maturities (N107 billion) at lower stop rates (average stop rate: -77bps to 11.4%). Similarly, despite pent up demand (Subscription level: N475 billion) at this week’s OMO auction, the apex bank only issued N75 billion, leaving the market awash with liquidity. Against this backdrop of liquidity surfeit in the system, average secondary NTB yields (-64bps WoW to 10.85%) tested fresh flows this year. Similarly, average bond yields were 16bps lower to 13.61% led by the 58bps drop in Jul-21 yields.


Take-Away For The Week

Trend in Real Return 

This week, we feature trend in Nigeria's one year OMO rate, Headline inflation rate and real return.

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

Nigeria: Economic Dashboard @ 190719  

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