Nigeria Economy | |
Nigeria Economy | |
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PROSHARE | |
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Saturday, February 29, 2020 / 03:00PM / By ARM
Research /Header Image Credit:ARM
Global
Economy
The coronavirus, Covid-19, has now
infected more than 83,000 in at least 53 countries. Significant selloffs ensued
across global markets this week, as cases of the virus outside China jolted up.
The S&P 500 which, just last week reached a record high, has slipped into a
correction after falling 12% in 6 days -- on track for its worst week since the
2008 crisis. Stock markets in Japan, China and Europe also went into correction
this week . Instead, investors have flocked into safe havens such as gold - which touched an 8year high of above $1600 recently - and the US 10-yr note
whose yield dropped to a new record low of 1.1%. Brent oil prices slipped 9%
WoW to a 31-month low of 51.05 USD/bbl on concerns of demand. On economic data,
India's GDP expanded at a slower pace of 4.7% YoY in Q4 19 (Q3 20) after growth
in Q3 19 was revised higher to 5.1% from 4.5%. This marks the weakest growth
since Q1 13 and was weighed down by declines in fixed capital formation and
exports, offsetting improvement in private consumption.
Domestic
Economy
Data from the NBS showed Nigeria's economy
expanded moderately by 2.55% YoY in Q4 19, buoyed by growth in non-oil GDP (Q4
19: 2.3% vs Q3 19: 1.8% YoY). Meanwhile, oil GDP grew at a slower pace of 6.4%
YoY relative to the prior quarter (6.5% YoY). The slowdown in oil sector
mirrors reduced crude oil production recorded during the period (Q4 19:
2.00mbpd vs Q3 19: 2.04mbpd) due to improved compliance by Nigeria to the OPEC+
oil production cut. On the other hand, the performance in the non-oil sector
was hinged on growth in Services sector (+50bps to 4.0% YoY) and Manufacturing
(+10bps to 1.2% YoY) while agricultural sector flatlined at 2.3% YoY. For the
services sector, the growth was supported by improvement in ICT and Financial
services sub-sectors. Overall, the Nigerian economy grew by 2.3% YoY over FY 19
which is an improvement from the 1.9% growth reported in 2018. Elsewhere, in a
bid to curb subjective bills unrelated to actual consumption, NERC recently
placed a ceiling on estimated bills issued by Discos to unmetered customers,
pending the supply and installation of meters by Discos to consumers. The
energy cap only apply to R2 (residential-single and 3 phase) and C1 (Commercial - single and 3 phase) customers.
Equities
Yet
another downturn for the equity market with the NSE ASI declining by 4.3% to
26,216.46 points with the total market capitalization rounding off at N13.66
trillion. With Nigeria reporting the first confirmed case of coronavirus in
sub-Saharan Africa, investors alarm over a potential pandemic has deepened
stock market losses for the week. All sectors observed closed at a loss
excluding Cement (+0.59%). The sectorial decline includes: Banking (-12.19%),
Brewers (-13.95%), Oil & Gas (-4.40%), Construction (-3.96%), Telecom
(-3.47%) and Insurance (-3.91%) sector. Meanwhile, major driver of the losses
was observed in stocks like ACCESS (-12.77%), FBNH (-18.26%), STANBIC (-15.6%),
GUARANTY (-14.85%), UBN (-14.47%), STANBIC (-15.58%), NB (-16.41%), OANDO
(-18.18%) MTNN (-5.17%), amongst others.
Here are the stocks we recommend for the
upcoming week: Wapco STRONG BUY (FVE: N23.59), Guaranty Trust Bank Plc - STRONG BUY (FVE: N49.66), Nestle Plc - STRONG BUY (FVE: N1447.39), Seplat Plc - STRONG BUY (FVE: N828.90). Click here for our Weekly Stock
Recommendation.
Fixed Income
Subscription at this week's NTB auction
was the strongest so far this year, at 2.5x (N261.53 billion) the FGN's
offering of N104 billion. Nonetheless, in typical fashion, the FG only sold
what they offered. The surge in de-mand drove average stop rate down 28bps to
4.23%. At the OMO auction, the CBN offered N350 billion worth of bills (in view
of a N927 billion maturity) but sold N480 billion after strong subscription of
N545.23 billion. The 1-yr stop rate also dropped, by 2bps to 13.00%. Meanwhile,
we noted a significant surge in the money market by 14ppts from yesterday to
16% today. Speaking with our sources, we confirmed the apex bank enforced a
N700 billion CRR debit on DMBs today. This comes after news last week suggested
the apex bank would be enforcing discretionary CRR application on banks that
bid at OMO auctions. Meanwhile, at the secondary mar-ket, despite a 14bps WoW
rise in NTB yields to 4.01%, average FI yields fell 28bps to 6.53% as strong
demand for bond led their yields 70bps lower to 9.05%. Short-tenor bonds saw
the biggest interest: March-2025 (-170bps), March-2024 (-131bps), April-2023
(-108bps). Meanwhile, selloffs at the long-tenor ends of the drove the increase
in NTB yields.
Take-Away
For The Week
Loans to private sectors (N'million)
This week, we feature the quantum growth
in loans across various sectors between June 2019 and January 2020. In total,
overall private sector loans increased by N1.9 trillion which helped boost
growth in the finance sector which grew by 20.4% YoY in Q4 19, according to the
latest GDP figures. We expect growth to continue in the finance sector as loans
continue to increase.
Research 234 (1)
2701653 research@armsecurities.com.ng
Nigeria: Economic Dashboard @
280220
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