Weekly Economic and Financial Commentary – WE 21st Dec, 2018

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Saturday, December 22, 2018     09.05AM / By ARM Research 

 

Global Economy

During the week, the Federal Reserve increased the benchmark funds rate for the fourth time this year by 25 bps to 2.25%-2.50%. The FOMC reduced projection for rate hikes in 2019 to two times, compared to three times projected earlier in September. Meanwhile, the United Kingdom and Japanese central banks also met during the week but left their key interest rates unchanged at 0.75% and -0.1%, respectively.

 

Elsewhere, recent estimates of the Q3 GDP numbers for US and Japan were revised during the week to 3.4% and –0.6% YoY from 3.5% and -0.3% (Q2 18: +0.7%).

 

Domestic Economy

President Buhari presented the proposed federal budget for 2019 tagged “the Budget of Continuity” on Wednesday proposing aggregate expenditure of N8.83 trillion (N209 billion shy of the 2018 appropriation act of N9.12 trillion) splits into: non-debt recurrent expenditure of N4.7 trillion (+49% YoY), capital expenditure of N2.86 trillion (-0.34% YoY), debt service of N2 trillion (+6% YoY) and statutory transfers of N492 billion (-7.2% YoY).

 

To implement the proposed 2018 fiscal outlay, the FGN projects retained revenues of N6.9 trillion (-2.8% YoY) splits into: oil revenue of (+22.9% to N3.7 trillion), Non-oil (+0.04% YoY to N1.4 trillion), independent revenues (-42.7% YoY to N644 billion) and other revenues (-24% YoY to N1.2 trillion). Overall, fiscal deficit (excluding government enterprise expenditure and project tied loans) is projected to moderate by 5.2% YoY to N1.9 trillion.

 

Equities

This week, the Nigerian bourse broke its negative trend as it closed on a bullish note, with the ASI appreciating by 0.33% WoW to 30,3773.64 points, and market capitalization gaining N33.65 billion over the week. Sectoral performance showed gains in the Brewers (NB: 2.56%), Cement (DANGCEM: 1.08%, C.C.N.N: 13.38% and LAFARGE: 7.23%), Food (NESTLE: 1.39%, DANGSUGAR: 5.26% and FLOURMILLS: 1.95%), Insurance (MANSARD: 1.01% and CUSTODIAN & ALLIED: 0.98%), and Oil & Gas (MOBIL: 18.01% and FO: 18.05%,). Top gainers for the week were DIAMOND (57.89%) and UNITY (39.13%), while Top losers for the week JAPAUL (-9.09%) AND IKEJA HOTEL (-9.63%).

 

Fixed Income

Average yields in the fixed income market contracted 42bps WoW to 15.01% following moderation at the short and long ends of the curve amid pent up liquidity in the system (~N269 billion as at Thursday) for most part of the week despite mop up of N531.86 billion via OMO auctions (included stabilization securities worth N195.5 billion).

 

At the bond auction during the week, a total of N5.75 billion was sold at stop rates of 10-year: -33bps to 15.50%, 5-year: +25bps to 15.25% and 7-year: flat at 15.50%. Following news of the merger between Access and Diamond Bank, yield on DIAMOND 2019 Eurobond contracted by 591bps WoW to 20.1%. 

 

Take-Away For The Week

 

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Source: NBS, ARM Research

 

 

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Nigeria: Economic Dashboard @ 211218

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