Weekly Economic and Financial Commentary – WE 25th Jan, 2019

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Sunday, January 27, 2019    03.45pM / By ARM Research 

 

Global Economy

Data released during the week, showed that the Chinese economy expanded 6.4% YoY (Q3 18: 6.5% YoY) in Q4 2018. The deceleration largely reflects trade disputes with the US and waning domestic demand. Over full year 2018, the Chinese economy decelerated by 20bps to grow by 6.6% (2017: 6.8% YoY) – the slowest pace in almost three decades – following slowdown in industrial output and the services sector a fall-out of the ongoing trade dispute. 

Still in Asia, the Japanese central bank met during the week and voted to leave the key interest rate unchanged at -0.1%, as growth in the economy remain pressured amid crossfires between its major trading partners – US and China. The BOJ also trimmed its fiscal 2019 and 2020 core inflation forecast (the fourth downward review) to 0.9% (from 1.4%) and 1.4% (from 1.5%) respectively.

 

Domestic Economy

At its first monetary policy of the year, the MPC left all policy parameters unchanged (MPR at 14%, CRR: 22.5% and Asymmetric Corridor: -200bps/+500bps) following expectation of slowdown in global economic activity, risk to price level in the near-term and possible threats to gross external reserves from softening crude oil prices. 

On price level, the committee noted the impact of increased electioneering spending and continued disruptions to the food supply from herdsmen attack on consumer prices.

 

Equities

The Nigerian equities market closed positive for the second consecutive week, with the NSE ASI gaining 1.36% WoW to close at 31,426.63 points and market capitalization adding N157 billion. 

This was largely driven by gains in the Banking (+6.46%), Oil & Gas (+3.04%) and Insurance (+1.24%) sectors following buying interest in sector heavy weights: ACCESS: +16.07%, +FBNH: +4.97%, GUARANTY: +7.98% MANSARD: +4.84% OANDO +8.99% and TOTAL +10.00%.

 

Fixed Income

The debt management office released the long-awaited bond issuance calendar during the week, with planned issuance of N400 billion coming higher by 14% YoY compared to same period in the prior year. 

Accordingly, buy sentiment tapered at the long end of the curve with bond yields expanding by 2bps WoW to 15.22%. At the short end of the curve, following CBN’s liquidity squeeze through OMO sales of N786.52 billion (including stabilization securities of N50.24 billion) average NTB yield rose 33bps to 14.76%. Overall, average fixed income jumped 17bps to 14.99%. 

 

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Take-Away For The Wee

 

Figure 1: Total FAAC Allocation to Nigeria States in 2018 (N’billion)

 

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Source: NBS, ARM Research 

 

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Nigeria: Economic Dashboard @ 250119

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Most Recent Weekly Commentaries /Footnotes                                                           

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

2.      Weekly Economic and Financial Commentary – WE 14th Dec, 2018

3.      Weekly Economic and Financial Commentary – WE 07th Dec, 2018

4.      Weekly Economic and Financial Commentary – WE 30th Nov, 2018

5.      Weekly Economic and Financial Commentary - WE 16th Nov, 2018 

 

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