Weekly Economic and Financial Commentary - Week Ended Jan 10, 2020

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Saturday, January 011, 2020 / 03:30PM / By ARM Research /Header Image Credit: ARM

 

Global Economy

In November 2019, the US trade deficit decreased by 8.3% MoM ($3.9billion) to $43.1billion (October 2019: $46.9 billion). This decrease came as imports decreased by $2.5 billion to $251.7 billion while ex-ports increased by $1.4 billion to $208.6 billion. Meanwhile, the US trade deficit with China decreased $2.2billion to $25.6billion in November, amid ongoing resolution of the 18-month trade rift. The two coun-tries are expected to sign a phase one trade deal in the coming week. In the 11 months to November, the US trade deficit has dropped $3.9billion to $562.9billion, from similar period in 2018. According to pre-liminary data, inflation in the EU printed at 1.3% in December 2019 (November: 1.0%) - the highest since June. The spike stemmed from the jump in energy prices by 0.2% (-3.2% in November), while food, alcohol & tobacco prices rose 2.0% (November: 1.9%). Breaking it down geographically, there were increases in the major economies; Germany (1.5% vs 1.2% in November), France (1.6% vs 1.2% in Novem-ber) and Italy (0.5% vs 0.2% in November).

 

Domestic Economy 

Updated report from the world bank showed a revision to its growth forecast for Nigeria's economy. According to the report, Nigeria's 2019 GDP was revised lower to 2.0% (prior forecast: 2.1%) and projected to rise slightly by 2.1% in 2020 and remain at the same growth rate till 2022. Precisely, softer external demand, lower crude oil prices and a slower-than previously expected improvement in oil production were drivers for the quell forecast. Meanwhile, the December 2019 minor review of MYTO 2015 (multi-year tariff order) published over the weekend showed average end user allowed electricity tariffs will be slightly increased from N25.3/kwh to N31.05/kwh from April 1st, 2020. However, updates from NERC showed there will be no immediate tariff increase until it holds public and stakeholder consultations. Hence, we await final clarifications from NERC after its consultations to ascertain increase/maintenance or decrease in electricity tariffs.

 

Equities

The bullish sentiments continued this week as the NSE ASI gained 9.07% WoW to close at 29,415.39pts while market capitalization advanced significantly by N2.2 trillion. The boost in market capitalization was largely fuelled by the listing of BUA Cement Plc on the NSE. Precisely, it listed 33.86 billion ordinary shares at N35 per share, making it the third largest company on the bourse. On sectoral performance, gains were seen across Cement (+20.59%), Banking (+8.58%), Telecom (+4.37%), Food (+1.59%) and insurance (+0.47%) transcending losses in the Brewers (-0.17%), Personal care (-5.21%) and Oil & Gas (-0.44%) segments. A further probe revealed gains in DANGCEM (+21.13%), MTNN (+6.42%), FBNH (+15.91%), ACCESS (+6.40%), GUARANTY (+6.15%), UBA (+12.00%), ZENITH (+13.51%), and DANGSUGA (+5.63%) amongst other stocks.

 

Fixed Income

This week, average FI yields were 30bps down WoW, following uniform 30bps declines at both ends of the curve. The fall in bond yields were led by declines across long-tenor bonds: Mar-2036 (-64bps), Apr-2037 (-60bps) & Apr-2049 (-41bps). Investors also showed interests in the Apr-2023 (-44bps) & Jan-2026 (-67bps) bonds. At the NTB segment, there was increased demand at the short-tenor (-40 bps) and mid-tenor (-41 bps) segments which suppressed the selloffs at the long-tenor (+74 bps) bills. Meanwhile, at the OMO auction this week, a total of N411.14 billion was sold against N350billion offered by the CBN. Bulk of the sale occurred at the 1-year bills (N411.04 billion) while N100 million was sold at the 91-day - the first sale in the past five auctions. For the second consecutive auction, there was a slight decline in the 1yr stop rate (-1bp to 13.25%).

 

Take-Away For The Week

 

End user electricity tariffs

 

Following the December 2019 minor review of multi-year tariff order (MYTO), we feature the end user electricity tariff across eleven DisCos. Although the implementation of tariff is uncertain, the chart reveals electricity tariff will increase by 23% to N31.05/kwh (i.e. from 2015 levels to 2020 projections) if implemented.


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Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.


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