A Rising Tide Lifts All Boat - H1 2019 Review And H2 Outlook

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Thursday, August 15 2019  10:43 AM / Greenwich Research / Header Image Credit: Greenwich Research 

 

In the first half of the year 2019, the Nigerian economy stabilised, at a growth rate of 2.01%, figures from the most recently released quarterly GDP estimates from the National Bureau of Statistics (NBS) show. The capital outflow last year, sprung on to 2019, as the political uncertainty heightened investor apathy in the general broad economy and the equity market in H1 2019. The economy grew at slow -but-positive rate, although growth remains fragile. The International Monetary Fund (IMF) expects the Nigerian economy to grow by 2.30% in 2019. 

The Broad economy grew by 2.01% in Q1 2019, The Oil sector contracted by –2.40% in Q1 2019, following its Q4 2018 decline by -1.64%. The Non-Sector grew by 2.40% and 2.70% in real terms in Q4 2018 and Q1 2019 respectively. Non-Oil sector growth was driven by growth in the agricultural and information and technology sectors. 

In H1 2019, the Nigeria stock market endured a bearish year, shedding 4.56% (28/06/2019), the bearish tight grip on the market persists after a difficult 2018 ,where the equity market suffered a loss of 17.82%. External headwinds and internal headwinds (i.e. fiscal policy constraints , unstable political environment) affected investor sentiment in the market, although to varying degrees dragged the market down in H1 2019. 

The year 2019 being an election year in Nigeria, heightened investor apathy for investments and heightened concerns in the markets on the back of the likely negative impact of political risk crystallization. Capital flight from the Nigerian equities and fixed income securities eased after the election was concluded, however, Increased FPIs were unable to improve the market bear as most investors looked to play in safer, risk free markets and deluged into the money market markets , depressing yields. 

In the absence of muted fiscal policies from the FGN due to cabinet reshuffles, the Central Bank of Nigeria (CBN) has looked to facilitate growth by intensifying pressures on deposit money banks to increase loans to the real sector. 

Foreign reserves grew by 4.63% in H1 2019, and Nigeria’s Balance of Payments (BOP) remained positive as the Nigerian economy remained a net exporter in USD. (this however, could be misleading due to the exportation of crude and high price from crude receipts).


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