The month of August has come and gone and as expected the stock market ended the week on a negative note. For the first time since April, the All Share Index, closed on a negative note after stocks slipped by 0.98% month to date. In fact, apart from the NSE 30 index, all other sub-indexes posted losses for the month of August. It’s important to note that the month of August has traditionally ended negative for Nigerian stocks, gaining only once in about 12 years.
On the macro-economic front, the National Bureau of Statistics reported that Nigeria’s inflation rate for the month of July 2017 was 16.05% maintaining its 6th month streak of a drop in year on year inflation rate. The bureau also reported that Nigeria’s capital importation for the second quarter of 2017 was $1.79 billion compared to $908m.
Another good news we got from the data standpoint was that of the Purchasers Managers index. The index is also up 53.5%, the fifth consecutive month above the 50 point benchmark, indicating that confidence is getting restored in the manufacturing sector.
Not a lot occurred this month on the macro-economic front, except of course the return of President Buhari and the controversy trailing the appointment of top executives of the NNPC.
The week ahead
The National Bureau of Statistics will be releasing it second quarter GDP report on Tuesday. The much awaited reported is likely to confirm that Nigeria is now out of recession. If the report does indeed confirm that Nigeria is out of recession, then we would expect to see a rash of boisterous statements from the APC government. More importantly, the news would likely be welcomed by the international community, particularly portfolio investors, who have been waiting on the sidelines to see if the macro trends does reflect growing optimism in the country. If this week will go down as one of the most significant this year, then the GDP report will be key to that.
The earnings season is well and over and I believe profit taking is now at its tail end. As indicated above, any positives from the GDP report will be passed on to the stock market. If we post a stronger that expected GDP growth rate, like 2%, we won’t be surprised to see another bull run. Focus will have to be on blue chip stocks in the financial sector, consumer goods and industrial sectors. The oil and gas sector could also feature on the list of targeted stocks for investors.
Dividend payments will be made by Red Star Express, Custodian and Allied Insurance and GT Bank this week. If you are a shareholder in these companies then expect to get an alert from your bank.
The naira closed last week relatively stronger after it closed at N366 from an open of N370 to the dollar. We expect the naira to trade at these levels this week as more Nigerians return from the holiday and pilgrimage. More influx from foreign portfolio investors, in the wake of the GDP report, could also strengthen the exchange rate in the NAFEX window.
Lending rates are expected to remain at double digits despite the drop in inflation rate for the month of July 2017. Commercial banks still have one eye at treasury bills and OMO yields which closed 19% for the week. Banks are also hesitant to extend loans and we do not expect news (even if positive) to change the way banks view risks in the economy.
As expected, President Buhari, last week, presided over is first Federal Executive Council meeting in over 3 months. The meeting was held on August 30 with the $5.792 billion 3,050 megawatts Mambilla Hydro-Power project at Gembu in Taraba, approved for construction. Another meeting is expected this week, so we should look forward to more approvals from the President. We should expect to get more clarity on expired oil licenses, rail projects and funding for the natural disaster in Benue State.
There is fear that the latest missile testing by North Korea could spook global markets. Already, the US has responded with harsh words but there seems to be cautious optimism that economic interest will entrench reasoning.
Insecurity: FG to implement town hall meetings to reach a national consensus
The meetings are set to address the twin issues of insecurity and its concomitant effect on national unity and cohesion.
The Federal Government announced the launch of town hall meetings to address the twin issues of insecurity and its concomitant effect on national unity and cohesion.
This was disclosed by the Minister of Information, Lai Mohammed, at the Town Hall Meeting in Kaduna on Thursday, themed “Setting Benchmarks for Enhanced Security and National Unity in Nigeria.”
What the Minister is saying
“The correct starting point towards addressing these myriads of problems is the building of an “elite consensus” on the security, unity, indissolubility, and peaceful existence of Nigeria.
“Such elite consensus had worked in the past. Can we make it work now and proffer solutions in order to stave off the threats to our unity as a nation?” he said.
The Minister disclosed that the meetings are necessary to bring all critical stakeholders together to deliberate on the issues and possibly reach a consensus on the way forward.
“We expect this Town Hall meeting to develop concrete, implementable resolutions because a lot of talks and postulations had taken place with little or no requisite outcome.”
In case you missed it
- Former Vice President, Atiku Abubakar warned that the rising insecurity in Nigeria is a result of rising youth unemployment. He urged Nigeria to tackle out-of-school children cases, pay a monthly stipend to poorer families, incorporate youths who are above school age into massive public works programmes and others.
- Senator Ali Ndume insisted that the Federal Government needs to increase its total military spending to be able to tackle the rising insecurity in Nigeria which has seen a number of school students in 2021 kidnapped by bandits.
IMF lifts 2021 global GDP growth to 6%
The group also warned that economic recoveries are diverging dangerously across and within countries.
The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.
The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.
What the IMF is saying
“The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.
This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.
China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”
On divergent recoveries
The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.
“The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.
“Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.“
For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.
In case you missed it
The International Monetary Fund (IMF) identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.
Nairametrics | Company Earnings
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- Cornerstone Insurance Plc notifies stakeholders of late submission of financial statements.
- NSE approves delisting of 11 Plc shares.
- Berger Paints Nigeria Plc reports a 67% decline in Profits in FY 2020.
- MTN Nigeria raises N73.5 billion from CP Issuance to finance operations.
- Jaiz Bank proposes dividend worth N884 million for shareholders.