Economy & Politics
This week: What to expect from the Nigerian Economy
This is Nairametrics Outlook for the week ending October 28th, 2017.
The week from the rear view
- Last week, Corporate Nigeria was stunned with the news that Nigeria’s leading Oil and Gas company, Oando was suspended from trading on the Nigerian Stock Exchange. The Nigerian Stock Exchange suspended Oando’s shares following an instruction from the Securities and Exchange Commission, SEC. SEC informed investors that its initial investigation had revealed allegations of a Breach of the provisions of the Investments & Securities Act 2007, SEC Code of Corporate Governance for Public Companies, Suspected insider Dealing, Related party transactions not conducted at arm’s length and Discrepancies in the shareholding structure of Oando Plc.
- On the Macro-economic front, we had forecasted a further drop in inflation rate that would be below the 16% ceiling. The National Bureau of Statistics confirmed this as September inflation rate was 15.98%, while food inflation remained stubbornly high at 20.32%.
- Nigerians were again shocked on Saturday, when reports confirmed the Federal Government had obtained a court order to freeze bank accounts that are not BVN compliant. The reactions will likely dominate discourse in the coming days.
Outlook for the week
Nigerian Stock Exchange
- Access Bank and FBN Holdings are expected to dominate headline releases for company results from the financial sector.
- Other major results expected are that of Nigeria Breweries, Seplat, Guinness, Diamond Bank, Stanbic, Flour Mills, to name a few.
- On the dividend front, Guinness Nigeria Plc will be paying dividends on the 26th of October 2017.
- The All Share Index is up 3.2% this month and 36% for the year, however the index slid by 0.71% last week. Despite the fantastic result from Zenith Bank, GT Bank and Dangote Cement, market sentiments did not shift as all 3 stocks failed to appear on the top 10 gainers list.
Macro-economic data
- The National Bureau of Statistics is scheduled to release data on its monthly FAAC allocations.
- They are also expected to release data on the power sector, financial sector, payment channel statistics as well as GDP by payment and expenditure for the 3rd and 4th quarter of 2016.
- None of these are expected to have any significant bearing on markets or the economy.
Government & Regulators
- We expect to get more clarification on the controversy surrounding the court decisions on BVN.
- Debates should continue on Nigeria’s debt status as the government continues to defend its planned quest to increase dollar denominated loans
- Last week, we got wind that the CBN in conjunction with some banks were swapping dollars for Naira denominated T-bills in favour of foreign investors.
- The Securities & Exchange Commission will likely provide more insights into the current investigation of SEC. We won’t be surprise if the current management of Oando is coerced to recuse itself from ongoing investigations.
- There are indications that an impending announcement could be made in the power sector. Industry charter suggest, NERC was considering raising tariffs in line with MYTO requirements.
That’s it for the week and do have a most profitable week ahead.
Economy & Politics
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.
Business
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.
READ: Corruption erodes the constituency for aid programmes and humanitarian relief – IMF
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.”
READ: Nigeria needs structural and monetary policy reforms to unlock potential – IMF
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.
READ: The 4th industrial revolution and the birth of a new international monetary system
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.
