Mounir Gwarzo

This is Nairametrics Outlook for the week ending November 4th, 2017

The week from the rear view

  • Last week, the Central Bank Governor, Godwin Emefiele, pronounced that Nigeria was likely to record single digit inflation rate in 2018. Unsurprisingly, not a lot of people agreed with him and understandably so. Those against point to the continuous rise in food inflation as a reason. Food inflation has remained stubbornly high at above 20%, suggesting that it may take a while longer before we achieve single digit inflation. However, the very few who support the CBN Governor believe the impact of “base effects” will continue to slow down inflation rate barring no surprise increases in electricity tariffs and fuel prices.
  • Embattled Oil and Gas giant, Oando obtained a court injunction against the Security and Exchange Commission barring the commission from technically suspending the trading of its shares and continuing with its proposed forensic investigation. SEC is yet to comment on this injunction.
  • The comeback of the Consumer Kings was confirmed last week after Nestle and Dangote Flour Mills blew the pack with blistering year on year results. Dangote Flour Mills has now wiped away its accumulated losses and can now pay dividend while Nestle produced a 43% YoY rise in revenue for the period ended September 2017.
  • The Nigerian All Share Index closed the week 0.34% down but is still up 2.8% for the month and could close October on the positive for the first time in years. October is typically a bad month for stocks.
  • The race for the acquisition of 9 Mobile stepped up a notch after reports revealed about 13 companies had submitted bids to acquire the embattled company.

Outlook for the week

Nigerian Stock Exchange

  • As mentioned above, Nigerian equities are likely to close on a positive note this month on the back of some of the blistering results we have seen. Results have been largely positive for the financial, industrial and consumer goods sectors indicating that the economy starting to gain some traction. Corporate Revenues for the 34 quoted companies we track have hit about N1.9 trillion in the first 9 months of the year compared to about N1.5 trillion same period last year. Pr-tax profits are up 120% to about N326 billion.
  • Reports that the MSCI has decided to keep Nigeria on its index after placing it under review for a possible demotion to a standalone status for months is also a positive vibe for stocks. They cite the success of the Investor/Exporter Window as a reason. This could likely spur another round of influx of foreign portfolio investment into the equities market.
  • About 44 results were released last week as we wind down to the end of the earnings season. We do not see any major mark down this week, as the next set of dividends will be due later in the month.
  • We should also be on the look out for more deals this week as corporates step up capital raising efforts, particularly from the bond market. We also expect to see more news on the deal side of things as foreign companies look out to snap up local ones.

Macro-economic outlook

  • The Central Bank will be selling Treasury Bills on the 2nd of November, which is on Wednesday this week. The last one-year auction sold for 15.59% or a true yield of 18.4%. 91-day treasury bills currently sold for a rate of 13.1%.
  • It’s a busy week for the National Bureau of Statistics as we expect release of more macro-economic data. They will be releasing FAAC report for September and October 2017 as well as Job creation survey. Others are telecoms data, motor vehicle registration data and fiscal statistics data.
  • The highlight for us are the Jobs Survey, telecoms and motor vehicle data.

Government and regulators

  • The government’s plans to forfeit accounts that are not BVN compliant is still subsisting and banks have less than 7 days to comply. Some NGO’s have joint the suit challenging the government and we expect to see more right groups join forces to challenge the judgement.
  • Interestingly, this has been one polarising decision and it appears that opinions are evenly divided on the government’s plan to claim funds frozen in the accounts. A few others believe this is all part of government’s plan to force people to register BVN as it will be a PR disaster if they were to actually forfeit amount deposited in bank accounts.
  • The FG announced last week that it was pushing on with its plan for an N8tr budget for the year 2018. The government has failed to meet any of its revenue and expenditure targets this year, which is not a surprise. Another Federal Executive Council meeting is expected this week and we expect the government to provide more details, particularly over its debt plans.

World Outlook

  • Oil prices rose above $60 over the weekend signaling perhaps the beginning of another bullish period. Analysts opine the rise in oil prices have been largely influenced by climate disasters in North America and insecurity around the world. This is positive for the Government as it translates to higher revenue earnings. However, it also means subsidy cost will increase, thus a net neutral effect. Nigeria still imports much of its fuel needs.
  • The US President, Donald Trump is expected to announce his pick for the Chairman of the Federal Reserve, the US equivalent of the CBN. This is one decision that could jolt the markets as whoever is selected is bound to have a massive effect in the direction of interest rates. This is perhaps why foreign portfolio investment has tapered a bit as investors worry about rate hikes in the US.

That’s it for the week and do have a most profitable week ahead.

 

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