Macro-economic update of week of 22 October 2018   

Global Economy 

 

29 October 2018 : Preliminary estimate of the U.S Q3 18 GDP printed at 3.5% (Q3 17: 2.8%), higher than the Bloomberg estimate of 3.0% - albeit lower than the 4.2% growth rate reported in Q2 18. Consumer spending – which is the largest component of GDP – grew 4% YoY to reach the highest level last seen in Q4 14, offsetting the 7.9% decline in business spending. Elsewhere, the central bank of Canada raised its benchmark interest rate this week by 25bps to 1.75%, in a move aimed at slowing the rate of growth in inflation to its long-term target of 2% from September 2018 level of 2.2%.


Domestic Economy


The Federal Executive Council (FEC) on Wednesday approved the 2019-2021 Medium-Term Expenditure Framework and Fiscal Strategy Paper which outlined FG’s fiscal strategies and macroeconomic projections for 2019-20121 as well as framework for the annual budget over the same period. Importantly, the FG expects GDP growth and inflation of 3.0% and 9.98% in 2019 respectively compared to ERGP expectation of 4.5% and 13.39% respectively. The council also approved the government’s proposed N8.73 trillion expenditure for 2019 which is N400 billion lower than 2018 budget. The budget was premised on assumptions of $60/bbl oil price, exchange rate of N305/$ and crude oil production of 2.3 mbpd.


Equities


The Nigeria equity market closed positive for the second consecutive week with the NSE ASI increasing by 0.20% WoW. Most of the gains was seen in the last trading day as the market gained 1.1% on Friday alone. Pertinently, the bullish performance reflected gains in DANGCEM (+0.48%), SEPLAT (+4.86%), TOTAL (+8.2%), STANBIC (+2.2%) and ZENITHBANK (+4.8%). DIAMOND (+20%), FIDELITY (+10.58%) and ROYALEX (+10.0%) were the highest gainers of the week. On a sectoral basis, the Banking (+1.07%), Construction (+5.63%), Insurance (+1.34%), Oil & Gas (+3.19%), Real Estate (+0.37%) and Construction (+0.02%) sectors closed positive while the Brewers (-1.17%), Personal Care (-3.23%) and Food (-0.04%) sectors closed negative.


Fixed Income


Average yields in the Nigeria’s fixed income market rose to a four-week high of 14.67% (+13bps WoW) on the back of elevation at both ends of the curve. For context, in a bid to mop up N284.1 billion worth of OMO bills maturity which hit the system on Thursday, CBN initiated an OMO sale same day, which saw 1-year OMO bill close +50bps higher to 14.5%. This stoke upward pressure in the secondary market, with NTB yields expanding +18bps WoW to 14.26%, as investors repriced in tandem with higher OMO rates. Furthermore, following higher stop rates at this week’s Bond auction, secondary market bond yields edged up 7bps WoW to 15.07%.


Reporting for EasyKobo on Monday ,29 October 2018 in Lagos, Nigeria


Source: ARM Securities Limited


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