Global Economy 

12 November 2018 : The U.S Fed left its interest rate unchanged at 2.25% yesterday, citing the moderation in business investment from the rapid pace witnessed earlier in the year. While the economic outlook looks roughly balanced and inflation as at September (+2.3% YoY) remains near its 2% target, the FED still guided to gradual rate hike in coming months. Elsewhere, the preliminary estimates of U.K’s GDP for Q3 2018 shows that the economy grew by 1.5% YoY – the fastest since 2016 – driven by household spending and stronger exports, both of which tamed the impact of deceleration in business investment. Over in china, trade balance for the month of October printed at a surplus of $34.01 billion driven by a faster growth in exports relative to imports.

Domestic Economy

Following the threat of a nationwide strike by Labor Unions in Nigeria over the relatively low level of the minimum wage, the FGN is reported to have heeded the request of the Labor Unions with the approval of a N30,000 ($83) minimum monthly wage, which is 67% higher than the current minimum wage N18,000 approved in 2010. Although, this proposal is yet to be officially declared by the FGN, we believe this will defeat FG’s effort of curtailing recurrent expenditure. Hence, we see scope for higher fiscal outlay over 2019. Elsewhere, the long-awaited Eurobond issuance has been scheduled to start with a roadshow next week. The FG is looking to raise $2.8 billion of which the proceed is earmarked to fund CAPEX for 2018 fiscal year.

Equities

The Nigeria equity market closed the week positive, expanding slightly by 0.23% WoW driven by the interest in NESTLE (+7.35%) and other bellwether stocks – ZENITHBNK (+3.61%), GUINNESS (+1.37%) and SEPLAT (+6.96%). On a sectorial basis, most sectors closed negative except the Food sector which increased 4.99% WoW reflecting the gains in NESTLE.

Fixed Income

Average yields in the fixed income market continued its upsurge this week, rising 32bps WoW to 14.93%. The upswing in the naira yield curve was driven by elevation at the short and long ends of the curve. On the former, NTB yields rose following liquidity tightening by the CBN from the sale of OMO (N681.2 billion) twice this week. Bond yields towed similar path, rising 13bps WoW to 15.39% on the back of liquidity tightening by CBN and sell off across the long end of the curve.

Reporting for EasyKobo on Monday , 12 November 2018 in Lagos, Nigeria

Source: ARM Securities Limited

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