Global Economy

15 March 2019 : The US Consumer Price Index for the month of February released during the week by the Bureau of Labor Statistics showed uptick in headline inflation by 0.2% MoM after three consecutive months of flat MoM growth. However, headline inflation moderated to 1.5% YoY from 1.6% YoY in the previous month due to lower energy prices (-5% YoY) relative to same period in the prior year. Excluding food and energy prices, the core index rose 2.1% YoY (January: 2.2% YoY), 10bps higher than the US Feds target of 2%. Elsewhere in Eu- rope, United Kingdom (U.K) trade deficit expanded to £3.83 billion from £3.45 billion in the prior month following a faster increase in imports (+2.8% MoM to £58.49 billion) rela- tive to exports (2.3% to £54.7 billion).

Domestic Economy

Data released this morning by National Bureau of Statistics revealed that the headline inflation increased by 11.31% YoY in F ebruary, 6bps lower than 11.37% reported in the prior month. In line with our expectation, the moderation stemmed from both food and core indices. On the former, food indices dipped 3bps to 13.47% YoY following moderation in pric- es of farm produce while continuous decline in PMS price (-15.7% YoY) accounted for moderation in the core basket (-11bps to 9.8% YoY). Elsewhere, Q4 2018 balance of payment released by the apex bank showed improvement in Nigeria’s current account balance with a surplus of $1.1 billion in the quarter (relative to a deficit of $1.5 billion in Q3 18) following sturdy growth in trade surplus by 80.8% QoQ to $6.8 billion largely on account of a moderation in imports (-20.7% QoQ to $9.9 billion) compared to growth in exports of 2.8% to $16.7 billion. However, the capital account contracted for the third consecutive quarter to $2.14 billion (25% QoQ), with total flows for 2018 printing at $16.8 billion (+37.7% YoY).

Equities

The equities market closed the week negative, with the NSE ASI shedding 2.45% WoW to close at 31,142.72 points while market capitalization lost N291.5 billion to N11.6 trillion. The downturn was driven by bearish sentiments in the Banking (-4.81%), Brewers (-1.80%), Cement (-2.42%), Personal Care (-1.22%), and Insurance (-0.23%) indices which offset gains in Food (+1.34%) and Oil and Gas (+0.11%) indices. Dissecting the sectoral performance showed sell pressure across bellwether stocks (GUARANTY: -5.09%, ZENITH: - 11.82%, IB: -10.93%, GUINNESS: -4.69%, DANCEM: -2.56%, LAFARGE: -0.77%, PZ: -5.58%, and PRESTIGE: -7.41%).

Fixed Income

Average yields in the fixed income market dipped 31bps WoW to 13.78% following moderation at both ends of the curve. The lower yields at the short end was driven by the conflu- ence of lower stop rates at this week’s NTB auction (average stop rate: -73bps to 12.03%) as well as reduction in OMO rates (~180 Day: -24bps to 13.2%) by the apex bank this week. Consequently, average NTB yields contracted 54bps WoW to 13.36%. Similarly, following investors interest in varying long dated instruments, average bond yields dipped 8bps WoW to 14.20%.

Reporting for EasyKobo on Friday , 15 March 2019 in Lagos, Nigeria

Source: ARM Securities Limited

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