MPC calls for rebasing of Nigeria’s GDP 

27 March 2019: The CBN governor mentioned at yesterday’s MPC meeting that some committee members have called for the rebasing of the nation’s GDP in order to reflect the current prices and economic structure of the country. The National Bureau of Statistics last rebased the GDP in 2013, adopting 2010 as the new base year, an update from the 1990 base year figures. The rebasing exercise at the time was particularly paramount given the substantial development and structural evolution the Nigerian economy had undergone in the time, highlighting the need to capture underreported sectors such as telecommunications, film industry and e-commerce. The resulting c.90% increase in GDP figures moved Nigeria from the second largest to the largest economy in Africa and 26th largest in the world. Ideally, in line with international best practices and recommendation of the UN Statistical Commission, GDP rebasing/re-benchmarking exercises should be carried out every five years to reflect changes in production and consumption pattern. More importantly for Nigeria, the exercise becomes more significant to reflect changes in the overall price structure of the economy, relative prices of commodities as well as production patterns given the sizable cost escalation in the period as well as the economic downturn witnessed in 2016. 

Bond market turns bearish ahead of March auction 

Once again, the CBN refrained from conducting an OMO auction yesterday. Meanwhile, the Interbank Call rate declined 600bps to settle at 16.43%. 

Trading in the T-bills market turned mixed, with sell pressure concentrated on mid-dated maturities. Overall, yields declined 2bps on average, with notable movements on the 86DTM bill (declined 15bps to 11.52%) and the 170DTM bill (advanced 29bps to 13.95%). On the other hand, sentiment was bearish in the bond space, with average yields on benchmark bonds advancing 2bp. Specifically, the yields on the 13.98% FGN FEB 2028 and 12.40% FGN MAR 2036 bonds advanced 1bpsand 4bps respectively to settle at 14.31% and 14.39%. 

We expect the MPC decision to reduce the MPR by 50bps to spur buying activity in the bond market today. That said, activity should be tampered by the March Bond Auction, where the DMO would be offering ?100 billion across the 5-year, 7-year and 10-year bonds. Meanwhile, we foresee a trickle-down effect from the bond space causing yields to decline in the long-dated maturities in the t-bills market. 

ASI moderates 1bp amidst mixed session 

Whilst the equity market closed further in the red yesterday, sell-offs moderated from the previous day’s losses, with the ASI losing a mere 1bp after a mixed market session. However, market activity weakened, with turnover at ?1.7 billion and only 144 million units of shares traded. 

Starting from the positive, the Industrial Goods (+35bps) and Oil & Gas (+49bps) sectors recorded upticks thanks to gains in DANGCEM (+80bps), MOBIL (+180bps) and OANDO (+179bps). Conversely, the Consumer Goods (-54bps) and Banking (-38bps) sectors declined, as losses in NB (-360bps), PZ (-286bps), ETI (-333bps) and UBN (-249bps) erased gains in CADBURY (+960bps) and ZENITHBANK (+93bps). 

Market breadth remained negative with 17 advances to 23 declines. 

Market Outlook 

Whilst we expect underlying market sentiment to remain largely mixed, we expect the MPC decision to reduce rates to spur mild interest in the market, leading to a positive close today. 

Corporate Disclosures 

The Board of Directors of Diamond Bank have announced that following the Court Sanction of the Scheme of Merger between Access Bank and Diamond Bank Plc, the Shareholders of Diamond Bank will receive the Scheme Consideration of cash and shares, as stipulated in the Scheme Document. Shareholders are therefore required to take necessary steps to ensure the accuracy of their personal details with the registrars of Access Bank Plc. 

The Board of Directors of GlaxoSmithKline Consumer Nigeria Plc has notified the Nigerian Stock Exchange and the investing public that the 2018 Audited Financial Statements is currently undergoing review and would be filed with the Exchange on or before 28 March 2019. Consequently, the closed period will remain in place until 24 hours after the release of the Financial Statements to the public 

Reporting for EasyKobo on Tuesday , 26 March 2019 in Lagos, Nigeria

Source: Vetiva Capital Management Limited