Naija Lo Wa

FSDH, Meristem Securities, and Lead Capital all released their 2010 Outlook recently. You can download them below.

Here are excerpts from FSDH Securities report. I will add excerpts and notes from the others later.

The Nigerian Economy
The current global economic and financial crises had serious implications for the performance of the Nigerian economy in 2009. We observe that the global economic and financial landscapes are improving at a fast pace and the outlook is good. The Nigerian economy, being part of the global economic village should move in line with the rest of the world. Although there are current and potential political issues that need to be resolved in order to move the country forward, we believe the relevant parties will work together to resolve the crisis before it degenerates to an uncontrollable situation that could cause a collapse of the country’s burgeoning democracy.

The recent rising price of crude oil at the international market with the improved oil production in Nigeria following the Amnesty program of the FG to the militants in the Niger Delta area, in addition to the fact that the unspent portion of 2009 capital budget allocation will be added to 2010 fiscal year should improve the fiscal position of the FG in 2010. The current average oil price to date at US$78.25/b is higher than the 2010 budget benchmark oil price of US$57/b. The 2009 budget is predicated on an oil price assumption of US$57/b, oil production of 2.088mb/d an average exchange rate of N150/US$1 (average so far US$148.22/US$1).

In the year 2010 the outlook of inflation rate in Nigeria will be influenced by the expected fiscal expansion, quantitative easing strategy of the CBN to boost outputs & ensure credit creation in the financial system, supply bottleneck inherent in the economy as a result of the infrastructure deficits and expected rise in commodities prices. All these factors will exert inflationary pressure on the consumer price index in 2010, thus our forecast inflation rate is in the range of 12.5% -14.5% to end the year.

The weakening US Dollar as a result of restructuring of international investment from US Dollar denominated financial instruments to other commodities like Gold may help the value of Naira to appreciate in nominal term against the US Dollar. In addition, the rising price of crude oil at the international market, in the face of improving oil production, may improve the foreign exchange earning capacity of the country with its positive impact on the foreign exchange rate. Given these dynamics, we are persuaded to release a forecast exchange rate for 2010 in the region of N140US$1- N145US$.

- We doubt the ability of the proposed Asset Management Company (AMC) to produce the desired results as we believe a major constraint remains the transfer pricing of toxic assets. We however expect increased acquisition activities in banking industry in 2010.
- Given the structure of the economy which is in favour of Agriculture, and the progress recorded so far in the oil & gas sector, we are comfortable to release a GDP growth rate of between 7% and 8% in 2010.
- As the price of oil improves in the international market and oil output improves in the Niger-Delta area of the country, Nigeria should be able to increase its exports and consequently improve external reserve by about 12.5% to US$53.01bn.
- We expect inter-bank rates to trend downward on account of the expected monetary and fiscal expansion in 2010. Also the CBN guarantee of inter-bank placements and pension funds placements should increase activities in the inter-banks placement and prevent inter-bank liquidity crunch.
- We expect that the FIRS, DMO, FMF and Market Operators will finalize the challenges to the effective take-off of active Corporate Bond issuance and trading before the end of Q1, 2010. This will create another investment outlet for the excess fund in the financial market and reduce excessive oversubscription of the FGN bonds. Thus we expect the prices of FGN Bonds to trend downward and this will improve the yields of the bonds.
- We expect the new FGN Bonds issue for the year 2010 to carry low coupon rates.
Equities Market
Our review of the equities market shows that a number of the highly capitalized stocks across the sectors on the Nigerian Stock Exchange (NSE) are trading at their support prices as their share prices have refused to drop below certain price levels. We are of the opinion that there may still be some unresolved problems in the Nigerian Banking industry, the drastic actions of the CBN, especially in dissolving the board of the troubled banks and making them to make provisions for all non-performing loans have substantially addressed the problems in the sector.
- We expect a dramatic drop in corporate benefits that Nigerian banks will declare for the period ended December 31, 2009. This is expected to improve at the end of the current year as the banks’ profitability improves.
- The commitment of the CBN to guarantee all foreign credit lines to the Nigerian bank will ensure that large companies in Nigeria that have ability to access funds through their banks will continue to enjoy such foreign credits. This will boost the expansion drive of manufacturing companies and petroleum marketing companies and position them for better profitability in the quarters ahead.
As the global economy and financial market improve, we expect a return of some hedge funds and portfolio managers in the Nigerian equities market as we believe it offers some unique opportunities. In addition, the expected drop in interest rate in the money market in 2010 should be a good development for the equities investors.
- Bearing unforeseen circumstances in the nation’s polity that will affect the equities market negatively; we expect the equities market to appreciate in 2010. The factors that should support the expected appreciation in 2010 include: the global recovery that we expect; the improvement we expect at the macroeconomy level in Nigeria and some sectoral recovery prospects that exist for quoted companies. Given these factors, we are persuaded to release a forecast growth rate in the NSE ASI in the region of 15% and 20% to end the year 2010.

Dont forget, you can also read the outlooks from the NSE and Afrinvest here and here.