Naija Lo Wa

FSDH Securities, IBTC Asset Management and Access Bank have all prepared well-written and thorough Economic Reports for Q2 2010. They are worth reading. They also provided outlooks for the rest of the year. Their outlooks were generally positive.  Here is Access bank’s outlook for the rest of the year:

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- GDP growth to stay above 6% in the near – medium term. NBS recently projected that the economy would grow by 7.74% by end-2010, up from 6.66% recorded in 2009. However, the growth trajectory may be undermined by a downward spiral in oil price at the international market, amid weak demand fundamentals, poor state of infrastructure, sustained inflationary pressures and the possibility of breakdown of FG’s Amnesty Programme.

- Moderate inflationary pressures due to CBN’s AMCON, SME and Power Sector Intervention Funds. Expansionary nature of the budget, moderate increase in commodity prices, announcement effect of salary increase for public sector employees and the proposed removal of petroleum products subsidy may pose additional upside risks to price stability. However, inflation appears to be effectively balanced by the continued underperformance of monetary aggregates, well-anchored inflationary expectations, weak aggregate demand, adequate supply of food and petroleum products, as well as stability in Naira’s exchange rate.

- Naira to stay stable against the US Dollar in the near term. CBN remains the largest supplier of foreign exchange in the economy and with expected increases in sale of FX by oil companies following FG’s peace deal with militants, Naira would further stabilize at current levels. Naira’s outlook remains tied to size of external reserves, FX demand, sustained high crude oil price, as well as development in global economy.

- Domestic interest rate to remain stable at current levels. Decline in statutory returns and the erosion of confidence in the market pose upside risks to a stable interest rate outlook. However, the CBN extension of its guarantee for all interbank transactions from December 2010 to June 30, 2011 will likely stabilize rates at current levels.

- Equities market to experience rebound from recent lows. Improved investors’ optimism and expected positive effect of the AMCON arrangement would likely put key indicators of the equities market in an upward trajectory in the medium term, when the company is expected to buy up banks’ toxic assets.

- The bond market is set to receive a boost. We also anticipate an increase in state and corporate bond issues to better fund longer term projects. Also FG has plans to finance N897 billion of its total deficit worth N1.5 trillion from the local bond issues.

- Banks earnings likely to be suppressed, as competition is expected to reduce profit margin, especially with respect to interest rate spread. A resurgence in massive deposit mobilization drive may distort the relatively stable interest rates in the money market.</blockquote>