Archive for the ‘special reports’ Category

FSDH recently released their analysis/review of the Nigerian economy for the first half of the year and their outlook for the rest of the year.

Below is their summary. And you can read the full report below.

Courtesy of Afrinvest, FSDH Securities, IBTC, Access Bank and Lead Capital here are the weekly reports for the week ended October 14th as well as the reports for the past month.

<blockquote>Equity Market Review & Outlook
+ The Nigerian equity market closed the week in bearish territory, despite a marginal rally on the last trading day. Consequently, the  benchmark Index shed 176bps, while the average value of transactions for the week rose by 45.2%, relative to the previous week.
+ We expect equity market activities to remain flat this week as attractive rates in money and fixed income markets will lure investors from this market, despite anticipation that the release of results this week will boost the level of activities.

Money Market Review & Outlook
+  A hike in the MPR last week led to corresponding hikes in money market rates across board. A dearth of liquidity within the system saw rates skyrocket during the week, with slight moderation on Friday as proceeds from AMCON bond sales to the tune of N450.0bn were credited into the system.
+ We expect a decline in system liquidity this week on the back of an upcoming bond auction. Interbank rates should adjust upward by the end of the week, as liquidity within the system eases out.

Foreign Exchange Market Review & Outlook
+ Demand for the Dollar at the official market stood at US$1.3bn, 93.8% higher than the US$685.4m on demand at the single auction in the previous week. The CBN’s offer of US$400.0m at Monday’s auction was 45.7% short of the US$736.9m on demand, depreciating the Naira by 151k to close at N156.91/US$1.00.
+ We expect to see a slight depreciation in the Naira this week at the official market, with an appreciation at the interbank segment. We also expect the CBN to help ease supply gaps for the Greenback at the interbank, in a bid to limit the growing premium between markets.

Bond Market Review & Outlook
+ The 275bps hike in the MPR to 12.0% last week saw yields in the bond market adjust upwards by at least 300bps apiece on all securities at the end of the week. Although inflation for September came in at 10.3%, 100bps above the 9.3% reported for August 2011, these instruments will continue to generate real returns for investors based on current yields.
+ Despite an inflow of N450.0bn from the sale of AMCON bonds by certain banks late last week, liquidity is expected to tighten slightly this week on account of T-bills and bond auctions. This may lead to a further increase in yields, albeit marginally.</blockquote>

Afrinvest Weekly Update - 14th October 2011 (493).
NSE Weekly Report - FSDH - October 14th 2011 (518).
NSE Weekly Report - IBTC - October 14th 2011 (557).

Week Ended October 7th:
Afrinvest Weekly Update 7th October 2011 (461).
NSE Weekly Report - FSDH - October 7th 2011 (472)

Week Ended September 30th:
NSE Weekly Report - Access Bank - Sept 30th 2011 (507).
NSE Weekly Report - FSDH - Sept 30th (473).
NSE Weekly Report - Lead Capital - Sept 30th (438).
NSE Weekly Report - Lead Capital - Sept 30th 2011 (438)

Week Ended September 23rd:
Afrinvest Weekly Update 23rd September 2011 (457).
NSE Weekly Report - Access Bank - Sept 23rd 2011 (460).
NSE Weekly Report - FSDH - Sept 23rd 2011 (472).
NSE Weekly Report - Lead Capital - Sept 23rd 2011 (471)

The Monetary Policy Committee of the Central Bank of Nigeria met for their regular meeting on July 25th and 26th 2011. The 3 major decisions made were:

1. To tighten monetary policy by a majority decision of 10 to 2.
2. To raise the MPR by 75 basis points from 8.0 per cent to 8.75 per cent by a majority vote of 8 members in its favour, 1 member favoured 50 basispoint increase while 3 members voted for holding the MPR at 8.0 per cent.
3. To maintain the corridor at +/- 200 basis points around the MPR.

Below is the summary from the communique of the meeting:

The Monetary Policy Committee (MPC) met on 25th and 26th July, 2011 to review domestic economic conditions during the first half of 2011 and the challenges facing the Nigerian economy against the backdrop of developments in the international economic and financial environment in order to chart the course of monetary policy in the second half of the year.

On the global scene, the Committee noted with concern the enormity of the challenges being faced by the US and euro zone countries as well as the major emerging market economies such as the fiscal position of Brazil, possible real estate bubbles in China and seemingly intractable inflation in  India, which may impact the Nigerian economy adversely through several channels. The economic slowdown and the commodity price inflation in the international economy as well as the rapid increase in prices of some asset classes in some emerging market economies remain serious threats to the global economic recovery. There are continuing widespread threats of inflationary pressures fuelled by the sustained high energy, commodity and food prices in the global economy. Headline inflation in many of the major emerging market economies is now exceeding 6 per cent and is running close to or above central banks’ targets in a number of other larger economies.

The performance of the global financial markets was mixed. Many national currencies in Africa depreciated against the US dollar while in many emerging markets, currencies appreciated vis-à-vis the US dollar during the first half of 2011. Furthermore, most stock markets around the world showed weak recovery during the period due to high inflation, weakening consumer confidence and government finances, particularly in the US and eurozone. The unfolding debt crises in the European periphery could damage confidence and output in the near-term while the US debt and unemployment situation pose grave danger to the international economy given the reserve currency role of the US dollar and the size of the US economy. It is not unlikely that the US will lose its AAA rating and actual default is possible unless a deal can be worked out between the White house and the Congress.

On the domestic scene, the Committee noted that inflationary pressures which were traceable to the high expenditure levels associated with the April 2011 general elections as well as the effects of rising international energy, commodity and food prices had moderated by June 2011. This development was due in part to the tight monetary policy stance of the Bank since September of 2010. However, the Committee observed that the inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum prices.

Significant injection of liquidity from FAAC in the third quarter coupled with the impact of AMCON recapitalizing intervened banks to the tune of N1.6 trillion will both add to inflationary pressures. The Committee welcomed the favorable growth projections but cautioned that the current security challenges, infrastructural bottlenecks and the uncertainty in the international economy as well as fiscal developments could undermine investors’ confidence and output growth in the near term.

The Committee expressed serious concerns about the continued sluggish growth of credit to the private sector during the first half of the year which is attributed, among other factors, to the heightened credit risk in the real economy as a result of the persisting structural problems occasioned by the inadequate power supply and critical infrastructure deficit. It also observed that the lending rates of deposit money banks (DMBs) remained relatively high.

You can download the full communique below:

MPC JULY COMMUNIQUE NO 77 (411)

And here is the communique from the June meeting:

CBN - MPC Communique No 76 Issued on May 24 2011 (408)

Before the July 25th and 26th meeting, Afrinvest, Access Bank, and Vetiva had released preview documents of the Central Bank’s decision, you can read them below:

Monetary Policy Committe Decision Preview - Access Bank - July 25th 2011 (451).

Monetary Policy Committee Communique - Afrinvest - July 26th 2011 (423).

Monetary Policy Committee Decision Preview - July 2011 - Vetiva (448)

Courtesy of the NSE, Vetiva and Proshare, here are the reports on the performance of the Nigerian Stock Exchange for the month of February.

Monthly Economic Note - Vetiva Research - February 2011 (569).

Monthly NSE Report - Proshare - February 2011 (659).

NSE Summary for February 2011 (968)

Here are outlooks from Afrinvest and Vetiva for the Pharmaceutical, Cement and Banking sectors of the Nigerian economy for 2011:

Afrinvest 2010 Pharmaceutical & Healthcare Sector Update (1520).

Vetiva Research - Cement Sector Study (4780).

Vetiva Research - Nigerian Banking Sector Update - January 2011 (766)

Vetiva Research recently released their Economic Outlook for the Nigerian economy for 2011. It is a very detailed report and the accompanying document includes their underlying assumptions.
Vetiva Research 2011 Economic Outlook (1203).
Vetiva Research - 2011 Outlook and Underlying Assumptions (833)

An excerpt of their outlook for the different sectors of the economy is below:
<blockquote>Sector Outlook

Banking Sector: Risk gives way, eyes on fundamentals
We are overtly upbeat on 2011 earnings, as the key drags on growth fizzle out. Aside our modest outlook on loan growth which is expected to enliven interest income as well as fee and commission books, the steady uptick in the overall yield environment will provide support for appreciable growth in FY’11 earnings over 2010 levels. Our top calls in the sector are ZENITHBANK, ACCESS and FIRSTBANK. These three banks have an expected return of 27%, 25% and 17% respectively.

Consumer Sector: Tough year ahead…efficiency, requisite
The global factor of rising commodity prices, and constrained domestic credit growth will combine to pose challenges for companies within the consumer sector in 2011. It is worthy to note that these stress points would play differently for the sub-sectors within the Consumer industry. Importantly, the ability of consumer companies to improve and sustain production efficiencies would gird against some of these pressures. In the consumer space, we are bullish on Dangote Flour and Flour Mills on the basis of our expected return of 29% and 11% respectively.

Energy Sector: Elections to slow reforms
With far reaching reforms in the pipeline in of the oil, gas and power segments of the Energy industry, electioneering for the April polls seems to be shifting the focus of the legislators, and also the ability of the executive arm of government to focus on implementation. We note that for most segments, less activity on the reforms would be felt pre-election, whilst the Government is likely to put more focus on the pressing issues in the Energy Industry, post-elections. Our top shot in the sector remains Oando, based on our estimated return of 32%.

Infrastructure Sector: Set for mixed realities
Our focus on the building materials sub sector is on the cement producers, as they dominate the infrastructure sector. The outlook for the cement producers follows from our overall expectations of slow infrastructure development. In line with the additional capacities expected to come on stream this year, the sub sector is set to witness a major boost in cement supply. On consumption, we expect some improvement in Q1’11 given the onset of the dry season. The construction sub sector will still be dependent on government capital expenditure. We expect a reduced level of government contract awards and mobilization as focus on elections stalls decision making in government quarters. Notwithstanding the strong fundamentals of the sector, most of the stocks are stretched at current prices. However, we remain bullish on Lafarge WAPCO and Julius Berger based on our estimated potential return of 18% and 14%.

Insurance Sector: Searching for value
With the Nigerian economy forecast to grow at 7.0% in 2011, and given rising income levels and higher risk awareness among the populace, we are cautiously optimistic about the demand for insurance products. However, intense competition with rate undercutting, moderate returns from investments, and adjustments to the new regulatory guidelines is likely to continue to taper short-term profitability. Our favorite in the Insurance space remains Custodian and Allied Insurance based on our estimated return of 32.1%

Capital Markets: High Expectations Amid Uncertainty
Our expectation is that the equity market will close 2011 18% up, with the benchmark index ending the year at 29,246.49. In our view, this base case scenario would be driven by a 30% return by banks,  while Petroleum Marketing and our new Infrastructure (includes building materials and construction companies) sectors are forecast to return 18% and 9% respectively. We expect our new Consumer group to return 15%, however, sub sector forecast puts Food & Beverages at 21%, the Brewers at 12%, while the Conglomerates will throw in a 6% return. As in 2010, we believe the Insurance sector would once again lag the broader market with 2011 return forecast at 5%.

Our Bull case estimate for the equity market performance rises 606 bps above our base case scenario to 24%. Again the banks will lead with a 40% return, Petroleum Marketing and Consumer sectors will follow with 25% and 19% respectively. The Infrastructure sector will post 18% return, while Insurance counters will return 10%.

Our Bear case estimate sees equities returning 10% for the year. This scenario forecasts banks adding 25%, the Petroleum Marketing and Consumer sectors posting gains of 10% and 6% respectively, while the Infrastructure and Insurance sectors will shed 4% and 5% respectively.

Given the expected hyperactivity in local Bond issuances by AMCON and the federal government early in the year, we expect the bond market to continue to attract capital flows as bond  yields would trend   higher in 2011, hence shaving off, only slightly though, some of the potential investments in equities. Stronger still, the uncertainty in the Nigerian Political environment might delay significant investments in the capital markets  further into the year as investors exhibit caution over the outcome of the elections. </blockquote>

Here is Vetiva Research’s review of the economic activities for February 2011.

And here is their outlook:
Vetiva Research Feburary 2011 Monthly Economic Note (485)
<blockquote>Outlook

Inflation
We  expect inflation to trend higher in the short-term thereby piling pressure on the need to  continue raising interest rates. We emphasize “short-term”,  as the drivers of inflation are clearer and more persuasive over this time frame. Fiscal spend in the run up to the April elections, expectations on the back of the  recently approved  N18,000 minimum wage,  high oil prices owing to rising  tensions in the MENA region and,  spiking food prices on the back of adverse weather conditions are a few of the risks somewhat certain to linger up till H1’11. Our  view is that these risks are short-lived,  and we expect  inflation will finish the year in the 10%-11% range.

Interest rates
The lack of clarity on the fiscal direction of the government and the anticipation of higher  oil revenues have pushed  ahead market expectations  of the likely timing and pace of monetary policy tightening. On this assumption, we expect interest rates to edge higher gradually in reaction to the tightening measures. In addition, we anticipate there will be a more dramatic reaction as soon as the  CBN’s  guarantee on interbank market transactions is removed as expected in H1’11.

Exchange rates
Without discounting the possibility of short-lived volatilities, we remain positive on the stability of the  naira on the back of  a steady accretion of reserves and well managed demand  base. We are cautiously optimistic that the withdrawals from the Excess Crude Account (ECA) as seen in 2010 will not recur.

From all indications, oil prices are not a major risk  to  reserve accumulation in 2011  as prices are forecast to remain significantly above the budget benchmark. The major risk we see is the health of oil production volumes, which will depend on the outcome of the April elections.  Another slightly worrying consideration is the devaluation of the US  dollar  which is the world’s reserve currency. The Bloomberg Dollar Index has lost 4.8% and 1.1% in the last three  months,  and one month respectively. There is no gainsaying that the greenback will devalue further in  2011,  as the government is committed to closing its huge deficit gap. It may make sense for the CBN to actively pursue diversification of Nigeria’s reserve currency exposure.</blockquote>

FSDH Securities recently released their Economic and Financial Outlook for 2011. You can download it below.

The minutes from the just concluded meeting of the Central Bank’s monthly Monetary Policy Committee meeting has been released. The excerpts are below:

<blockquote>MPC Decisions
In the light of the above considerations, the Committee is committed to maintaining price stability by pursuing the current policy thrust of monetary tightening in view of the perceived inflation risks in the near term. The Committee took the decision to further tighten monetary policy.  This was a decision taken by a majority of 11:1.  The following measures were approved:
1.  Raise the MPR by 25 basis points from 6.25 per cent to 6.50 per cent with immediate effect (a majority vote of 11:1);
2.  Maintain the symmetric corridor of +/- 200 basis points by 7-5; 4 members voted for asymmetric corridor by 50 basis points increase in Standing Deposit Facility rate;
3.  Raise the Cash Reserve Requirement (CRR) Ratio by 100 basis points from 1.00 per cent to 2.00 per cent with effect from February 1, 2011 with a majority vote of 11:1; and
4.  With effect from March 1, 2011, raise the Liquidity Ratio (LR) by 500 basis points from 25.00 per cent to 30.00 per cent with a majority vote of 11:1.</blockquote>

And you can download the full minutes below.

Below is the excerpt from Stanbic IBTC’s Quarterly Review for Q4 2010 and their outlook for 2011. You can download the full report below.

Below is the Official NSE 2010 Market Review and 2011 Outlook. Some points of note:

  • Mixed performance by listed companies
  • Declining income and savings
  • Absence of margin facilities
  • Reduction of bank exposure to margin loans
  • Continued banking reforms
  • AMCON commenced operations
  • GDP growth averaged 7.6% with oil contributing 84% of GDP
  • Government revenue was N5,297.18 billion which was 11% below budget requirement
  • Inflation was at 12.8% as of Nov 2010
  • 93.3billion shares with a value of N797.55billion traded
  • Average of 377million shares worth N3.2billion traded daily
  • Zenith Bank, First Bank, GTBank, UBA and Access Banks were the most traded
  • 2011 growth projected to be 7 – 7.4%
  • Big risk of inflation

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