Naija Lo Wa

Here is Afrinvest’s response to the recently announce CBN policy changes. I think a substantial part of their analysis is spot on.  Some of the main points are:

1. Limited scope for a manjor price appreciation of the commercial bank sotcks
2. Banks have already indicated their intentions to slow down lending volumes to close to zero. So the benefits of these changes and reductions in lending rates are relatively ineffective
3. A near zero real exchange rate in an economy with an uncertain inflation outlook does not lend itself to medium term currency stability
4. The Naira is expected to come under substantial pressure
5. Commercial banks are rated as Underweight
6. Recommends diversification into non-Naira assets, preferably US$ denominated assets in the short to medium term. Non-financials (particularly Breweries, Beverages and Consumer-related products) continue to offer some scope for value appreciation, despite worsening business/market conditions.