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Here are outlooks from Afrinvest and Vetiva for the Pharmaceutical, Cement and Banking sectors of the Nigerian economy for 2011:Vetiva Research - Nigerian Banking Sector Update - January 2011 (787)
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 (1222).
Vetiva Research - 2011 Outlook and Underlying Assumptions (851)
An excerpt of their outlook for the different sectors of the economy is below:
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>
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 Vetiva’s Research Report on the Nigerian Brewery Sector and a quick analysis of the top 2 players.
Here is an excerpt from the report:
We update our view on Nigerian brewery sector with NEUTRAL ratings on the 2 biggest players – Nigerian Breweries Plc and Guinness Nigeria Plc with pooled market share of 80%.
- Volume drivers still at work. With a 15m hectolitres (mhl), (2009 est.) according it the second largest in SSA, the Nigerian brewery market, in our estimate, will grow to 23mhl by 2015 premised on the combined impact of beer per capita consumption (PCC) growth (13litres expected vs. 10litres currently), population build-up (2.8% p.a.) and nominal per capita income growth (8.3% p.a.). Consumption of brewed products is intrinsically linked to GDP growth which is rising across SSA economies, with Nigeria expected to deliver aboveaverage growth performance, based on IMF and World Bank forecasts.
- Eyed by the bigwigs… Nigerian brewery sector is increasingly attracting the attention of global majors: SAB Miller, Carlsberg and Castel. These interests re-affirm the growth opportunities embedded in the sector and we expect it to generate a positive development for the sector in terms of volume growth and deeper market penetration.
- …in view of robust investment thesis. The investment case for the Nigerian brewery sector is uncomplicated: the sector is largely dominated by 2 global players, Heineken and Diageo, through their subsidiaries (Nigerian Breweries Plc and Guinness Nigeria Plc respectively); beer consumption is notably at low levels with PCC of 10litres, which is a 56% discount to comparative benchmarks and 40% discount to levels attained in the 1980s; medium to long-term economic outlook is healthy at 5%-plus real GDP growth expectation over the next decade; supportive demographics characterised by growing youthful population with avid thirst for fun and social culture that encourages festivities. These fundamentals form the basis of our conviction for a deserving long-term call on the sector.
- Credible route to economic growth potential… Nigerian brewers are moderately shielded against Nigerian macroeconomic risks as sales recover quite swiftly from unfavourable economic cycles, proven once again in the 2009/10 financial years. We believe the sector provides a solid route to accumulate direct exposure to Nigeria’s medium-term growth potential, and indeed SSA, as we think domestic beer consumption rate will increasingly set the Nigerian market apart on the heels of expanding economy. We will play this growth theme through NB and Guinness from a long-term perspective given their operational scale, market dominance and impressive CAPEX.
- …but we are NEUTRAL on full valuation, in the near-term. From a valuation standpoint, the shares of quoted brewers offer a long-term attractive proposition but, on a 12-month horizon we find the risk-reward profile limited, as the shares have performed strongly (41% in 12 months) and trade at forward P/E multiple of 17.1x and EV/2010e EBITDA of 9.8x. We are on the sidelines to make an inroad into the sector’s long-term growth prospect on better valuation attraction. At this point, we think direct acquisition and repositioning of fringe players is a potent source of alpha.</blockquote>
Afrinvest released a report on the Nigerian Economy. It is more a scorecard of the Nigerian Economy so far for 2010. As usual, it is a very comprehensive review.
I must say, it is not comforting in any way. Here are some reasons for concern – Nigeria’s investment rating has been downgraded from Stable to Negative, there has a huge depletion of the foreign reserves, the government is still on a borrowing binge, and the Naira is reducing value. And dont forget the upcoming elections.
Some excerpts are below. But to get the full benefit, read the entire report.Afrinvest 2010 Nigerian Market Review (644)
<blockquote>On the macroeconomic front, an analysis of provisional data provided by the National Bureau of Statistic (NBS) indicates that real GDP grew by 7.7% in Q2 2010, up from the 7.4% recorded in Q1 2010. The CBN has revised the GDP estimates upwards, forecasting a 7.8% growth in GDP for 2010 (with growth estimates of 7.7% and 8.2% in Q3 and Q4 respectively). The upward review in GDP forecasts rides on the back of favourable rainfall (a critical input for agricultural produce), improved crude oil and natural gas production, and the relative stability in crude oil prices. The non-oil sector is expected to remain the key driver of overall growth. External reserves stood at $36.6bn as at mid September, compared to $37.2bn by the end of July 2010. This range is expected to hold, depending on the stability of oil prices and output.
Oil production has remained relatively stable around the 1.9–2.1mbpd range (year to date), following the return of stability to the Niger-Delta earlier in the year and the success of the on-going amnesty programme. Oil prices have however been volatile all through the year; it stood at $83.30 at the end of Q3 ’10, which is above the country’s benchmark oil price of $60.00. We re-iterate our belief that oil prices will hover between the $70.00 – $80.00 range in the near term as the global economy firms up. The Naira, which remained fairly stable in the first two quarters of the year, saw more volatility in the third quarter and closed the quarter in the CBN, inter-bank and parallel market windows at N149.85/US$1.00, N154.60/ US$1.00 and N156.00/US$1.00 respectively.
The devaluation is not unconnected with the huge surge in dollar demand, particularly at the tail-end of the third quarter. The CBN Governor, Sanusi Lamido Sanusi, explained that this was as a result of an increase in the volume of petroleum products as well as rice imports, following enhanced credits from the Federal Government’s Petroleum Stabilization Fund (“PSF”) and waivers granted to rice importers. By the end of October, the Naira had appreciated to N148.50/US$1.00, N150.85/US$1.00 and N154.00/ US$1.00 at the CBN, inter-bank and parallel market windows respectively. The CBN has promised to intervene and defend the naira where necessary while it continues to monitor developments in the market, taking measures to eliminate speculative demand and exchange rate volatility.
The NBS recently revised and rebased the Consumer Price Index (CPI) to a November 2009 base period, in a bid to reflect the current consumption structure. Subsequently, inflation rose by 70bps from July to August 2010, and dropped marginally by 10 bps in September, closing at 13.6%. Afrinvest Research is of the opinion that fiscal injections related to election expenses may spur an upward trend in inflation. We however observe that the CBN is actively combating inflation through tighter monetary policies, an example of which is the recent increase in MPR to 6.25% and Standing Deposit Rate (SDR) to 3.25%.
The stock market was up 20.2% by the end of October 2010, after varying degrees of oscillation in the course of the year. This is however an improvement from the 30.5% decline recorded in the corresponding 2009 period.
Stability in Oil Prices…
Crude oil prices remained stable during the quarter with a Q3 2010 average (Bonny light) of $77.84 per barrel, a slight drop from the $80.06 per barrel recorded in Q2 2010. This drop in price has been compensated for by an increase in daily production, from approximately 2.35 million barrels per day in Q2 2010 to about 2.41 million in Q3 2010. Consensus analysts’ forecasts indicate that the outlook on oil prices is stable both in the short and medium term. Investor expenditure on commodities picked up during Q3 2010 after very strong flows during the tail end of 2009. Recognizing this upward trend in oil prices, analysts have reviewed their forecasts up towards the $95.00 mark over the next 12 months. Afrinvest Research expects fundamentals and investor flows to drive oil prices, though the potential increase in production quota/output may lead to a supply glut and check an upward movement in price.
With the return of stability in the country’s leadership, President Jonathan has taken a number of steps, seemingly in the right direction, aimed at boosting economic performance in the third quarter. Top on the list is the unveiling of a very articulate strategy designed to put an end to Nigeria’s chronic power shortages through the privatization of the country’s inefficient power generation and distribution facilities. The recent sanitization of the Nigerian Stock Exchange (NSE) (which should help rebuild investor confidence) and the incorporation of the Asset ManagementCompany of Nigeria (AMCON), are further indications that the president seeks to create the desired enabling environment for economic growth and development.
The exchange rate assumption of N150.00/US$1.00 is proving difficult to sustain given the drastic reduction in the nation’s foreign reserves, the depletion of the windfall oil savings and the fact that inflation has climbed to a high of 13.6%, a sharp contrast to the 11.2% assumed for the budget. We believe that this will pose a threat to exchange rate stability with the exchange rate at N151.50/US$1.00 as at end of October 2010. Cost efficiency ratios are also a major concern, as the quality of government expenditure is suspect, while the level of budget performance remains poor.
Piling Debt Despite Increasing Revenues…
A Sovereign Wealth Fund (SWF) is a state-owned investment fund composed of financial assets, which include money, stocks, bonds, property and other financial instruments. In the Nigerian context, the SWF is expected to replace the current Excess Crude Account (ECA). The ECA was set up as a stabilization fund to bridge budget deficits and fund domestic infrastructure investments. It was however set-up as a political arrangement (and without legal backing) during the Olusegun Obasanjo administration. The bill for the National SWF was submitted to the National Assembly on the 13th of September, to ensure that it has a legal underpinning. About N153.0bn (US$1.0bn) has been set aside as seed capital for its take-off. The fund is to be used for three distinct purposes; savings for the future generation, an economic stabilization fund, and an infrastructure fund for co-investment with other investors.
The Debt Management Office (DMO) released figures in Q3 2010 showing an outstanding domestic debt of N4.2tn (US$28.2bn) from N3.8tn (US$25.3bn) in Q2 2010. FGN bonds accounted for 64.0% of the Q2 2010 domestic debt amount, while Non-treasury Bills (NTBs) and Treasury Bills accounted for 23.9% and 10.4% respectively. Development Stocks and Promissory Notes made up the balance of the debt figure with both responsible for just less than 2.0% of the domestic debt figure. The increase in domestic debt can mainly be attributed to the financing of Federal Government budget deficits and expenditure on capital projects. The DMO also released its issuance calendar for 2010 showing a quarterly increment FGN auctions from N300.0bn in Q2 2010 to N330.0bn in Q3 2010, with a scheduled issuance of N408.8bn in Q4 2010.
The Federal Government also plans to issue a N75.0bn (US$500.0m) Eurobond to fund outstanding infrastructural projects. This is expected to be a five year bond with a fixed coupon rate of 8.625% that will also help finance the budget deficit in the country. This means that the country’s domestic debt figure could climb to over N4.5tn (US$30.0bn) by Q4 2010. In a related development, the international rating agency, Fitch Ratings, downgraded Nigeria’s credit rating to a BB-, and from a stable to a negative outlook. This was based on certain factors, including the near total drawdown of the excess crude account and the continuous fall in foreign reserves.
A depleted excess crude account, amid oil revenues of N7.2tn (US$48.0bn) is a major cause for concern, while the quality of Government expenditure remains worrisome. Apart from the cost incurred from Nigeria’s bureaucratic structure, there is a risk that if a project funded through an FGN Bond is unsuccessfully completed either through mismanagement or poor execution by the contractor, the Federal Government would have to redeem its initial debt on the maturity and re-issue another debt instrument for the same project. This, coupled with the interest paid on any debt facility, means that a project could cost 2-3 times its original price. The Minister of Finance however noted that the steps needed to ensure that Nigeria’s outlook be upgraded to stable are already being implemented. Standard & Poor’s Rating Agency however affirmed Nigeria’s B+/B global scale rating and the NGA+/NGA-1 national scale rating. They also confirmed a stable outlook, reflecting expectations that the country will maintain her strong external and fiscal balance sheet, and improve in budgetary performance.
Our Overall Expectation: 2010
With election related activities on the rise, we fear that progress on the roadmap to reforms in the power sector may stall. The revival of the power sector is a key factor in the continuous growth of industries and businesses in particular and the economy in general. There is therefore an urgent need to follow through on these reforms. We expect that the relative peace in the Niger Delta, as well as stability in crude oil prices, will enhance the country’s foreign exchange revenues. The excess revenue, which will be saved in the SWF, is expected to be used to improve on infrastructure and close budget deficits where necessary.
The CBN stipulated a September 2010 deadline for AMCON to become fully operational. This has however not been the case. We however hope to see some clarity as to the direction of the banking sector when AMCON becomes fully operational. There has also been interest in certain banks by both local and foreign participants, suggesting that mergers and acquisitions are likely to occur. We also believe that the banks will resume lending, although at a gradual pace. Persuasive mechanisms by the CBN may also encourage this to happen as quickly as possible. The resilience of many listed companies in the face of harsh macroeconomic and business conditions has been shown by the relatively decent financial results released. We expect investors to continue to show interest in stocks with positive results and growth potential, as well as a high level of transparency and corporate governance.
The drive by the SEC to ensure transparency and corporate governance in the NSE is expected to boost investors’ confidence and renew interest in equities. The uncertainty around the outcome of the forensic audit on the NSE has somewhat dampened this. We therefore believe that the timely conclusion and release of the audit findings will help restore investor confidence and encourage positive sentiments towards the equities markets. Participants will however remain cautious and eager to lock in any significant short term gains. This suggests that there will be constant profit-taking activities in the market, signifying volatility in trading which may persist till the end of the year.
In our Q1 2010 Market Review, we re-iterated our expectations of significant volatility within the NSE ASI 20,000 to 28,000 points range. Afrinvest Research remains bullish on equities, although we are slightly cautious. We review our forecast to a bear case scenario of a 10.0% -15.0% downside and a bull case of a 5.0% – 10.0% upside from around the 25,000 mark. We also expect lending rates to slowly dip and savings rate to rise as the year comes to an end. </blockquote>
Late last month, <a href=”http://online.wsj.com/article/BT-CO-20101022-710047.html”>Fitch lowered Nigeria’s outlook primarily because of the withdrawals from the Crude Accounts</a>. Here is an excerpt from the report in the Wall Street Journal:
<blockquote>Fitch Ratings moved toward a possible downgrade of Nigeria’s junk-level ratings, raising concerns about the country pulling money from a crude-oil account the help fund government operations.
That and a continued gradual fall of international reserves at a time of high oil prices and record oil production is a major concern, according to Fitch. It also raises vulnerability to any renewed fall in oil prices and threatens macroeconomic stability.
Fitch director Veronica Kalema said that while there were plans to remedy the situation through the establishment of a sovereign wealth fund and removal of the fuel subsidy currently taken out of the country’s excess crude account, implementing those actions “will be challenging before elections expected in April next year.” The poll has increased short-term political uncertainty, Fitch said.
Other major constraints on the rating — low per capita income, weak transparency and governance and the infrastructure deficit, especially the power shortage — remain in place. Nigeria’s national infrastructure is poor and power generation is grossly inadequate, resulting in low industrial production while offices and homes go for days without electricity.
Fitch revised Nigeria’s outlook to negative.
Fitch did note that Nigeria’s ratings — which stand at BB-, or three notches into junk — are supported by robust non-oil sector growth, and low public and external debt ratios. The recovery in oil production in the fourth quarter last year, and renewed reform momentum this year, also support the ratings.
In August, the nation said gross domestic product grew 7.4% in the first half of the year, building on 5.9% growth the same time in 2009. The enhanced economic development was linked to growth in non-oil sectors and improvement in oil production.
Earlier this month, the International Monetary Fund said the economies of sub-Saharan Africa will be among the best performing in the world this year and next, lagging only behind those in emerging Asia. It raised its growth forecasts for Nigeria’s economy to 7.4% in both 2010 and 2011 from 7% and 7.3%, respectively.</blockquote>
But in the last week, Fitch affirmed it’s long-term investment rating of B+ for Nigeria. Here is the excerpt of that report from Bloomberg:
<blockquote>Standard & Poor’s Ratings Services affirmed its ‘B+’ long-term rating on Nigeria, Africa’s most populous nation and top oil producer, with a stable outlook before a $500 million Eurobond sale next month.
The agency also affirmed its ‘B’ short-term foreign and local currency sovereign credit ratings on the West African nation, it said in a statement today.
“The outlook is stable, reflecting our expectation that Nigeria will maintain its strong external and fiscal balance sheet and that its budgetary performance will gradually improve over the next few years,” it said.
The announcement “will help to allay the concern of potential investors in Nigeria’s Eurobond,” especially after Fitch Ratings cut its outlook on the country to negative from stable on Oct. 22, said Bismarck Rewane, chief executive officer of Financial Derivatives Co. Ltd., a fund manager.
Nigeria plans to appoint bookrunners next week for its first-ever Eurobond sale, planned for mid-December, Abraham Nwankwo, director general of the Debt Management Office, said today.
“The ratings on Nigeria are constrained by high political risk, but supported by a strong balance sheet,” Standard & Poor’s said in the statement.
The nation of about 150 million people is scheduled to hold general elections in April in which incumbent President Goodluck Jonathan, from the mainly Christian south, has said he will run. Politicians from the predominantly Muslim north say that decision runs counter to an agreement by the ruling People’s Democratic Party to reserve the office for the region until 2015. Jonathan stepped in to the office after the death of former President Umaru Yar’Adua, a northern Muslim, on May 5.
Fitch Ratings lowered its outlook on Nigeria’s BB- rating to “negative” on Oct. 22, concerned about withdrawals from the excess crude account and a drop in foreign currency reserves. The decline in reserves increased the risk to the economy from any renewed drop in oil prices, Fitch said.
Nigeria’s foreign-exchange reserves fell 7.6 percent to $33.9 billion in the month to Oct. 21, according to data on the website of the Central Bank of Nigeria.
Nigeria’s economy, the second-biggest on the continent after South Africa, is expected to grow 7.8 percent in 2010, up from 7 percent last year, driven by non-oil industries such as agriculture, central bank Governor Lamido Sanusi said on Sept. 21. </blockquote>
To get the full details, you can download a copy of their report below. I believe that the report by Fitch is the most detailed analysis and description of the Nigerian economy.
Fitch Ratings For Nigeria 2010 (1014)
Proshare has been doing a consistently good job of preparing a detailed review and analysis of the NSE every month. Here is their report for the month of October. It has a detailed breakdown of the NSE activity for the month as well as the company results reported during the month.NSE Monthly Report - Proshare NG - October 2010 (356)
And here are the official NSE reports for the month of September and October 2010NSE Activity Report For October 2010 (433)
FSDH has also released the Economic and Financial Review for Q3 2010 and their outlook for Q4. It is a very thorough and detailed report. Please take time to read it. It is worth the time.FSDH - Quarterly Economic Review - Q3 2010 (1514)
The team at Access Bank have prepared a very detailed and informative review of the Nigerian economy for the 3rd quarter. You can read below.
The <a href=”http://www.nigerianstat.gov.ng/”>National Bureau of Statistics</a> recently released the Consumer Price Index for August 2010. You can read the full report below. But here is the summary:
<blockquote>CONSUMER PRICE INDEX: AUGUST 2010
(BASE PERIOD NOVEMBER 2009 = 100)
This edition of the Statistical News contains the revised Consumer Price Index (CPI) based on Nigeria Living Standard Survey (NLSS) 2003/2004. The consumption expenditure data were revalued to November 2009 which is the base period for the revised CPI.The May 2003 based and September 1985 based indices are being continued using factors derived from the new CPI. All of these indices will yield the same price change for any commodity group contained in all the series.
A new sub index – Imported Food Index- is available in the revised CPI.A TOTAL of 10534 informants spread across the country provide price data for the compilation of theNew CPI each month. Also, 740 product specifications are priced in each centre for computation of the New CPI. More enquiries relating to the CPI revision can be obtained from email@example.com or firstname.lastname@example.org.
ALL ITEMS INDEX
The Composite Consumer Price Index (CPI) rose by 13.7 percent year-on-year in August 2010. This is higher than 13.0 percent recorded in the previous month in the new CPI series. The monthly change of the CPI was 1.8 percent increase when compared with July 2010. The urban All Items monthly index rose by 1.3 percent while the corresponding rural index recorded 2.1 percent increase when compared with the preceding month. The year-on-year average consumer price level as at August 2010 for Urban and Rural dwellers rose by 10.9 and 15.6 percent respectively. The percentage change in the average composite CPI for the twelve-month period ending August 2010 over the average of the CPI for the previous twelve-month period was 13.5. This was marginally higher than what was recorded by making similar comparison in July 2010. The corresponding 12- month average percent change for urban and rural indices rose by 10.2 and 15.3 respectively.
Average monthly Food prices rose by 2.0 percent in August 2010 when compared with July of same year. The level of the Composite Food Index was higher than the corresponding level a year ago by 15.1 percent. The average annual rate of rise of the index was 14.7 percent for the twelve-month period ending August 2010. The rise in the index was caused mainly by slight increase in the prices of some food items like yam, potatoes, meat, fish, cooking oil, fruits and vegetables.
ALL ITEMS LESS FARM PRODUCE
The “All items less Farm Produce” index which excludes the prices of agricultural products rose by 1.5 percent in August 2010 when compared with July 2010. The increase was due to price rise observed with some pharmaceutical products and household equipments. In the twelve-month to August 2010, the index rose by 12.4 percent while the average annual rate of rise of the index was 11.5 percent for the twelve-month period ending August 2010.</blockquote>
They also released the Revised GDP for 2009 and the Estimates for Q1 and Q2 2010. The GDP economy grew by over 7% in Q2 2010. Here is an excerpt:
<blockquote>On an aggregate basis, the economy when measured by the Real Gross Domestic Product (GDP), grew by 7.69 percent in the second quarter of 2010 as against 7.45 percent in the corresponding quarter of 2009 as shown in Figure 1.
The 0.24 percentage point increase in Real GDP growth observed in the first quarter of 2010 was accounted for by the increase in production in the oil sector and wholesale & retail trade activities in the economy. The nominal GDP for the second quarter of 2010 was estimated at 6,824,477.43 million naira as against the 5,872,694.58 million naira during the corresponding quarter of 2009 thus indicating an increase.
The economy, which can be broken into two broad output groups, that is, Oil and Non-oil sectors, had both sectors witnessing increased output in the second quarter of 2010. The non-oil sector growth was driven by growth in activities recorded in the wholesale & retail trade sector, while the oil sector output increased as a result of the Federal Government’s amnesty and post amnesty development programme for the Niger Delta which restored peace in the area thereby ensuring re-entry/ recommencement of operations and encouraging investments in the sector.</blockquote>
You can download the report below:
National Bureau of Statistics - Revised 2009 GDP and Estimates for Q1-Q2 2010 (1058)
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:
– 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>
Download Proshare’s February Capital Market Report below. Here is an excerpt from the executive summary:
Below is the Monthly Economic News and Views presentation (by B.J. Rewane) from the Lagos Business School’s executive breakfast session.
This blog is dedicated to informing users on the latest business and economic news news from the CBN and Nigerian Stock Exchange. Happy reading!