Economy
Nigeria’s Economy Gathers More Momentum
By FSDH Research
A review of the latest Purchasing Managers’ Index (PMI) published by the Central Bank of Nigeria (CBN) for the month of April 2017 suggests that the Nigerian economy is on the way out of recession.
However, we believe more policies are required to achieve sustainable growth. The PMI report shows that the Composite Manufacturing Index (CMI) expanded for the first time in the year 2017 and attained the highest level so far in the year 2017.
The CMI increased to 51.1points in April 2017 from 47.7 points in March 2017. Although the Composite Non-Manufacturing Index (CNMI) is slightly below 50 points level, it increased to 49.5 points in April 2017 from 47.1 points recorded in March 2017 to attain the highest level in 16 months.
This represents the first month-on-month (MoM) increase after 16 consecutive months of decline.
The PMI report also shows that the production level in the manufacturing sector expanded for the second consecutive month, increasing to 58.5 points in April 2017 from 50.8 points in March 2017. PMI below 50 points level suggests a decline in business activity, PMI higher than 50 points level suggests an expansion while PMI at the 50 point level suggests no change.
We believe the increase in PMI is sustainable in the short to medium-term provided policies that increase access to credit and create an enabling business environment are pursued.
The monetary aggregates in Nigeria as at March 2017 show that the annualised growth rate in the money supply is below the target the CBN sets for the year 2017.
In Nigeria, narrow money supply (M1) is the sum of demand deposits and currency in circulation less the cash currency held in deposit money banks’ vault.
Quasi money supply (QM) is the savings deposits plus time deposits. Broad money supply (M2) is the sum of M1 and QM (M2 = M1 + QM). The M2 decreased by 7.17% to N22trillion in March 2017 from N23.7trillion in December 2016.
The major drop is from M1 which dropped by 12.71% to N10trillion in March 2017 from N11.4trillion in December 2016. The QM also dropped marginally by 2.03% to N12.1trillion from N12.3trillion in December 2016. We attribute the drop in M1 to the drop in demand deposits which in turn can be linked to a drop in private sector deposits with the CBN.
Demand deposits dropped by 13.46% to N8.3trillion in March 2017 from N9.6trillion in December 2016. Private sector deposits dropped by 36.68% to N2.1trillion in March 2017 from N3.4trillion in December 2016. The CBN’s growth target for M2 in 2017 is 10.29%, thus the contraction in Q1 2017 is at variance with the growth target for the year.
The efforts to combat high inflation rate, increase the supply of foreign exchange through foreign investment in the fixed income securities, and to sustain investment from the domestic investors, are responsible for the drop in money supply in Q1 2017. Net domestic credit increased marginally by 1.17% to N27.45trillion in March 2017 from N27.15trillion in December 2016, much lower than the growth target of 17.93% for 2017. The annualised growth rate in net domestic credit in Q1 2017 is 4.7%, also significantly below the target growth rate of 17.93% for 2017.
While net credit to the Federal Government increased in Q1 2017, the net credit to the private sector dropped. Net domestic credit to the Federal Government increased by 8.17% to N5.29trillion in March 2017 from N4.81trillion in December 2016 but the net domestic credit to private sector dropped by 0.33% to N22.27trillion in March 2017 from N22.35trillion in December 2017. Policies to increase money supply will be required when there is stability in the foreign exchange market and the inflation rate is moderated.
Source: FSDH Research
By Dipo Olowookere
The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.
Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.
Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.
But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.
Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.
As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.
A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.
Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.
Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.
Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.
By Adedapo Adesanya
Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.
The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.
FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.
On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.
During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.
The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Adedapo Adesanya
It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.
In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.
In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.
The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.
President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.
The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.
President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.
Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.
Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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