Economy
CBN April PMI Shows Improvement in Business Conditions
By Cordros Capital Research
According to the Central Bank of Nigeria’s (CBN) Purchasing Managers’ Index (PMI) report for the month of April, manufacturing activities, during the month, expanded after three consecutive months of contraction. The report also shows that the non-manufacturing sector came within a whisker of exiting its 16-month streak of decline.
Specifically, the manufacturing PMI grew to 51.1, from 47.7, while the non-manufacturing PMI came in at 49.5 (vs. 47.1 in March).
Indeed, the notable improvement in April’s PMI came to us as no surprise, as it validated our expectation for the month. Suffice to say that business owners and manufacturers are positively responding to a number of encouraging developments in the broader macroeconomic space.
Here, we highlight (1) the CBN’s recent and sustained commitment to forex stability, particularly narrowing the spread between the official and parallel segments of the currency market rates, (2) government effort at improving the ease of doing business in Nigeria, as the Presidential Enabling Business Environment Council (PEBEC) rolled out fresh reforms to consolidate and deepen the impact of its previous plan, (3) the recent approval, by the FGN, of the reduction of documentation requirements and timeline for import and export trade transactions to 48 hours (4) the launch of the nation’s Economic Recovery and Growth Plan (ERGP), (5) the soon-to-bepassed 2017 appropriation bill, which will herald the establishment of Satellite Industrial Centres (SICs) across the six geo-political zones of the country, (6) an extension of the tenure of the 2016 budget’s capital spending projects until 5th May, 2017 amid a total sum of N1 trillion released from the same budget, thus far, for capex, and (7) a reported rebound in Nigeria’s business confidence, according to the latest edition of the Global Economic Conditions Survey.
Manufacturing PMI Bucks Declining Trend
The manufacturing PMI commenced the second quarter of the year on an impressive note, bucking its 3-month contraction trajectory, expanding by 3.4 percentage points, from 47.7 in March, to 51.1 in April. The notable improvement was supported by considerable expansions in production level (58.5, previously 50.8), new orders (50.1, previously 45.6), and inventories (50.6, previously 49.1), which we believe was in response to the relative stability – amid the apex bank’s renewed commitment to improve FX liquidity – of the NGN exchange rate (particularly at the parallel market) during the period under review. Clearly, this, in addition to improved power generation (close to 5,000MW), further strengthened manufacturers’ confidence, supported by the slower pace of contraction in employment level (46.6 vs. 43.6) during the month.
Ten of the sixteen sub-sectors reported growth in the review month, in the following order: appliances & components; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; cement; nonmetallic mineral products; printing & related support activities; furniture & related products; electrical equipment and plastics & rubber products. The paper products; primary metal; computer & electronic products; fabricated metal products; petroleum & coal products, and transportation equipment sub sectors reported decline in the review period.
Non-Manufacturing PMI Misses Expansion by a Whisker
The non-manufacturing PMI showed further signs of improvement, with the index, at 49.5, marginally shy of the 50 point expansion threshold. This marks the highest point of the index in its 16-month contraction spree.
Primarily, in April, the non-manufacturing PMI benefitted from the growth of 3.5 percentage points and 4.1 percentage points in business activity (53.3, from 49.8) and new orders (50.5, from 46.4). Also, the slower rate of contraction in employment level (45.5, previously 44.0) and inventories (48.6, previously 48.0) was positive for the overall nonmanufacturing index.
Of the eighteen non-manufacturing sub-sectors, eight recorded declines in the following order: management of companies; construction; professional, scientific & technical services; arts, entertainment & recreation; wholesale trade; health care & social assistance; repair, maintenance/washing of motor vehicles and accommodation & food services.
The remaining ten sub-sectors: agriculture; utilities; educational services; transportation & warehousing; finance & insurance; electricity, gas, steam & air conditioning supply; real estate, rental & leasing; information & communication; public administration and water supply, sewage & waste management reported growth in the review month.
Comment:
Clearly, April 2017 PMI figures speak to the fact that, manufacturing and non-manufacturing activities improved over the one month period. We look for the level of improvement achieved thus far being consolidated, going forward, as the impact of the positive drivers supporting the encouraging figures deepens. We highlight the (1) CBN’s sustained commitment to forex stability, (2) possibility of the 2017 appropriation bill being passed early this month, following which the establishment of the FGN Satellite Industrial Centres (SICs) across the six geo-political zones of the country will commence, (3) potential gains from the recently launched Economic Recovery and Growth Plan (ERGP), (4) full implementation of the Presidential Enabling Business Environment Council (PEBEC) fresh plans on the ease of doing business, and (5) sustained improvement in power generation, on the back of cessation of hostilities by militants in the Niger Delta, and the rise in water level at the various dams in the country.
By Adedapo Adesanya
Okitipupa Plc was the sole price gainer at the NASD Over-the-Counter (OTC) Securities Exchange on Friday, August 7, lifting the trading platform by 0.44 per cent at the close of transactions.
The share price of the palm oil producer appreciated during the trading session by N25.00 or 9.0 per cent to N277.00 per unit compared with the previous day’s N252.00 per unit.
As a result, the market capitalisation gained N12.29 billion to close at N2,807 trillion, in contrast to the previous session’s N2.795 trillion, while the NASD Security Index (NSI) added 93.63 points to finish at 4,678.08 points compared with Thursday’s 4,657.59 points.
The bourse recorded a price loser yesterday, and this was Mass Telecoms Innovation Plc, which crashed by 3 Kobo or 9.4 per cent to settle at 32 Kobo per share versus the previous day’s 35 Kobo per share.
The volume of securities traded by investors plunged by 81.5 per cent to 535,7560 units from 2.9 million units, the value of securities slumped by 93.9 per cent to N6.0 million from N99.2 million, and the number of deals decreased by 41.9 per cent to 36 deals from 62 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units transacted for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 77.0 million units exchanged for N5.5 billion.
GNI Plc also ended the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, trailed by Infracredit Plc with 2.3 billion units valued at N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
By Dipo Olowookere
A 0.15 per cent growth was achieved by the Nigerian Exchange (NGX) Limited, driven by continued buying interest in banking stocks such as First Holdco and others.
The banking index was up by 1.53 per cent during the session, offsetting the losses recorded by the others. The industrial goods segment fell by 0.37 per cent, the insurance counter shrank by 0.21 per cent, and the energy sector contracted by 0.04 per cent, while the consumer goods space closed flat.
At the close of business, the All-Share Index (ASI) moved up by 364.26 points to 245,573.60 points from 245,209.34 points, and the market capitalisation increased by N235 billion to N158.513 trillion from N158.278 trillion.
Despite the gains printed by Customs Street during the trading day, investor sentiment was weak, as there were 22 price gainers and 24 price losers, indicating a negative market breadth index.
UPDC surged by 9.23 per cent to N3.55, CWG soared by 6.56 per cent to N19.50, AXA Mansard appreciated by 4.80 per cent to N13.10, Neimeth advanced by 4.24 per cent to N8.60, and Cutix improved by 4.00 per cent to N2.60.
Conversely, Red Star Express lost 10.00 per cent to trade at N18.00, CAP declined by 9.98 per cent to N115.45, John Holt shrank by 9.82 per cent to N10.10, ABC Transport depreciated by 9.57 per cent to N5.20, and Legend Internet crashed by 8.70 per cent to N4.20.
A total of 1.5 billion equities worth N26.7 billion exchanged hands in 42,580 deals on Friday versus the 531.8 million equities valued at N20.5 billion traded in 44,826 deals on Thursday, representing a spike in the trading volume, value, and number of deals by 182.06 per cent, 30.24 per cent, and 5.01 per cent, respectively.
The busiest stock during the session was Fortis Global Insurance, with a turnover of 824.5 million units valued at N2.1 billion, FCMB traded 217.9 million units worth N2.8 billion, Access Holdings exchanged 176.2 million units for N4.7 billion, Chams sold 32.5 million units worth N132.1 million, and First Holdco transacted 25.0 million units valued at N3.7 billion.
By Adedapo Adesanya
The Naira further closed south against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, August 7, by 81 Kobo or 0.06 per cent to N1,365.69/$1 from N1,364.88/$1.
It was a similar situation for the Nigerian Naira in the official market during the session as against the Pound Sterling; it lost N1.08 to quote at N1,839.17 versus the previous day’s N1,838.09/£1, and against the Euro, it slipped by N1.23 to close at N1,575.73/€1, in contrast to the preceding session’s N1,574.80/€1.
Further, at the GTBank forex counter, the Nigerian currency weakened against the Dollar yesterday by N2 to settle at N1,371/$1 compared with Thursday’s N1,369/$1, and at the black market, it traded flat at N1,400/$1.
The country’s legal tender came under FX demand pressure on Friday, with turnover rising by 304.3 per cent to $399.5 million from $98.8 million the previous day, with the number of deals slightly up to 107 from 106.
Next week, traders expect the Naira to hold steady, buoyed by dollar sales by the Central Bank of Nigeria (CBN), whose presence in the market could help ease demand pressure.
As for the cryptocurrency market, Bitcoin (BTC) neared the $65,000-mark after it gained 0.8 per cent to trade at $64,968.05, as investors took advantage of recent drops to shore up their holdings.
Previously, the decision by the US Senate to delay a vote on the Crypto Clarity Act until at least September weakened the outlook. The bill, which would set out which US regulator oversees which digital assets, needs 60 votes to pass and it is unclear whether it currently has 50.
Solana (SOL) grew by 2.5 per cent to $74.81, Dogecoin (DOGE) rose by 1.3 per cent to $0.0702, Binance Coin (BNB) jumped by 1.1 per cent to $593.80, Ethereum (ETH) expanded by 0.5 per cent to $1,916.08, Ripple (XRP) also soared by 0.5 per cent to $1.03, and TRON (TRX) appreciated by 0.2 per cent to $0.3275.
However, Cardano (ADA) depreciated by 1.0 per cent to $0.1997, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
