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Nigeria General Economic Report

Q1 2019 REVIEW

The IMF expects the Nigerian economy to grow at 2.0% in 2019 versus the World Bank’s estimate of 2.2%-both estimates are significantly lower than the Government of Nigeria’s budget forecast of 3.0%.
Nigeria’s social context remained dire with unemployment as at Q3 2018 at 23.1% (20.9 million unemployed persons) and per capita income at $2,034, down from 2014 high of over $3,000.

However macroeconomic conditions have improved significantly, Nigeria’s annual inflation rate dropped to 11.31 percent in February 2019 from 11.37 percent in the previous month, as prices rose at a slower pace for all categories. Inflation Rate in Nigeria averaged 12.46 percent from 1996 until 2019. External reserves growing again, reaching $44.4bn in March 2019; and official and NAFEX exchange rates remaining stable.

The Gross Domestic Product (GDP) in Nigeria expanded 5.30 percent in the fourth quarter of 2018 over the previous quarter. GDP Growth Rate in Nigeria averaged 1.44 percent from 2010 until 2018.

Capital markets however remain depressed even though they rose briefly in February.
Nigerian Stock Market closed the month of March 2019 down as NSEASI dipped by -2.14% as against +3.81% gain recorded in the month of February 2019. Furthermore, the NSEASI ended Q1 2019 in the negative territory with -1.24% loss.

The NBS data shows that inflation dropped for the second consecutive month this 2019.
In January 2019, the inflation rate increased by 11.37%, while it was 11.31% (year-on-year) in February 2019. The slight drop represents 0.06% points lowers in February than 11.37% which was recorded in January 2019.On a month-on-month basis, the Headline index increased by 0.73% in February 2019, this also represents a 0.01% lower than 0.74% points recorded in January 2019.

Also, the percentage change in the average composite CPI for the twelve months was 11.56%, showing a 0.24% points from 11.80% recorded in January 2019. For the month of March, we expect further decline in inflation. Although as at the time of this report the figures are yet to be released we expect inflation in march to decline to 11.25% YoY as both core and food inflation should firm further.

FX Market
The FX window witnessed relative stability during the first quarter of 2019.

The balance of flows at the Investors and Exporters Window (IEW) turned to a positive of $372million in the month of March, from a net outflow of $208 million in February. The surplus at the IEW emanated largely from faster decline in outflows compared to inflows.
FPI flows declined 22% MoM to $2.7 billion ($3.5 billion in February) to account for 94% of total offshore funds. On the local leg, dollar supply (ex-CBN) rose slightly by 7.6% MoM to $870 million, with cumulative total flows ex-CBN settling at $3.7 billion (-17.6% MoM).

The CBN official rate remained relatively stable at $/₦307, while on the parallel market rates also remained stable at $/₦358 buying and $/₦360 selling within the period.

Equities Market
Nigerian Stock Market closed the month of January 2019 in red as NSEASI dipped by-2.70% as against +1.80% gain recorded in the month of December 2018. Also in the month of February 2019, Nigeria’s Equities Market closed in green as NSEASI inched up by +3.81% as against -2.78% loss recorded in the month of January 2019, this could be attributed to the bullish trend in the second week of February where the NSEASI sustained positive returns all through the despite the fears surrounding the general elections.
The Stock Market closed the month of March 2019 down as NSEASI dipped by-2.14% as against +3.81% gain recorded in the month of February 2019.

Furthermore, the NSEASI ended Q1 2019 in the negative territory with -1.24% loss while the NASD USI closed the quarter northwards with +2.31% gain recorded.

Fixed Income Market
The FGN Bond market maintained a bullish run in the month of February with increased demand from Foreign portfolio investors pressuring bond yields c.100bps lower to c.14.20% on average from c.15.21% closing the previous month.
The renewed interests from Foreign Portfolio Investors came mostly on the backdrop of a relatively peaceful conclusion to the presidential elections which was held on the 23rd of February 2019. Investors interests were mostly on the 10-year benchmark (2028s) which witnessed significant increase in traded volumes, with its yields compressing by c.130bps M/M to 13.95% as at 28-February 2019.
The FGN Bond Auction for March 2019 conducted by the Debt Management Office (DMO) on Wednesday, March 27, 2019, at which N100 billion Bonds were offered, was oversubscribed just as in the Auctions for January and February 2019. The trend of investors’ preference for the longer tenured instrument continued, with the 10-year bond significantly oversubscribed.

Renewed Interests from Foreign Portfolio Investors also fuelled a considerable decline in NTB yields, with increased demand witnessed mostly on the longer tenured bills during the course of the quarter.

The CBN also sustained its spate of OMO issuances over the course of the month of January and February, with a total sale of N2.19Trn of the N1.87Trn maturities in the month of February alone. They however, stopped the issuance of the long tenured maturities in March as the Monetary Policy Committee reduced the MPR to 13.5% from 14.0%.

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