Nigeria Macro & Markets Q2 2017 Update and H1 2017 Outlook

July 17, 2017/InvestmentOne Research

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Going into H2 2017, we see sustained pick up in global economic output with support from growth momentum in emerging economies as well as in commodity exporters.

Risk to ongoing fragile recovery in global GDP growth however remains; led by monetary tightening measures by major central banks and its implication for capital flows to emerging and developing markets.

In Nigeria, we expect the ongoing economic recovery to continue on a positive trajectory given relative peace in the Niger Delta, support to fiscal spending by traction with some offshore borrowing  as well as recent reforms in the FX market.

We also expect government’s spending capacity to be buoyed by improved oil earnings following the reopening of Forcados oil terminal as well as traction with planned c.N1.11trn offshore borrowings (Eurobond and Multilateral institutions).

In our opinion, sustained FX sales by the apex bank and improved liquidity injection, from implementation of 2017 budget, bode well for both construction and manufacturing sectors output.

Given expectation of continued tight monetary policy, we expect yields on fixed income instruments to remain at current levels in H2 2017.

We also expect ASI performance to see support from the impact of improving macro-economic environment on earnings scorecards; recent reform in the FX market; and the revised PFA investment guideline which mandates an increased allocation to equity.

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