Click here to download full Report
Globally, economies and financial markets were challenged in 2011 as the Euro-zone debt crisis and its undercurrents swept through emerging and developed markets albeit in varied dimensions. Heightened sovereign risks for debt-ridden Greece sent shivers down the spines of European banks and the global corporate world with substantial exposures to the Euro. The US continued to witness calls for reduced budget deficits amidst rising unemployment and worsening sovereign ratings.
The dimming prospects for the global economy led to a cut in IMF’s latest growth estimates for the global economy in 2012. Advanced economies are now expected to witness a slowdown in output growth from 1.8% to 1.6%, while the Euro-zone economy is expected to contract by 0.5%, with Italy and Spain forecasted to underperform with the highest declines of -2.2% and -1.7% respectively.
Afrinvest Research believes the ongoing quick-fix measures to alleviate Greek debt debacle should provide temporary relief to the global economy in 2012. With the expected private sector debt write-down, we do not anticipate further financial convulsions emanating from the Euro-zone, at least in the short term. However, we would like to see more holistic measures and long term solutions to the crisis, as well as a greater level of co-operation among European countries, especially as the region is becoming increasingly linked to emerging markets, which are expected to drive longer term global economic growth.
Nigeria in 2012: Any Reason for Optimism?
The Nigerian political environment and broader macroeconomic outlook seem to have stabilized since the widely accepted elections of April 2011. While the government continued to make steady progress in reforms to the banking, power and oil and gas sectors, 2011 saw a fundamental shift in public criticisms of government’s fiscal spend. We believe this is a positive development and could go a long way in redirecting the allocation of economic resources with greater attention to probity, as well as a more responsive stance on Nigeria’s appalling social and economic infrastructure.
We estimate a GDP growth rate of between 7.0% and 7.5% for the economy in 2012 with increased contribution from the non-oil sector especially agriculture, telecoms and financial services. We also expect an appreciable improvement in power supply on account of ongoing reforms in the power sector. Expected increase in collaborations with international organizations should help in addressing growing security threats. We expect the CBN’s banking sector reforms to berth in 2012, giving further impetus to bank lending particularly given the mild uptick in credit growth observed towards the end of 2011. We envisage less aggressive fiscal tightening measures in 2012 even as reduced government borrowing should bear positively on the domestic equity market.
Given unfolding realities in Nigeria’s macroeconomic backdrop, as well as anticipated global economic conditions, our focus in 2012 remains on fundamentally strong and countercyclical companies, with strong cash generating capacity and strong management teams. We are also favorably disposed to sectors that are positively exposed to emerging opportunities in the Nigerian reforms agenda and infrastructural spend going forward.
Click here to download full Report
Source: Afrinvest
