… Smolders from Insecurity
July 25, 2018/Cowry Asset
Executive Summary
➢ The global economic performance buoyed appreciably in the first half of 2018 going by leading economic indicators. It was driven improved economic conditions in the United States, Europe, China, amongst others. We anticipate that risk from the ongoing trade dispute involving the U.S. and other major players such as China and the Eurozone, if allowed to degenerate, would dent the output growth projections especially for advanced and emerging economies.
➢ Africa’s biggest economy appeared to have grown modestly in the first half of 2018 as data from the National Bureau of Statistics reported real output growth of 1.95% in Q1 2018 while the Purchasing Managers’ Index, a leading economic indicator, continued to trend above 50 points for both the manufacturing and nonmanufacturing sectors. Notwithstanding the positives, output expansion should be limited to the extent that insecurity persists in agrarian regions as well as the speed at which the fiscal authorities execute the 2018 fiscal spending plan given the delay in the signing of the 2018 appropriation bill.
➢ The monetary authority remained focused on ensuring foreign exchange rate and price stability in anticipation of increased spending via election campaigns and 2018 budget execution among other things. The foreign exchange market saw a convergence of FX rates on the back of restrictive monetary policy, significant accretion to reserves, increased weekly foreign exchange interventions by CBN in the market, and boost in foreign portfolio inflows.
➢ Overall market performance indicator – the NSE All Share Index – increased year-todate by 0.09%. Investors had earlier in the year (January) gained 17.91%, before the significant sell-offs by the foreign portfolio investors that came earlier than anticipated due to political uncertainties ahead of 2019 general elections. Howbeit, we note that the undervalued share prices in the market would present buy opportunities for investors in the second half of 2018.