December 4, 2018/InvestmentOne Report
Please click to view the full November 2018 Macro & Markets Update
This past month was largely shrouded by a veil of negative news hitting the Nigerian economy, from declining oil prices to the absence of fundamental macroeconomic hard data, due to a lack of funding, and a general sense of disintegrating investors’ confidence.
· However, on a slightly positive note, we saw manufacturing PMI readings for the month of November 2018 print at 57.9 index points, up from 56.8 points in the previous month.
· In the outgone month, we saw the FAAC disburse N788.1 billion to the three tiers of government as allocation for the month of November from revenue generated in October 2018. This was due to increased crude oil sales and tax proceeds. We highlight that the rise in disbursement as well as the timeliness of the release represents a positive for the economy.
· The National Bureau of Statistics (NBS) released the Inflation report for the month of October 2018, which showed a slower increase in consumer prices to 11.26% year on year (y/y), from 11.28% (y/y) in September 2018. We spotlight that the drop in inflation comes after two consecutive increases in the consumer price index; this was largely driven by the composite food index which slowed to 13.28% in October 2018 vs. 13.31% in September 2018.
· The Monetary Policy Committee (MPC) met on the 21st and 22nd of November, 2018. Amidst weakening crude oil prices, continuous capital flow reversal and subdued global economic growth outlook, the committee maintained status quo as it held the policy rate and other policy parameters constant. It is noteworthy that all eleven members of the committee voted for the MPR to be held at 14%.
· In our opinion, we believe the market is still weak due to factors such as the increasing U.S treasury yields as well as investors’ skepticism around the country’s 2019 elections. However, the recent sell-off, which has restored attractive upsides on our top picks, presents a decent entry opportunity for investors with a medium to longer term horizon.