20/5/2019/Coronation  Report

Q1 2019 GDP was reported today at +2.01% y/y versus the Bloomberg consensus estimate of +2.54% y/y.

This was lower than the +2.38% y/y growth reported for Q4 2018. Q1 2019 non-oil growth was +2.47% y/y compared with +2.70% y/y for Q4 2018. The growth rate has slowed down but not enough to deflect our forecast of +2.25% growth for FY 2019.

The large agricultural sector reported improved growth. The slowdown in growth is attributable to a small slowdown in the growth rate for telecoms (but still +12.18% y/y), manufacturing and oil & gas. The one-week delay to February’s general elections doubtless stalled commerce and manufacturing.

Negative implications for equities.  A slowdown in the growth rates was partly signaled by several published data which we believe the equity market has already priced in: sluggish loan growth at banks; poor results from food and consumer manufacturers.

Neutral for inflation.  The agriculture segment (22% of GDP) is returning to trend growth, which is a positive for food supply and hence inflation. However, inflation is proving sticky (April: 11.37% y/y).

Neutral for interest rates. The Monetary Policy Committee of the Central Bank of Nigeria meets today and tomorrow to set the Monetary Policy Rate (MPR). Following strong Q1 Foreign Portfolio Investment market rates have fallen to 13.67% (1-year T-bill). We doubt the MPC will want to change the largely symbolic MPR from 13.50%, having made a 50bps cut in March.

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