January 15, 2021/Cowry Asset Report

The global economy continued to expand for the sixth consecutive month in December as output, new orders and employment rates continued to grow. According to J.P. Morgan Global Composite Output Index, global business activities (manufacturing and services) expanded to 52.7 points in December, slower than 53.1 points in November.

Nigeria’s foreign exchange reserves declined month-on-month by 0.11% to USD35.37 billion at the end of December despite increased crude oil prices over the same period (Bonny Light climbed m-o-m by 9.86% to USD51.27 a barrel). Consequently, Naira depreciated against the greenback in most forex market segments in November, expect at the interbank forex market where Naira gained 0.05% to average N380.69/USD.

Nigeria’s total public debt rose by 17.60% to N32.22 trillion as at September 2020 (from N27.40 trillion as at December 2019). The increase in total debt was chiefly due to a rise in external debt by 35.07% to N12.19 trillion (or USD31.99 billion at N381.00/USD) as at September 2020 from N9.02 trillion (or USD27.68 billion at N326.00/USD) in December 2019 – Nigeria received additional USD3.36 billion from International Monetary Fund (IMF) in Q2 2020 which further increased to USD3.45 billion in Q3 2020. Naira also weakened against USD.

In December, FGN bonds were auctioned at higher stop rates for the 15-year and 25-year maturities as investors continued to push for higher yields. In the secondary market, FGN bonds generally traded at relatively lower premia in December relative to November as Market Capitalization to outstanding value ratio fell, on average, to 148.33% in December from 158.16% in November.

The Nigerian stock market witnessed sustained bullish activity in December, as investor confidence waxed stronger amid expectation of improved corporate releases and actions for the FY 2020 earnings season – and thinned-out yields in the fixed income space. Specifically, the NSE ASI climbed by 14.9% m-o-m to 40,270.72 points while market capitalization rose by 15.0% to N21.06 trillion. Hence, on a year-to-date basis, the NSE ASI gained 50.03% while the market capitalization accelerated by 62.5%.

The global economy continued to expand for the sixth consecutive month in December as output, new orders and employment rates continued to grow. According to J.P. Morgan Global Composite Output Index, global business activities (manufacturing and services) expanded to 52.7 points in December, slower than 53.1 points in November. The consumer goods, intermediate goods, investment goods and financial services categories recorded expansions; however, consumer services activity fell for the eleventh consecutive month. The US, Germany, Brazil, India and China recorded output expansion. However, the Eurozone and Russia witnessed contraction.

The United States recorded sustained expansion in business activities in both manufacturing and services. IHS Markit U.S. Composite PMI rose to 55.3 points in December, albeit slower than 58.6 points in November as concerns about a second wave of the COVID-19 pandemic dampened demand. China’s business expansion was also broad-based as the Caixin Composite Output Index rose to 55.8 points in December from 57.5 points in November amid sustained business confidence and incoming businesses which contributed to steady rise in employment; although export growth remained sluggish. However, the Eurozone remained in contraction territory as IHS Markit Eurozone Composite PMI pointed to 49.1 points in December (albeit better than 45.3 points in November) as the services sector remained a drag on overall performance amid COVID-19-related restrictions which slowed demand. Albeit, countries like Ireland and Germany continued to expand, mainly in the manufacturing sector.

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