Economic Update - November 2017
- Capital flows riding the ranges. Capital importation to Nigeria sustained its strong growth for the second consecutive quarter in Q3 2017, with combined flows of $4.1 billion over the quarter being two-fold higher QoQ and YoY. In sync with trend, the strong capital flows emerged from portfolio flows which printed at $2.8 billion (double-fold increase QoQ) even as ‘other investment’ sustained the positive momentum, rising 69% QoQ to $1.3 billion. That said, FDI printed at an 11-quarter low of $117 million. Portfolio flows largely flooded the equities market which contributed nearly half (48%) of the total flows and the highest in the last 11 quarters of $1.9 billion ($1.3 billion excluding one-off transaction in Dangote cement and Mobil). Furthermore, amidst elevated interest rate environment and falling YoY headline inflation, foreign capital was upbeat to short term debt instrument (+630% QoQ) and bonds (+100% QoQ).
- Eurobond Issuance: dovish outlook for FI Yields. Nigeria accessed the global debt market raising $3 billion - her largest single issuance on record. The issuance was split into the 10-year and 30-year series of 1.5 billion apiece bearing coupon of 6.5% and 7.625%. The offer was oversubscribed with orders in excess of $11.4 billion (bid-cover of 3.8x). Comparing the cost with recent issuances especially that of Egypt’s 10-year and 30-year bond at rates of 6.65% and 7.95% respectively, the issue looks relatively favorable.
- Budget 2018: Still a long stretch. President Buhari presented the proposed federal budget for 2018 tagged “the Budget of Consolidation” to the National assembly with FGN proposing a 15.7% YoY expansion in aggregate expenditure to N8.61 trillion splits into: non-debt recurrent expenditure of N3.5 trillion (+32% YoY), capital expenditure of N2.4 trillion (+11.7% YoY), debt service of N2 trillion (+21% YoY) and statutory transfers of N457 billion (+5.1% YoY). To implement the proposed 2018 fiscal outlay, the FGN projects retained revenues of N6.6 trillion (+30% YoY) largely underpinned by higher oil receipts (+15% YoY to N2.4 trillion) and a 40% YoY jump in non-oil revenues to N4.2 trillion.
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