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Macro-Economic Update - May 2019

  • Improved liquidity, compelling case for near term stability: The liquidity in the Investor & Exporters Window (IEW) improved in the month of May, with inflows (Ex-CBN) accounting for 95% (April: 86%) of total outflow and the market closing with unmet demand of $128 million (April: $396 million). The lower unmet demand stemmed largely from faster decline in outflow (-14% MoM to $2.5 billion) compared to 5% MoM decline in Inflow (Ex-CBN) to $2.3 billion. Going by breakdown of inflow (Ex-CBN), the decline emanated largely from domestic participation at the window, with sales by non-bank financial institutions declining 32% MoM to $496 million. On the other hand, offshore flows expanded by 7% MoM to $1.7 billion, with FPI flows accounting for 90% of offshore funds. Notably, the increased FPI participation reflected in the fixed income market during the month, as average yields contracted 70bps to 12.94% (April: +5bps). 
  • Reflecting the improved liquidity at the window, available data as at the time of writing showed absence of CBN sales, with the apex bank accruing a net purchase of $396 million (April: $768 million) to support the gross external reserve expansion by $330 million (April: $365 million) to $45.5 billion. As a result, the naira was stable across markets, with the NAFEX and parallel rate closing the month at N360.74 and N359.39 against the dollar respectively.
  • Inflation to move northward in May: Inflation rate for the month of  April took a different turn, printing at 11.37%, 12bps higher than numbers reported in the prior month. The outing mirrors a surprising uptick in food inflation, printing at 13.70% YoY (March: 13.45%) – overshadowing the moderation in core inflation to 9.28% YoY (March: 9.46%). On the food index, uptick in prices of farm produce which expanded by 47bps to 13.79% YoY led the increase. From data provided by NBS, the price increase was more evident in the Northwest and Eastern regions particularly Zamfara, Kebbi and Bauchi which is not far-fetched, given the emergence of clashes between security agencies and Armed bandits in these regions. Core inflation on the other end mirrors the impact of stable PMS prices at N145/litre, which outweighed increases in diesel (+12.9% YoY) and kerosene (+13.6% YoY) prices. Similarly,  Month-on-Month inflation inched up by 16bps for the second consecutive month to 0.94%, mirroring increases in food and core inflation.
  • Q1 19 GDP: Strong start to the year but not great: The GDP numbers released for Q1 2019, showed the economy expanded by 2.0% YoY (Q1 18: 1.9% and Q4 18: 2.4%), as the resilient growth in the  non-oil sector neutered contraction in the oil sector. On the former, the services and Agric sector (which accounts for majority of the economy led the momentum), with the sector growing  by 2.5% YoY. On the flipside, oil sector contracted further by 2.4% YoY for the fourth consecutive quarter, mirroring the decline in crude oil production. Over the review period, average crude production printed at 1.96mbpd compared to a revised production level of 1.98mbpd in Q1 18.
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ARM Securities Limited
ARM Securities Limited

ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape. ​

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