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Nigeria Strategy Report H2 2018 Excerpts- A tale of resolve and recovery across MEA

• In today’s cut-out of our core strategy document – The Nigeria Strategy Report, we review developments in Sub Saharan Africa as well as in Middle-East and North African climes over H1 18.  The section also provides insights on what we believe will be major drivers of both growth and overall investor sentiment for the rest of the year.
• In our H1 2018 Strategy report, we had posited that growth in SSA will remain resilient on the back of strong momentum in smaller economies which should neuter downside risk in powerhouse constituents such South Africa, while we opined that growth in the MENA region will be driven by sturdy performance in Egypt. Our views largely played out as buoyant growth among economies such as Kenya, Ghana and Cote d’Ivoire supported activities in SSA despite drags in South Africa and Nigeria. Meanwhile, the impact of economic reform continued to bode well for growth in Egypt even as low rainfall impacted growth in Morocco.
• For currency and inflation, our prognosis was that higher foreign exchange flows from commodity export will support currency defense with the attendant impact keeping a tight lid on inflation. Whilst our views materialized through Q1 18, we witnessed slight deviation from our outlook as rate normalization in the U.S propelled local assets sell-off with knock-on effect spiking mild currency depreciation across the region over Q2 18. Irrespective, the positive impact of high base from last year continued to stoke inflationary deceleration in SSA even as structural shocks such as implementation of VAT in Saudi Arabia and energy price increases in Egypt triggered renewed inflationary fear.
• For the rest of the year, we expect economies in SSA to remain strong on the back of higher commodities prices, improved agricultural output from favorable weather conditions and robust consumer spending – in the face of moderating inflation, while the impact of economic reform will continue to drive growth in MENA region with Saudi Arabia expected to exit recession on the back of marked growth in non-oil sector.