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Breakfast Report - 04 September 2023

The Week Ahead
In Q2’23, Nigeria’s real GDP growth slowed to 2.51% y/y, 22bps lower than our estimate (Vetiva: 2.73% y/y) and 103bps lower than the Q2’22 outcome (3.54% y/y). While the agricultural sector expanded at a faster pace, growth in the services sector slowed, and the industrial sector contracted. We attribute this outcome to the normalization of post-COVID economic activities and a sustained relapse in the oil sector. Despite the pipeline surveillance contract, the upstream sector could remain in a recession due to crude theft. We note that although oil production fell to 1.29 mb/d in July 2023, this is still slightly above the Q3’22 average of 1.21 mb/d. Barring a deeper oil sector relapse, overall growth could remain above 2.5% in Q2. In the downstream sector, the take-off date for domestic refining of crude has been extended by two years. While we expect telecoms and financial services to continually post stellar returns in the services sector, we expect agricultural interventions to buoy the agricultural sector. Thus, we expect real GDP to grow by 2.63% y/y in Q3’23 (Q3’22: 2.25% y/y) and 2.47% y/y in 2023 (2022: 3.10% y/y).
Equity: Banking stocks are set for a swell time on Monday, with GTCO’s H1’23 numbers recording a 181% and 262% growth in gross earnings and profit after tax respectively. We look forward to another positive close in the banking sector, while other sectoral indices trade mixed.
Fixed Income: With an auction slated for this week, we expect the secondary market to open on a mixed note. There was significant demand at the last auction, which in turn drove the buy-side interest in the NTB space this week. That said, we anticipate investors will wait for the outcome of the auction to determine their stance on the market.