EUR 132.56 For Business Accounts Only

Breakfast Report - 10 October 2016

• The Nigerian Bureau of Statistics cut Nigeria’s 2016 growth forecast from 3.8% to -1.3% (Vetiva estimate: -1.3%). Also, the International Monetary Fund (IMF) revised Nigeria’s growth forecast for 2017 to 0.6%, down from its previous forecast of 1.1%. According to IMF, the downward revision can be justified by incessant disruptions to oil production, dearth of foreign currency supply, abysmal power generation and weak investor sentiment.
  
  
• The Federal Government has allegedly submitted the Medium Term Expenditure Framework and Fiscal Strategy paper for 2017-2019. Reported details of the framework reveal an estimated budget spending of ₦6.81 trillion in 2017, 13.3% above 2016 budget estimate. The details also revealed that capital and non-debt recurrent expenditure are projected to increase by about ₦217 billion and ₦177 billion from ₦1.80 trillion and ₦2.65 trillion respectively. Furthermore, crude oil production was set at 2.2mbpd and benchmark oil price at $42.5, compared to 2.2 mbpd and $38 in the 2016 budget. In our view, the increase in the oil price benchmark can be explained by the modest recovery in oil prices in 2016. However, we note that the 2017 benchmark fails to reflect the sharp drop in the nation’s oil output as a result of militant activity in the Niger Delta which cut average daily production to a low of 1.7 mbpd in May. Oil production in the medium term will largely be determined by the Government’s success in two key areas – addressing security threats in the Niger Delta and improving capacity utilization in the nation’s key refineries.
  
  
• Coming off the Independence break on last Monday, the Nigerian equity market kicked off the last quarter on a negative note, trading lower across the week save for Thursday when gains in DANGCEM and select Consumer Goods lifted the NSE ASI marginally up. Losses for the 4-session trading week were recorded at 1.77%, extending the ASI ytd loss to 2.82%.
  
  
• Considering the array of mid-large caps that remained under pressure at the close of the week, we believe the ASI could open lower in the week ahead.