EUR 138.52 For Business Accounts Only

Breakfast Report - 16 January 2017

• Nigeria’s inflation peaked for the year in December with a year-on-year (y/y) print of 18.6%, up from 18.5% in November. This rise was driven by an uptick in month-on-month (m/m) inflation to 1.1%, the highest since July last year. We highlight that this rise in month-on-month inflation in December is consistent with trend seen for the past decade as the month is usually associated with heightened business activity and higher aggregate demand. Looking at the main sub-Indices, there was some cheer as Core Inflation moderated to 18.1% y/y (November: 18.2%) driven by the third successive decline in m/m inflation to 0.6% (November: 0.7%). In contrast, Food Inflation rose to 17.4% y/y (November: 17.2%) as m/m inflation rose for the fourth successive month to reach 1.3% (November: 0.9%). Notwithstanding the persistent rise in inflation, we highlight the slowing Core Inflation as an encouraging sign and expect that the waning effect of Christmas festivities will be positive for inflation.
• According to the National Bureau of Statistics, average price of Premium Motor Spirit (PMS) closed the year at ₦146.70, 22.7% higher than in December 2015 and marginally above the stipulated pricing band of ₦135-145. On a similar note, average Automotive Gas Oil price in December was ₦196.25, 19.5% higher than in December 2015. Meanwhile, average Household Kerosene (HHK) price fell to ₦231.85 per liter in December, representing the first year-on-year fall (11.2%) in national HHK prices. In month-on-month terms, prices moderated 18% to fall to their lowest level since April of last year.
• The Nigerian equity market see-sawed in the past week but closed the week positive, up 28bps w/w. Notably, the Banking sector shrugged off the broad negative market sentiment to log a 327bps w/w gain as investors continued to bid up stocks in the sector. Whilst the Industrial Goods sector also eked out a mild positive return for the week, the Consumer Goods and Oil & Gas sectors dipped further in the red, extending their ytd loss to 406bps and 295bps respectively.
• Save for the banking sector, sentiment across key sectors remains quite bearish. We believe this could drag the ASI further down this week.