Breakfast Report - 17 October 2016
September inflation rose to 17.9% y/y (Vetiva estimate: 17.8%, August: 17.6%) with both Core Inflation (17.2% to 17.7%) and Food Inflation (16.4% to 16.6%) rising further during the month. Nonetheless, the pace of inflation continued to slow on a m/m basis, clocking in at 0.8%, the first sub-1 reading since January. However, whilst Food Inflation mimicked this pattern, rising a mild 0.8% m/m in September (August: 1.2%), monthly Core Inflation increased for the first time since May 2016, registering at 1.0% (August 0.9%). Year-on-year inflation continues to be driven by the Imported Food and Utilities categories which rose to 20.8% and 26.3% respectively, a slight increase from the 20.7% and 25.9% recorded in August. In the Petroleum downstream sector, prices of Premium Motor Spirit (PMS) moderated further in September (down 0.6% on average to ₦146.30/litre) but remain elevated compared to last year’s levels following the partial deregulation of PMS prices in May 2016. Likewise, prices of diesel (AGO) and kerosene (Household Kerosene) declined 2.0% and 3.2% on a monthly basis albeit with sharp variation across states.
Meanwhile, the Minister of Finance – Kemi Adeosun disclosed that the Federal Government has struck a deal with the World Bank and other development organizations for the release of $1.3 billion as capital base for the take-off of Development Bank of Nigeria (DBN). According to her, the DBN would serve as a vehicle for Small and Medium-sized Enterprises to access credit to run and expand their operations.
Nigerian equities opened the past week on a positive note with the NSE ASI climbing 71bps over the first two trading sessions amidst gains across large caps particularly in the banking sector. The ASI however retreated at mid-week amidst late market volatility with the index down marginally 3bps before posting heavier losses on Thursday on market reaction to FO’s 9M’16 earnings release (PAT down 56% q/q) and news of CBN directive to all banks (excluding First Bank) to halt the sale of dollar proceeds of International Money Transfer Services to BDCs. Overall, the ASI could only muster a w/w gain of 0.09% with ytd loss cut to 2.73%.
As Q3 earnings season opens up further, we expect trading activity to pick up as investors position ahead of the numbers.
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