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Breakfast Report - 20 August, 2018

The Week Ahead                                                                            

Speaking over the weekend, Dr. Yemi Kale, the Statistician-General of the Federation hinted at a flat GDP growth for Nigeria in Q2’18, citing the challenges in the agriculture sector as a potential impediment to near-term growth. The National Bureau of Statistics is scheduled to release Q2’18 GDP figures at the start of next week and we forecast year-on-year growth of 1.6% during the period, down from 2.0% in Q1’18. One driver of this material decline is the moderation in oil production observed in the quarter, with initial estimates suggesting a decline of c.150,000 bpd. On the back of this, we expect flat y/y GDP growth in the oil sector in Q2’18. Meanwhile, although the manufacturing sector should have posted a decent performance — helped by a low base and stable foreign exchange — the heavyweight services sector is likely to have remained weak.                                                                    

Equity: After posting ten straight negative closes, the ASI recorded a 187bps rebound on Friday following a strong recovery in Industrial Goods. This gain was however unable to offset earlier losses with the index recording a 51bps w/w loss. Despite the DANGCEM-driven recovery witnessed on Friday, we foresee a return to negative territory this week given that underlying investor apathy remains in the market. Nonetheless, we expect milder losses today.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Stock Watch: UBA is one of the last Tier 1 banking institutions yet to release their H1’18 financial statements. The stock lost for four straight sessions last week to settle at ₦8.35, bringing the stock to a ytd loss of 19%.                                                                  

Fixed Income: Despite healthy system liquidity, demand in the fixed income market was weak last week amid wider emerging market weakness. As the global and political landscape remain unchanged, we anticipate a tepid start to this week’s trading.