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Breakfast Report - 25 November 2019

The National Bureau of Statistics published Q3’19 GDP figures on Friday, reporting real GDP growth of 2.28% y/y, higher than the revised Q2’19 figure of 2.12% y/y. The report stated that the Oil sector grew 6.49% y/y, slower than the 7.17% y/y growth recorded in Q2’19. We note that the slower growth was due to a higher Q3’18 base, even as the country recorded its highest average daily crude production figure (2.04 million bpd) in Q3’19. Meanwhile, the Non-Oil sector continues to disappoint, this time growing by a mere 1.85% y/y, barely 0.20% higher than Q2’19, as the Agriculture (2.28% y/y) and Manufacturing (1.10% y/y) sectors continue to perform below potential. One key bright spot, however, was the Information and Communication sector which grew by 9.88% y/y, albeit lower than Q2’19 growth. Overall, the sector contributed 11.34% to real GDP, lower than its 14.55% contribution to GDP in Q2’19 but already higher than the contribution of the oil sector. Ultimately, economic growth remains weak amid sluggish growth in the real sector. While the CBN has enacted various initiatives to encourage real sector investment, policy direction needs to catch up in order to drive real, sustainable growth in the Nigerian economy.

Equity: With the market closing positive for four consecutive days on the back of considerable liquidity diversion from the fixed income market, we expect to see this trend continue into the new week.

Stock Watch: NESTLE closed the week on an impressive note. The counter closed 8.70% above its opening price on Friday to settle at ₦1250.00, while also gaining 8.70% w/w.

Fixed Income: Following two weeks of consistent downward pressure on yields, we have begun to see slowdown in yield moderations across the fixed income market as yields gradually become less attractive. Thus, even with relatively high system liquidity, we foresee milder demand and moderate activity across the fixed income space, keeping yields sticky around current levels.