Breakfast Report - 26 February 2024
The National Bureau of Statistics confirmed that Nigeria’s GDP expanded by 3.46% y/y in Q4’23, which is 28bps above our estimate (Vetiva: 3.18% y/y) and 93bps above Bloomberg Consensus estimate (2.53% y/y). This represents the best quarterly expansion during the year and can be attributed to the recovery in the oil sector. For the record, the oil sector recorded its first positive output growth since March 2020, thus recovering from a 3-year-long recession. Overall, this contributed to the full-year real output expansion of 2.74% y/y (2022: 3.10% y/y).
In Q1’24, we envisage oil production sitting above 1.5mb/d. According to the National Upstream Petroleum Regulatory Commission (NUPRC), oil production (including condensates) improved to 1.64mb/d in January. At this pace, the oil sector could record a strong rebound in 2024 and support the ailing non-oil sector. However, key worries over the non-oil sector abound as high fuel prices and elevated FX volatility could pave the way for contractions in the manufacturing sector. This weakness could spill over into the trade sector. Telecoms could continue to experience expansions, though could be weaker than usual due to regulatory constraints. Financial services could continue to deliver strong double-digit expansions on the back of a strong industry balance sheet. Thus, we expect real GDP to grow by 2.81% y/y in Q1’24 (Q1’23: 2.31% y/y). Due to the passthrough of FX and energy reforms to the non-oil sector, we downgrade our FY’24 growth expectation from 3.2% y/y previously to 2.92% y/y (2023: 2.74% y/y).
Equity: The market finally recorded positive sentiment on Friday’s close, as the market appeared slightly stable following the rate hikes in the fixed income space. We still anticipate another rocky trading week this week, as market participants look forward to the first MPC meeting for the year.
Fixed Income: We expect the week to start off with a quiet trading session as investors look forward to guidance from the MPC meeting.
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