EUR 88.38 For Business Accounts Only

Breakfast Report - 5th September 2016

Nigeria’s recession received the official stamp with real GDP down 2.06% y/y in Q2’16 (Q1’16: -0.36%). This was largely driven by the oil sector which contracted 17.5% y/y on the back of lower oil production. The malaise spread to the non-oil sector as it recorded a second successive quarter of y/y declines, notching negative growth of 0.38% vs 0.18% in Q1’16. We expect recession to last for the rest of the year as underlying drivers (currency weakness and oil production challenges) remain, with Q3 and Q4 GDP growth to register at -1.72% and -1.09% respectively to bring 2016 annual growth to -1.32%. Driven by low base effect and an improved currency outlook, we expect a minor growth rebound in 2017 to 1.23%. Official unemployment and underemployment rates rose to 13.3% and 19.3% respectively in Q2’16, up from 12.1% and 19.1% in the preceding quarter, majorly driven by labour force expansion and the negative growth registered across key sectors so far this year. Furthermore, year-on-year inflation in July registered at 17.1%, higher than the 16.5% y/y print in June, although m/m inflation fell from 1.71% to 1.25% in July. The Nigerian stock market opened the past week lower in a delayed trading session (caused by a technical glitch) that registered extremely low volumes. Afterwards, the ASI rallied for three days as investors looked past a flurry of weak economic data. Overall, the NSE ASI posted w/w gains of 1.11% with year to date loss standing at 3.09%.

Noting that the sharp reversal witnessed Friday was singlehandedly driven by DANGCEM, we believe market sentiment remains fairly strong (citing positive market breadth and volume traded) in spite of poor economic data.