MARKET INDICATOR
By Obinna Chima
The employment level index in Nigeria’s Purchasing Managers’ Index
(PMI) stood at 51.5 points in August, indicating growth in employment
for the fourth consecutive month.
According to the latest PMI, of the 16 sub-sectors, seven recorded
growth, four remained unchanged while five sub-sectors recorded
decline in employment level over the preceding month.
Also, the business activity index moderated to 56.1 points in August
2017, indicating growth for the fifth consecutive month. The index
grew at a slower rate, when compared to its level in the previous
month.
The report showed that 12 sub-sectors recorded growth in business
activity; three remained unchanged while three declined in the review
month.
Also, at 54.9 points, inventories index grew for the fifth consecutive
month, and at a faster rate when compared to its level in July 2017.
Thirteen of the 16 subsectors recorded growth, one remained unchanged
while two sub-0sectors recorded decline in inventories.
On the other hand, the non-manufacturing PMI report showed business
activities and new orders grew at a slower rate; but employment level
and inventories grew at a faster rate in August 2017.
“The composite PMI for the non-manufacturing sector stood at 54.1
points in August 2017, indicating growth in non-manufacturing PMI for
the fourth consecutive month.
“Of the 18 non-manufacturing sub-sectors, 15 recorded growth in the
following order: utilities; public administration; information &
communication; finance & insurance; health care & social assistance;
agriculture; accommodation & food services; electricity, gas, steam &
air conditioning supply; transportation & warehousing; repair,
maintenance/washing of motor vehicles; wholesale trade; educational
services; professional, scientific, & technical services; arts,
entertainment & recreation; and water supply, sewage & waste
management.
“The real estate, rental & leasing; construction; and management of
companies sub sectors recorded contraction in the review period,” it
added.
Also, the new orders index at 53.5 points grew in August 2017 for
the fifth consecutive month. Precisely, of the 18 sub-sectors, 12
reported growth; one remained unchanged while five recorded decline.
The employment level Index for the non-manufacturing sector stood at
54.4 points, indicating growth in employment for the fourth
consecutive month. Fifteen sub-sectors recorded growth in the review
month, one remained unchanged while two recorded declines.
“At 52.3 points, non-manufacturing inventory index grew for the fourth
consecutive month, indicating growth in inventories in the review
period.
“Eleven subsectors recorded higher inventories, 2 remained unchanged
while 5 subsectors recorded lower inventory in August, 2017,” the
report added.
Forex Market
Meanwhile, the Central Bank of Nigeria (CBN) last week
injected a total of $547 million into the forex market.
However, despite the intervention, the interbank exchange rate (NIFEX)
remained unchanged at N330 to a dollar.
In other segments, Cowry Assets Management Limited, in a report
revealed that the naira appreciated week-on-week at the Bureau De
Change and Parallel market segments by 1.36 per cent and 1.35 per cent
to N362 to the dollar and N365 to the dollar respectively.
It however depreciated at the Investors & Exporters’ forex window
(I&E) by 0.03 per cent to N359.67 to the dollar.
In the forwards market, the spot contract depreciated week-on-week by
0.02 per cent to N305.85 to a dollar.
However, the 3-month, 6-month and 12-month forward contracts
appreciated week-on-week by 0.27 per cent, 0.34 per cent and 0.10 per
cent to N377.4 to the dollar, N397.17 and N435.18 to the dollar
respectively.
Cowry Assets Management’s analysts anticipated that the week, the CBN
would continue to intervene in the interbank segment and increasing
investor confidence would lead to further stability of the
naira/dollar exchange rate.
The market did not open on Friday and Monday because of the public
holiday declared to celebrate the Eid-el-Kabir.
Interbank Money Market
Last week, the CBN auctioned treasury bills via primary and secondary
markets totalling N211.77 billion, viz: 91-day bills worth N26.14
billion (Stop Rate (SR) fell to 13.30% from 13.42%); 182-day bills
worth N30 billion (SR fell to 17.36% from 17.40%); 364-day bills worth
N137.00 billion (SR fell to 18.52% from 18.53%); 175-day bills worth
N18.58bn and 177-day bills worth N0.05 billion.
A part of these was offset by matured treasury bills worth N88.14 billion.
However, the Nigerian Interbank Offered Rates (NIBOR) fell across all
maturities. Specifically, NIBOR for overnight funds, 1-month, 3-month
and 6-month fell week-on-week to 9.03 per cent (from 11.32), 19.09 per
cent (from 19.88%), 21.39 per cent (from 22.71%) and 22.77 per cent
(from 23.61%) respectively.
This was as the impact of the Federation Accounts Allocation
Committee’s (FAAC) disbursement of N467.8 billion to the three tiers
of government last week was felt by the financial system.
Similarly, the Nigerian Inter-bank Treasury bills True Yields (NITTY)
fell for all the maturities– yields on the 1-month, 3-month, 6-month
and 12 months maturities fell to 17.01% from (18.28%), 19.66% (from
20.30%), 19.48% (from 20.38%) and 22.20% (from 22.39%) respectively.
“This week, we expect maturities via secondary market worth N135.41
billion viz: 345-day bills; hence, we look forward to further
financial system liquidity ease and resultant decline in interbank
rates,” Cowry Assets analysts stated further.
Bond Market
Also, prices of FGN bonds traded at the over-the-counter (OTC) segment
fell for most maturities amid sustained profit taking.
The 20-year, 10% FGN JUL 2030 paper, the 10-year, 16.39% FGN JAN 2022
debt and the 5-year, 14.50% FGN JUL 2021 debt depreciated week-on-week
by N0.06, N0.31 and N0.69 respectively; corresponding yields rose to
16.62% (from 16.61%), 16.47% (from 16.37%) and 16.77% (from 16.51%).
However the price of the 7-year, 16.00% FGN JUN 2019 appreciated by
N0.34 with the corresponding yield falling to 16.67% (from 16.89%).
Elsewhere, FGN Eurobonds traded on the London Stock Exchange
appreciated in value for all of the maturities amid sustained bargain
hunting.
But the 10-year, 6.38% JUL 12, 2023 and 5-year, 5.13% JUL 12, 2018
bonds appreciated by $0.74 (yield fell to 5.24% from 5.39%) and $0.14
(yield fell to 3.29% from 3.49%) respectively.
In addition, a 10-year FGN bond worth N20 billion matured in the just
concluded week; hence, a boost in liquidity was anticipated, with
attendant increase in bond prices at the OTC market this week.
Fitch Affirms Nigeria’s Rating
Fitch Ratings last week affirmed Nigeria’s long-term foreign currency
Issuer Default Rating (IDR) at ‘B+’ with a “negative outlook”.
The international rating agency in a statement explained that
Nigeria’s rating was supported by its large and diversified economy,
significant oil reserves, its net external creditor position, low
external debt service ratio and large domestic debt market.
These, it stated, were balanced against relatively low per capita
gross domestic product (GDP), an exceptionally narrow fiscal revenue
base and a weak business environment.
According to Fitch, the negative outlook reflected the downside risks
from rising government indebtedness, the possibility of a reversal of
recent improvements in foreign currency (FX) liquidity, and a
faltering of the still fragile economic recovery.
Fitch had forecast that the Nigerian economy would grow by 1.5 per
cent in 2017 and 2.6 per cent in 2018, following the country’s first
contraction in 25 years in 2016.
GDP growth continued to contract in 1Q17, but by less than in the
previous four quarters.
“The recovery will be driven mainly by increased FX availability to
the non-oil economy and fiscal stimulus, as higher oil revenue and
various funding initiatives have raised the government’s ability to
execute on capital spending plans.
“However, the FX market remains far from fully transparent, domestic
liquidity has also become a constraint, and the growth forecast is
subject to downside risks,” it noted.
Power Sector Loan
The Group Managing Director and Chief Executive Officer of Access
Bank Plc, Mr. Herbert Wigwe, last week explained why Nigerian banks
still have not made provisions for most of the power sector loans,
despite the fact that most of the loans taken by investors who bought
up the federal government’s assets in the electricity sector almost
four years had defaulted on their loan repayments. He said if the
banks were to make impairment charges on the loans it would be
counterproductive, as the power sector was systemically important and
critical to the growth of the Nigerian economy.
Wigwe, who said this during an interview on ARISE News Channel, the
sister broadcast station of THISDAY Newspapers, described the issues
surrounding the power sector privatisation as very important and urged
the federal government to look into the issues and create some form of
reprieve for investors that had staked their funds in the sector.
“There is a problem in that value chain and there is also a problem
with the pricing of their product which everybody needs to look at.
There is a problem in terms of access to gas also,” he explained.
