Global activity has broadly strengthened and is expected to improve further in 2014-15 with much of the growth coming from advanced economies. Inflation in these economies, nonetheless, has underperformed projections, reflecting still large output gaps and recent commodity price declines. On the other hand, activity in many emerging market economies has disappointed in a less favourable external financial environment, although they continue to contribute more than two-thirds of global growth. Hence, their output growth is expected to be lifted by stronger exports to advanced economies.

Based on projections, growth in the United States is expected to be 2.8 per cent in 2014 (WEO Update 2014), up from 1.9 per cent in 2013. Following upward surprises to inventories in the second half of 2013, the pickup in 2014 will be carried by final domestic demand, supported in part by a reduction in the fiscal drag as a result of the recent budget agreement. Also the euro area is turning the corner from recession to recovery. Growth is also projected to strengthen to 1 per cent in 2014 and 1.4 per cent in 2015 according to the World Economic Outlook Update 2014. However, the recovery is believed to be uneven.

Growth in Sub-Sahara Africa (SSA) remains robust and is expected to accelerate in 2014. Tight global financing conditions or a slowdown in emerging market economies could generate some external headwinds, especially for middle-income countries with large external linkages, producers of natural resources and frontier economies. However, growth in SSA remained strong in 2013 at 4.8 per cent, virtually unchanged from 2012, underpinned by improved agricultural production and investment in natural resources and infrastructure.

Overall, growth in emerging market and developing economies is expected to increase to 5.1 per cent in 2014 and 5.4 per cent in 2015. Growth in China rebounded strongly in the second half of 2013 due largely to acceleration in investment. This surge is expected to be temporary in part because of policy measures aimed at slowing credit growth and raising the cost of capital. However, growth in India picked up after a favourable monsoon season and higher export growth and is expected to firm further on the back of stronger structural policies supporting investment. Basically, many other emerging markets and developing economies have started to benefit from stronger external demand in advanced economies and China.


Growth outlook remains positive amidst security challenges

The Nigerian economy, in line with its performance in recent years, is expected to grow strongly in 2014 with expansion continuing to be driven by high oil prices and robust domestic demand. However, to achieve this, the country must push forward reforms to encourage broad-based development, alleviate poverty and nurture trend towards diversification of the economy. To buttress this, the IMF forecasts 7.4% GDP growth in 2014, up from a 6.2% growth rate in year 2013. This is in spite of the effects of instability in the North of the country and oil theft which has continued to act as a drag on the broader economy.

Despite a somewhat less upbeat regional outlook, on the back of lower external demand, sliding commodity prices and a reversal of capital flows, Nigeria has managed to maintain momentum, partly thanks to its healthy long-term fundamentals: a large domestic market of estimated 170m people and crude oil exports which have remained the dominant foreign exchange earner for the country.

Inflation Rate Accelerates by 10bps to 7.9% in April…

According to data released by the National Bureau of Statistics (NBS), inflation level increased from 7.8% in March to 7.9% year-on-year in April 2014. This was, however, attributed to an increase in food prices such as bread and cereals, meat, fish, dairy, oils and fats and fruits classes. However, according to the statement by the NBS on a monthly basis, prices weakened in April after an uptick in March. Prices increased by 0.62 per cent in April, lower than rates recorded in March by roughly 0.2 per cent. Food prices also moved in the same pattern, easing in April, while monthly core prices firmed at 0.4 per cent over the previous two months.

Nigerian Rebased GDP……….a paradigm shift

Nigeria’s economy is now at US$510bn ahead of South African economy and the largest in Africa. However, the rebased GDP numbers imply that the Nigerian market has potential and will serve as an alternative investment destination to international investors. Further, the rebasing exercise has brought Nigeria a step closer to its ambition of becoming one of the top 20 economies in the world by the year 2020. Also, Nigeria becoming the largest economy in Africa will have an impact on how it is perceived by international investors, though the impact will essentially be psychological.

However, beyond the euphoria of the rebasing exercise, any impact this is expected to have will be lost on the majority of Nigerians as estimated 60 per cent of its population live in abject poverty, living below less than a dollar a day. The worsening statistics is an indication of the absence of inclusive growth in Africa’s most populous nation.

CADBURY 07/4/2014 N1.30 NIL 14/5/2014 13/5/2014 N71.20
MANSARD 11/4/2014 N0.04 NIL 24/4/2014 24/4/2014 N2.28
CUSTODYINS 07/4/2014 N0.04 NIL 09/5/2014 08/5/2014 N2.13
UBA 14/4/2014 N0.50 NIL 28/4/2014 25/4/2014 N6.90
STERLINGBNK 14/4/2014 N0.25 NIL 30/4/2014 30/4/2014 N2.37
UNILEVER 14/4/2014 N1.25 NIL 16/5/2014 15/5/2014 N44.75
FIDELITYBK 14/4/2014 N0.14 NIL 02/5/2014 02/5/2014 N2.01
STANBIC 17/4/2014 N0.10 NIL NIL NIL N20.35
ACCESS 17/4/2014 N0.35 NIL 30/4/2014 30/4/2014 N7.87
DIAMOND 17/4/2014 N0.30 NIL 28/4/2014 28/4/2014 N5.90
DANGCEM 22/4/2014 N7.00 NIL 05/4/2014 02/5/2014 N227.80
TOTAL 22/4/2014 N9.00 NIL 16/6/2014 13/6/2014 N162.50
UBCAP 22/4/2014 N0.25 NIL 29/4/2014 06/5/2014 N2.35
ASHAKACEM 28/4/2014 N0.42 NIL 22/5/2014 20/5/2014 N16.23
NESTLE 28/4/2014 N24.00 NIL 13/5/2014 12./5/2014 N1,076.00
WAPCO 28/4/2014 N3.30 NIL N/A 21/5/2014 N109.20
DANGSUGAR 02/5/2014 N0.60 NIL 29/5/2014 23/5/2014 N9.30
Source: NSE, SA Capital Research


Nigerian Equities Market…off to a rough start

The Nigerian equities market started the year roughly with a negative first quarter and year-to-date performance of -6.25% as investors took profit on the back of the market positive performance the previous year. The All Share Index and market capitalization both closed the quarter at 38,748.01bps and ₦12,446 trillion respectively compared to 41,228.49bps and ₦13.194 trillion at the beginning of the year. Nonetheless, the market was characterized in the first quarter by the releases of corporate actions of quoted companies as shown in the table above.

Tracking the NSE sectoral performance, reflecting the negative performance of the equities market in the first quarter, all sectoral indices depreciated with the exception of only the NSE Industrial Goods that appreciated by 1.59%, while all other indices declined thus: NSE 30 (-9.08%; NSE Consumer Goods (-12.11%); NSE Banking (-16.64%); NSE Insurance (-11.28%); NSE Oil & Gas (-15.20%) and NSE Lotus II (-3.59%) accordingly.

Date NSE All Share Index NSE     30 NSE Consumers


NSE Banking NSE Insurance NSE Oil & Gas NSE Lotus II NSE Industrial Goods
31-Dec-13 41,329.19 1,907.17 1,100.25 447.84 152.87 339.88 2,863.12 2,546.59
31-Mar-14 38,748.01 1,733.91 966.98 373.33 135.63 288.21 2,760.37 2,587.10
Change -2,581.18 -173.26 -133.27 -74.51 -17.24 -51.67 -102.75 40.51
% Change -6.25% -9.08% -12.11% -16.64% -11.28% -15.20% -3.59% 1.59%

Source: NSE, SA Capital Research

The Nigerian equities market in Q1:2014 was largely influenced by key events in the first quarter of 2014. On the one hand was the continuous tapering of the U.S Fed which is now $55billion per month while on the other hand and predominantly the game changer is the further tightening by the apex bank (CBN). The quarter witnessed an increase in CRR on public sector deposits to 75 per cent from the initial 50 per cent as well as a further increase in CRR on private sector deposits to 15 per cent from 12 per cent. On the back of these monetary tightening policies, the banking stocks shed about 15 per cent of their value in Q1. Currently, recovery is driven majorly by positive earnings results. Equally, the sudden suspension of the Central Bank Governor, Mallam Sanusi Lamido, also impacted negatively on the market as Foreign Portfolio Investors exited the local bourse as a reaction to the suspension announcement. Hence, the aftermath of these key events is expected to affect the market for the better part of this year.


Source: NSE, SA Capital Research

However, Q1 of 2014 witnessed a significant increase in the participation of foreign investors as foreign portfolio transactions dominated activities in the market with 78.25% compared to 21.75% for domestic portfolio transactions. This is in contrast to previous year where foreign portfolio transaction was 52.76% and domestic portfolio transaction was 47.24% respectively. First quarter 2014 actually saw significant growth in FPIs transactions, from 49.28% in January to 78.25% in March. On the contrary, domestic transactions, however, declined from 50.72% in January to 21.75% in March, 2014.

The downside risks of FPIs dominance in the market is that these foreign investors are sensitive to a number of factors which might impact on the market either ways going forward. And these factors are: relative risk of the market; confidence in the financial sector now on the decline; international rating opinions; S&P, Moody’s et al as well as attractiveness of returns, amongst others.

Outlook for the Year…brace-up for turbulence ahead

Going forward, we expect the market to close the year positively albeit with a marginal upside. This is largely on the back of our cautious optimism on the equities’ market space owing to tight monetary policy environment, political uncertainty and insecurity, particularly in the North-east of Nigeria. However, going by the prevailing market and economic factors, we are upbeat on the fixed income securities market as current monetary tightening environment favours this asset class. While for the equities market, preservation of portfolio value will be uppermost in investors’ mind. Hence, we expect portfolios to be rebalanced towards more of defensive sectors like consumer and industrial goods as well as oil & gas sectors, thereby hedging portfolios against unforeseen uncertainties.