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We expect improvement in the domestic economy on the back of the structural changes that began in 2019. Notwithstanding, per capita income is likely to remain frail with scope for further changes in consumption patterns and, possibly, excess capacity for a few companies. Monetary bias could remain largely dovish, with administrative measures set to leave system liquidity at elevated levels and yields mostly lower in H1’20. Bold reforms would be needed to lubricate the proposed implementation of Nigeria’s
N10.6 trillion budget to properly stimulate growth.
Below is a summary of our calls on Nigeria’s broad macro-environment.
In equities, we expect investors to take advantage of bargain hunting opportunities in fundamentally strong names. We see scope for capital gains in ZENITH BANK, UBA, GUARANTY, and FBNH in the banking space. The investment case of WAPCO and UACN are also compelling following recent restructuring efforts/plans. The performance of a few other consumer names (such as FLOURMILL and NB) is likely to be buoyed by debt refinancing initiatives. We also like MTNN and DANGCEM, with reduced regulatory tension and strong market positioning set to buoy growth for the respective duo.
On a fixed income, investors are more likely to stay short in view of the expected recovery in the interest rate in coming quarters.
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