The second half of 2021 is expected to bring some cheer to macro watchers globally, with the most robust growth projected for Emerging Markets and Advanced Economies. Sub-Saharan African Economies may have to make do with milder out-turns, given the reality of their low fiscal & monetary bandwidths and lingering regulatory-cum structural impasses. Yet, base effects could instigate the most significant macro bounces across these markets in years.
In our view, Nigeria could record its paciest GDP growth in over 32 quarters in Q2’21, with construction, trade, manufacturing, real estate, and crude petroleum & natural gas moving from pull to push sectors on the impact of their low bases.
The jury is out on whether the expected recovery has been priced in by markets, despite pointers to the likely impact on monetary policy previously hinted by the MPC. These pointers, and our macro assessments, inform our projection for a tighter yield environment as the country edges close to the pre-election year 2022.
We, therefore, favour the same short duration fixed income strategy that proved broadly successful for short-sellers, who were not caught out by the discontinuation of the 2045 bond instrument in H1. Savvy equity investors would also have to ferret the market for opportunities, amidst expected broad market weakness driven by elevated yields and tighter liquidity.
We expect this class of investors to opt for fundamentally sound stocks trading at deep discounts to market and boasting consistently high dividend yields. In addition, investors could watch out for opportunities likely to be created by a strong rebound in sectors, like Oil and Gas and Brewery, that were battered by the pandemic.
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