Monthly Economic and Financial Market Outlook: Nigerian Economy on a Recovery Path

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An in-depth analysis of the key drivers of economic activity in Nigeria and other economies including a discussion of global factors that will affect these near term forecasts…

Domestic Scene:

  • The hope that the Nigerian economy will exit the current recession has improved further as the manufacturing and non-manufacturing activities increased in the month of June 2017 despite the decrease in the monetary aggregates
  • Manufacturing Purchasing Manager’s Index (PMI) in Nigeria expanded for the third consecutive month in the year 2017 to attain the highest level since March 2015. The Composite Manufacturing Index (CMI) increased to 52.9 points in June 2017 from 52.5 points in May 2017
  • The Composite Non-Manufacturing Index (CNMI) also expanded to 54.2 points in June 2017 from 52.7 points in May 2017 to attain the highest level since December 2014
  • The growth in the monetary aggregate was below targets, as the CBN employed tools to tame high inflation rate and stabilise the foreign exchange
  • We expect the inflation rate in Nigeria to drop to 15.64% in June 2017 from 16.25% in May 2017. However, the government decision on Premium Motor Spirit (PMS) price and electricity tariff still remain downside risks to the path of inflation in 2017
  • We do not believe there will be enough justification for the Monetary Policy Committee (MPC) of the CBN to increase interest rate when it meets on July 24-July 25, 2017
  • The accretion to the external reserves still significantly depends on the sustained oil production and efforts of the Organization of the Petroleum Exporting Countries (OPEC) and Russia to adhere to the agreed oil output cut till March 2018
  • The long-term stability of the foreign exchange rate depends on the conducive domestic business environment; particularly the sustained improvement in infrastructure
  • We expect the overall performance of the equity market for July 2017 to be positive, provided quoted companies report strong Q2 June 2017 results
  • Yields on fixed income securities may trend marginally lower in July 2017 because of the expectation of lower June 2017 inflation rate.

International Scene:

  • The OPEC released a global growth forecast of 3.4% for 2017, from 3.1% in 2016 in its monthly report for June 2017
  • The OPEC asserted that the improving momentum in the global economy from Q1 2017 is expected to continue for the remainder of 2017
  • The increased output from Nigeria and Libya have had a downside pressure on oil prices in May/June 2017. Thus, OPEC is considering placing a cap on crude oil production for Nigeria and Libya.

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