Stocks plunge further amidst bleak economic outlook

Global Markets: Global markets traded mostly in positive territory for the first two sessions of the past week following sustained uptick in oil prices, a positive European data (GDP grew 1.7% y/y in Q1’2016) and comments from the Fed chair that quelled concerns about a rate hike in June. However, buying momentum scaled back significantly for the rest of the week, sending most bourses well into the red as renewed concerns over the health of the global economy after weaker Chinese trade data and a downward revision in world bank’s growth forecast to 2.4% (previous: 2.9%) for 2016 weighed on investor sentiment.

Domestic Economy: The Nigerian Bureau of Statistics (NBS) released a report showing the Formal and Informal sector split of the 2015 GDP. The formal and informal sector accounted for N55, 371 billion (59%) and N38, 773 billion (41%) of the GDP at current basic prices respectively. Not surprisingly, the informal sector took the back seat in some key sectors of the economy such as manufacturing (12.1%), construction (11.6%), mines & quarrying (0.4%) and electricity (0%). The sector however accounted for a large chunk of the weightiest activity sectors i.e. Agriculture (91.85%) and Trade (55.7%). The relatively large size of the informal sector points to institutional weaknesses in taxation and regulation. The formalisation of the sector thus provide headroom for growth in government revenue and economic activity in the long run.
Equities: The Nigerian equity market continued to trend lower this past week as investors remained wary of the extended delay to the proposed currency framework and weak outlook for the economy at large (World Bank cut its 2016 growth forecast for Nigeria to 0.8%, previous: 4.1%). The market declined 1.5% for the week; year to date return now stands at  negative 4.9%

Fixed Income: Trading in the T-bills market was mixed with a bearish bias in first two sessions of the past week amidst a number of OMO auction announcements. However, demand resurfaced mid-week through week close, buoyed by a significant improvement in system liquidity from c.N289 billion to c.N996 billion. The bond market was largely bearish this past week as investors stayed the monthly bond auction due Wednesday, June 15. Overall, yields rose 40bps on average across maturities.

Currency: The Naira remained relatively unchanged at the official market, depreciating 8kobo kobo to NGN199.05. On the parallel market, the currency fell by NGN13/USD to NGN368/USD as delay in the release of the new currency framework by the CBN continues to exert pressure on the market.

[Punch]