NIGERIA ECONOMIC HIGHLIGHTS FOR AUGUST

Outlook

1. Weak corporate earnings will constrain stock prices increase
• Leading to a correction in overpriced stocks
2. Increased mopping up activities by the CBN will push up interest rates
3. Investors will rotate their portfolios away from FMCG’s and downstream petroleum companies
4. Market sentiment expected to be negative in the month

The Inevitability of the PDP

• The Presidency and the PDP are applying maximum pressure on the APC
• The PDP believe they have consolidated their base in the South East and parts of the South/South zones
• The surprise win at Ekiti State left the APC in disbelief and the PDP overconfident
• The impeachment in Adamawa and the lack of response by the APC shows that the PDP is the only game in town
• The PDP have become arrogant, overconfident and complacent
• Incumbency is a major factor in Nigeria
• The PDP is likely to be beaten at the Osun election
• The South West is now a political battleground

When the APC fights back

• The APC after being pushed to the wall will respond
• The attempted assassination of Buhari has exalted him to national prominence
• Most likely to be a potent candidate in a general election
• Can no longer be painted as an extremist since he is also victim
• In the North, the attempted assassination is believed to be politically motivated

Politics of Inevitability of the PDP

• If the APC win at Osun poll, they will be re-energised and will fight back
• The defining factors in the presidential election remain:
• The ability to fight the insurgency and
• The capacity to combat corruption effectively
• If the Boko Haram insurgency spreads beyond the North-East, the sentiment of resentment will shift to fear the need for effectiveness and change
• Other factors include the return of the Chibok girls
• Containment of the Ebola virus or epidemic
• If Ebola spreads and gets out of control, it could change the political electoral map
• A sharp improvement in power supply could be a political game changer in favour of the PDP
• An APC loss in Osun will lead to a North/South political electoral polarisation
• Setting up the presidential election as a proxy referendum of national unity after a century of amalgamation

Outlooks for August

• July inflation will inch up again to 8.3%
• Naira will trade flat at all segments
• Interbank: N162/$
• Parallel: N173/$
• Aggressive mopping up by the CBN to curb naira saturation in the money markets
• Interbank interest rates will increase again
• Corporate earnings will be weak relative to Q1
• Stock market sentiment will remain tepid pushing stock prices down
• Slow external reserves replenishment will continue to $41bn
• The political infighting over candidate selection in both parties will intensify
• The window for defection of disgruntled candidates will close in August 118