N1.68trn inflow to hit money market in March – FSDH Research

A total inflow of about N1.68 trillion is expected to hit the money market from the various maturing government securities and the Federation Account Allocation Committee (FAAC) in the month of March 2018, according to FSDH Research, an arm of FSDH Merchant Bank limited.
The firm estimates a total outflow of about N700 billion from the various sources such as government securities and statutory withdrawals, leading to a net inflow of about N980 billion.
Consequently, the yields on the Nigerian Treasury Bills (NTBs) are expected to drop further in March while the yields on the FGN Bonds should increase from the current level in the short-term.
The yields in the fixed income market recorded mixed performance in February 2018 compared to January. The yields on the Nigerian Government Treasury Bills (NTBs) decreased in February, while yields on selected FGN Bonds and the Nigerian Inter-Bank Offered Rate (NIBOR) increased during the same period, compared to January.
The major drivers of yields were drop in the inflation rate, possible increase in interest rate in the advanced economies Debt Management Office’s (DMO) strategy to realign the public debt in favour of the longer-tenored instruments and the delay in the fiscal and monetary policy announcements.
FSDH Research also observed that the yields on the FGN Euro Bonds are higher than their respective coupon rates.
In a monthly economic and financial markets outlook titled, ‘Growth Prospect with Rising Uncertainties’, FSDH Research notes that the Nigerian Economy requires additional policies to achieve sustainable growth particularly in the non-oil sector.
The data that the National Bureau of Statistics (NBS) released for the Full Year (FY) 2017 shows that the real Gross Domestic Product (GDP) grew by 0.83 percent in 2017, compared to the contraction of 1.58 percent in 2016. The growth rate was however below our GDP growth forecasts of 1.01 percent for 2017.
Ayodele Akinwunmi, head of research, said, “Our analysis of the growth pattern in FY 2017 shows that two sectors, Agriculture and, Mining and Quarrying were the major drivers of growth. Other leading sectors which are Trade, Information and Communication, Manufacturing and Real Estate contracted”.
Akinwunmi said Nigeria has a lot of prospect that is not fully utilised, but see uncertainties in the economy coming from both fiscal and monetary policies.
Such uncertainties include possibility of capital flight as a result of monetary policy normalisation in advanced countries, possibility of a drop in the crude oil price at the international market, and increase in food prices as a result of the rising unrest in the food producing states in Nigeria, which may have unfavourable impacts on inflation rate.
FSDH Research observed a slowdown for the Purchasing Managers’ Index (PMI) for the second consecutive month. This was contained in the latest PMI report that the Central Bank of Nigeria (CBN) published for the month of February 2018. The Composite Manufacturing Index (CMI) dropped from 59.3 in December 2017 to 57.3 in January 2018 and 56.3 in February 2018. Although the PMI figures are above 50 points, the slowdown may reflect the rising uncertainties in the country.
Some businesses have expressed concerns over the rising social unrest in some parts of the country and delays in fiscal and monetary policies announcement. FSDH Research notes that policy makers and economic managers in the country need to pay urgent attention to the declining trend in the PMI in order to nip it in the bud.

 

HOPE MOSES-ASHIKE