Comercio Partners Limited, an investment banking firm has asked investors to focus attention on industries positioned to profit from the current macroeconomic trends as revealed in the Gross Domestic Product (GDP) report for 2022.
One such industry is finance, (particularly banks) which stands to benefit most from the top banks’ rate increment.
Tosin Osunkoya, co-founder and Chief Executive Officer, Comercio Partners Asset Management Limited, gave this advice while reviewing the GDP report for the fourth quarter (Q4) of last year, released recently by the National Bureau of Statistics (NBS).
Among other things, the NBS report showed that while the economy recorded GDP growth of 3.52 per cent, Year-on-Year (YoY), in Q4 2022, up from 2.25 per cent in Q3 2022, it however recorded a lower annual GDP growth of 3.1 per cent, YoY for Full Year 2022, (FY’22), down from 3.4 per cent in FY 2021.
Osunkoya noted though the economy recorded lower GDP growth in FY 2022 due to the combined effect of the high inflation levels triggered by the Russia war in Ukraine as well as the 19.22 per cent contraction in the oil sector, the performance of the Services sector which continued to improve in 2022 represents a major silver lining.
He added that the impact of the improved performance of the Services sector is reflected in the higher real growth of 4.4 per cent, YoY recorded in the Non-Oil sector in Q4 2022.
Speaking on investment opportunities highlighted in the FY 2022 GDP performance of the economy, Osukoya stressed that though there are areas of concerns, namely the continued contraction in the oil sector and hushed growth in the agricultural sector, investors should focus their attention on specific industries that are strategically positioned to profit from the current macroeconomic condition.
“With the oil sector’s enormous influence on the Nigerian economy, its ongoing decline, which was marked by a negative growth rate of -14.93 percent in Q4 2022—is a major cause for concern,” he said.
“Also, another major concern was the hushed growth in agriculture majorly due to the historic flooding experienced during the latter part of the year 2022 which largely affected crop production.
“Investors should focus their attention on specific industries that are strategically positioned to profit from the current macroeconomic condition.
“To put things in perspective, banks must only pay eligible depositors 30 percent of Monetary Policy Rate (MPR) on their savings accounts, but the full increase in MPR would be factored into the price of their variable rate assets (loan).
“The net effect of this is a rise in Net Interest Income (NII) which would naturally dovetail into net earnings. This is already apparent in the FY 2022 earnings of the banks as Fidelity Bank, Stanbic and FCMB all posted increases in NII by 61.1 percent, 50.1 percent and 32.4 percent respectively.”
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