Employment Index Rises on Growing Business Activities
Obinna Chima
The employment level index in Nigeria’s Purchasing Managers’ Index (PMI) stood at 51.5 points in August, indicating growth in employment for the fourth consecutive month.
According to the latest PMI, of the 16 sub-sectors, seven recorded growth, four remained unchanged while five sub-sectors recorded decline in employment level over the preceding month.
Also, the business activity index moderated to 56.1 points in August 2017, indicating growth for the fifth consecutive month. The index grew at a slower rate, when compared to its level in the previous month.
The report showed that 12 sub-sectors recorded growth in business activity; three remained unchanged while three declined in the review month.
Also, at 54.9 points, inventories index grew for the fifth consecutive month, and at a faster rate when compared to its level in July 2017.
Thirteen of the 16 subsectors recorded growth, one remained unchanged while two sub-0sectors recorded decline in inventories.
On the other hand, the non-manufacturing PMI report showed business activities and new orders grew at a slower rate; but employment level and inventories grew at a faster rate in August 2017.
“The composite PMI for the non-manufacturing sector stood at 54.1 points in August 2017, indicating growth in non-manufacturing PMI for the fourth consecutive month.
“Of the 18 non-manufacturing sub-sectors, 15 recorded growth in the following order: utilities; public administration; information & communication; finance & insurance; health care & social assistance; agriculture; accommodation & food services; electricity, gas, steam & air conditioning supply; transportation & warehousing; repair, maintenance/washing of motor vehicles; wholesale trade; educational services; professional, scientific, & technical services; arts, entertainment & recreation; and water supply, sewage & waste management.
“The real estate, rental & leasing; construction; and management of companies sub sectors recorded contraction in the review period,” it added.
Also, the new orders index at 53.5 points grew in August 2017 for the fifth consecutive month. Precisely, of the 18 sub-sectors, 12 reported growth; one remained unchanged while five recorded decline.
The employment level Index for the nonmanufacturing sector stood at 54.4 points, indicating growth in employment for the fourth consecutive month. Fifteen sub-sectors recorded growth in the review month, one remained unchanged while two recorded declines.
“At 52.3 points, non-manufacturing inventory index grew for the fourth consecutive month, indicating growth in inventories in the review period.
“Eleven subsectors recorded higher inventories, 2 remained unchanged while 5 subsectors recorded lower inventory in August, 2017,” the report added.
Forex Market
Meanwhile, the Central Bank of Nigeria (CBN) last week injected a total of $547 million into the forex market. However, despite the intervention, the interbank exchange rate (NIFEX) remained unchanged at N330 to a dollar.
In other segments, Cowry Assets Management Limited, in a report revealed that the naira appreciated week-on-week at the Bureau De Change and Parallel market segments by 1.36 per cent and 1.35 per cent to N362 to the dollar and N365 to the dollar respectively.
It however depreciated at the Investors & Exporters’ forex window (I&E) by 0.03 per cent to N359.67 to the dollar.
In the forwards market, the spot contract depreciated week-on-week by 0.02 per cent to N305.85 to a dollar.
However, the 3-month, 6-month and 12-month forward contracts appreciated week-on-week by 0.27 per cent, 0.34 per cent and 0.10 per cent to N377.4 to the dollar, N397.17 and N435.18 to the dollar respectively.
Cowry Assets Management’s analysts anticipated that the week, the CBN would continue to intervene in the interbank segment and increasing investor confidence would lead to further stability of the naira/dollar exchange rate.
The market did not open on Friday and Monday because of the public holiday declared to celebrate the Eid-el-Kabir.
Interbank Money Market
Last week, the CBN auctioned treasury bills via primary and secondary markets totalling N211.77 billion, viz: 91-day bills worth N26.14 billion (Stop Rate (SR) fell to 13.30% from 13.42%); 182-day bills worth N30 billion (SR fell to 17.36% from 17.40%); 364-day bills worth N137.00 billion (SR fell to 18.52% from 18.53%); 175-day bills worth N18.58bn and 177-day bills worth N0.05 billion.
A part of these was offset by matured treasury bills worth N88.14 billion. However, the Nigerian Interbank Offered Rates (NIBOR) fell across all maturities. Specifically, NIBOR for overnight funds, 1-month, 3-month and 6-month fell week-on-week to 9.03 per cent (from 11.32), 19.09 per cent (from 19.88%), 21.39 per cent (from 22.71%) and 22.77 per cent (from 23.61%) respectively.
This was as the impact of the Federation Accounts Allocation Committee’s (FAAC) disbursement of N467.8 billion to the three tiers of government last week was felt by the financial system.
Similarly, the Nigerian Inter-bank Treasury bills True Yields (NITTY) fell for all the maturities– yields on the 1-month, 3-month, 6-month and 12 months maturities fell to 17.01% from (18.28%), 19.66% (from 20.30%), 19.48% (from 20.38%) and 22.20% (from 22.39%) respectively.
“This week, we expect maturities via secondary market worth N135.41 billion viz: 345-day bills; hence, we look forward to further financial system liquidity ease and resultant decline in interbank rates,” Cowry Assets analysts stated further.
Bond Market
Also, prices of FGN bonds traded at the over-the-counter (OTC) segment fell for most maturities amid sustained profit taking.
The 20-year, 10% FGN JUL 2030 paper, the 10-year, 16.39% FGN JAN 2022 debt and the 5-year, 14.50% FGN JUL 2021 debt depreciated week-on-week by N0.06, N0.31 and N0.69 respectively; corresponding yields rose to 16.62% (from 16.61%), 16.47% (from 16.37%) and 16.77% (from 16.51%).
However the price of the 7-year, 16.00% FGN JUN 2019 appreciated by N0.34 with the corresponding yield falling to 16.67% (from 16.89%).
Elsewhere, FGN Eurobonds traded on the London Stock Exchange appreciated in value for all of the maturities amid sustained bargain hunting.
But the 10-year, 6.38% JUL 12, 2023 and 5-year, 5.13% JUL 12, 2018 bonds appreciated by $0.74 (yield fell to 5.24% from 5.39%) and $0.14 (yield fell to 3.29% from 3.49%) respectively.
In addition, a 10-year FGN bond worth N20 billion matured in the just concluded week; hence, a boost in liquidity was anticipated, with attendant increase in bond prices at the OTC market this week.
Fitch Affirms Nigeria’s Rating
Fitch Ratings last week affirmed Nigeria’s long-term foreign currency Issuer Default Rating (IDR) at ‘B+’ with a “negative outlook”. The international rating agency in a statement explained that
Nigeria’s rating was supported by its large and diversified economy, significant oil reserves, its net external creditor position, low external debt service ratio and large domestic debt market.
These, it stated, were balanced against relatively low per capita gross domestic product (GDP), an exceptionally narrow fiscal revenue base and a weak business environment.
According to Fitch, the negative outlook reflected the downside risks from rising government indebtedness, the possibility of a reversal of recent improvements in foreign currency (FX) liquidity, and a faltering of the still fragile economic recovery.
Fitch had forecast that the Nigerian economy would grow by 1.5 per cent in 2017 and 2.6 per cent in 2018, following the country’s first contraction in 25 years in 2016. GDP growth continued to contract in 1Q17, but by less than in the previous four quarters.
“The recovery will be driven mainly by increased FX availability to the non-oil economy and fiscal stimulus, as higher oil revenue and various funding initiatives have raised the government’s ability to execute on capital spending plans.
“However, the FX market remains far from fully transparent, domestic liquidity has also become a constraint, and the growth forecast is subject to downside risks,” it noted.
Power Sector Loan
The Group Managing Director and Chief Executive Officer of Access Bank Plc, Mr. Herbert Wigwe, last week explained why Nigerian banks still have not made provisions for most of the power sector loans, despite the fact that most of the loans taken by investors who bought up the federal government’s assets in the electricity sector almost four years had defaulted on their loan repayments. He said if the banks were to make impairment charges on the loans it would be counterproductive, as the power sector was systemically important and critical to the growth of the Nigerian economy.
Wigwe, who said this during an interview on ARISE News Channel, the sister broadcast station of THISDAY Newspapers, described the issues surrounding the power sector privatisation as very important and urged the federal government to look into the issues and create some form of reprieve for investors that had staked their funds in the sector.
“There is a problem in that value chain and there is also a problem with the pricing of their product which everybody needs to look at.
There is a problem in terms of access to gas also,” he explained.