The report specifically expressed the belief that the Nigerian economy will exit its current recession, rekindling hope in the success of monetary and fiscal policies being implemented to steer the country from its downturn.
The financial experts said the Nigerian economy had improved further, as the manufacturing and non-manufacturing activities increased in the month of June 2017 despite the decrease in the monetary aggregates.
According to the report, Manufacturing Purchasing Manager’s Index (PMI) in Nigeria expanded for the third consecutive month in the year 2017 to attain the highest level since March 2015.
The report also noted that the Composite Manufacturing Index (CMI) increased to 52.9 points in June 2017 from 52.5 points in May 2017 while the Composite Non-Manufacturing Index (CNMI) expanded to 54.2 points in June 2017 from 52.7 points in May 2017 to attain the highest level since December 2014.
Although the researchers noticed that the growth in the monetary aggregate was below targets, as the CBN employed tools to tame high inflation rate and stabilise the foreign exchange, they expected inflation rate to drop to 15.64% in June 2017 from 16.25% in May 2017, adding that government decision on Premium Motor Spirit (PMS) price and electricity tariff still remain downside risks to the path of inflation in 2017.
Giving their expectations on interest rates, FSDH experts said “We do not believe there will be enough justification for the Monetary Policy Committee (MPC) of the CBN to increase interest rate when it meets on July 24-July 25, 2017.”
On the energy front, “The accretion to the external reserves still significantly depends on the sustained oil production and efforts of the Organization of the Petroleum Exporting Countries (OPEC) and Russia to adhere to the agreed oil output cut till March 2018.”
The researchers placed the long-term stability of the foreign exchange rate on the conducive domestic business environment; particularly the sustained improvement in infrastructure.
For the equities market, the experts expected the overall performance of the equity market for July 2017 to be positive, provided quoted companies report strong Q2 June 2017 results.
“We expect to see some profit taking in the equity market in July 2017. However, we expect the overall performance of the equity market for July 2017 to be positive, especially if companies report strong Q2 June 2017 results,” the report said.
They outlined stability in the macroeconomic environment, Strong Q2 results from quoted companies, improved sentiments towards the Nigerian economy, the sustained liquidity in the foreign exchange market and any unexpected possible change in the MPC policy decision as factors that may positively affect the market in July.
“Yields on fixed income securities may trend marginally lower in July 2017 because of the expectation of lower June 2017 inflation rate,” they noted.
Meanwhile, the experts stated that actions from the international scene which could affect Nigeria, borders on OPEC’s released global growth forecast of 3.4% for 2017, from 3.1% in 2016 in its monthly report for June 2017.
“The OPEC asserted that the improving momentum in the global economy from Q1 2017 is expected to continue for the remainder of 2017, with increased output from Nigeria and Libya having a downside pressure on oil prices in May/June 2017. Thus, OPEC is considering placing a cap on crude oil production for Nigeria and Libya,” the report said.