2013_Economic_Review___Outlook

2013
Standard Alliance Capital & Asset Management
Limited
Plot 1, Block 94, Providence Street, Lekki Scheme
1, Lagos.
Economic Review & Outlook

ECONOMIC REVIEW & OUTLOOK July 31, 2013
S t a n d a r d A l l i a n c e C a p i t a l & A s s e t M a n a g e m e n t L i m i t e d Page 2
Introduction
Despite increasing global financial improvement and short-term risks, the world economy
continues to expand at a subdued pace. According to the World Economic Situation and
Prospects (WESP) 2013 Report, global economic activity is expected to slowly gain
momentum in H2’2013 and year 2014 largely on the back of accommodative monetary
policies in developed and developing economies. However the short-term risks
associated with situation in the euro-zone, the fiscal adjustments in the United States
and the economic slowdown in large developing countries have diminished, but not
disappeared.
Nonetheless, new short-term risks have emerged, including possible adverse effects of
unconventional monetary measures in developed economies, which have led to increase
in global liquidity, higher risk appetite among investors, increase in asset prices, as well
as pushing up capital flows to emerging economies. This however, poses considerable
risks for emerging and frontier economies, a further surge in capital inflows could lead to
an appreciation of domestic currencies, excessive credit growth, and build-up of
significant leverage and asset price bubbles.
Growth in international trade is projected to recover marginally in 2013 and 2014 after
slowing down in 2012, on the back of expected gradual recovery in aggregate demand.
This projection however reflects expectations of a moderate pick up in import demand in
developed economies and most developing regions, particularly East Asia, Latin America
and the Caribbean.
Global Economy: Reduced Risk, but Slower Growth…
Foreign Direct Investment (FDI) Declines…..a Global Trend!!
Global FDI fell by 18 percent to $1.35trillion in 2012 and expected in 2013 to remain
close to 2012 level, with an upper range of $1.45trillion – a level comparable to the pre-
crisis average of 2005-2007 (UNCTAD-World Investment Report 2013) forecast. This
sharp decline was however in contrast to other key economic indicators such as GDP,
international trade and employment, which all registered positive growth at the global
level. Developing countries lead the pack in 2012 for the first time ever and are expected
to maintain this position in the near term. Developing countries accounted for 52 percent
Content:
• Introduction
• Economic review
- Global
- United States
- Europe
- Asia
- Africa
• Nigeria
- Oil sector
- Money market
- Fixed income market
- FOREX market
- Stock market
• Outlook

“Highly accommodative monetary
policy for the foreseeable future is
what’s needed in the U.S.
economy.”
of global FDI flows higher than that of developed countries, this is partly as a result
of the biggest fall in FDI inflows witnessed by developed countries which currently
account for only 42 percent of global flows.
However, FDI flows to developing countries witnessed a slight overall decline in
2012 but with bright spots going forward. Africa however resisted the trend with a 5
percent growth in FDI inflows to $50billion, driven largely by FDI in the extractive
industries, while expansion in investments in consumer-oriented manufacturing and
service industries equally contributed to this growth.
FDI flows to developed economies plunged by 32 percent to $561 billion a level last
seen almost 10 years ago (UNCTAD-WIR 2013). The majority of developed
countries saw significant drops of FDI inflows. Particularly countries in the euro area
which singularly account for two thirds of the global FDI decline.
U.S. Fed Announcement Unleashes Initial Selloff in Global Markets…..But
Markets have Since Recovered….
In late May this year, Ben Bernanke the U.S. Federal Reserve Bank Governor told
the U.S. Congress, a decision to scale back the Fed’s $85 billion per month stimulus
could be taken at one of its “next few meetings.” He however made the Fed’s
intentions even clearer on June 19, when he spoke openly of the reduction and
eventual end of the QE programme, potentially by mid-2014.
This announcement however produced mixed reactions across global financial
markets with U.S. 10-yrs treasury note benchmark soaring to 2.75% from 1.62% in
May before coming down to 2.54% which has pushed up mortgage interest rates
and at the same time hurting home refinancing activities and threatening to curb
housing demand in the U.S. Also the announcement triggered massive selloffs and
capital flight in emerging capital markets.
Following the unimpressive U.S. Q1’13 economic performance with real GDP
growth rate being revised downwards to 1.8% from 2.4%, the Federal Reserve
Chairman Ben Bernanke announced that its quantitative easing “QE” programme will
continue. Hence he said that “highly accommodative monetary policy for the
foreseeable future is what’s needed in the U.S. economy”.

Having been taking aback by the massive selloff that was unleashed in global
financial markets on the back of its QE tampering announcement. The U.S. Fed
pulled the trigger on quantitative easing “QE” and announced that assets purchasing
will continue till when positive and sustainable economic growth is achieved. This
has seen global financial markets recovering from the initial shock.
Euro zone Risks Weakened…… but still Compelling!!
The crisis in the euro zone remains a major risk factor for the world economy
recovery, although recent policy actions have lowered some of the short-term risks,
but emerging risks raises new concerns. Particularly the European Central Bank’s
Outright Monetary Transactions (OMT) programme and other policy initiatives since
late 2012 have significantly reduced sovereign risks and the risk of a euro area
break-up.
Despite the progress achieved so far, considerable banking and fiscal risks remain,
with a large number of banks having a weak balance sheets, fragile and possibility of
facing insolvency. Lending conditions are very tight in the Southern countries,
particularly for small and medium-sized businesses, while on the other hand it is
easy for other parts of the region. Hence ongoing lack of adequate access to funding
in the crisis countries hinders economic activities, and by extension exacerbates
unemployment and threatens recovery in the region.
Confidence dropping on Germany ………..as economy falters!!
A bastion of strength in the early years of the euro-zone crisis, the German economy
shrank in late 2012 and subsequently had a subdued start to 2013, narrowingly
avoiding a recession. A slow-down in China is particularly worrying for a German
traditionally export-driven economy, with China being the fifth most important market
for German exporters, accounting for roughly 6 percent of total German exports,
therefore a Chinese hard landing would definitely not leave the German economy
unharmed.
ING senior economist Carsten Brzeski said “New dark clouds have started to black
out growth prospects of the German economy. These clouds are not coming from
the South but from the East. The stuttering and now slowing Chinese economy is
clear cause of concern.”
“New dark clouds have started to
black out growth prospects of the
German economy. These clouds
are not coming from the south but
from the east. The stuttering and
now slowing Chinese economy is a
clear cause of concern.”

Recent data showed the Chinese
economy grew 7.5 percent year-on-
year in the June quarter in line with
expectation, but down from 7.7
percent in the first three months of
the year to mark the second straight
quarter of slowing growth.
However experts are still sticking to their overall positive forecast, indicating their
confidence in the robustness of the German economy, as it is still outperforming
peers within the euro-zone. Also its non-industrial data has been fairly positive, with
sentiment surveys improving, as the private sector is expanding, joblessness falling
and retail sales rising.
China’s economic growth declines for second successive quarter…
The growth of the second world largest economy in H1’2013 may not have slowed
as much as highly feared, but a large degree of uncertainty about its outlook raises
concerns. Recent data showed the Chinese economy grew by 7.5 percent year-on-
year in the June quarter in line with expectation, but down from 7.7 percent in the
first three months of the year to mark the second straight quarter of slowing growth.
Weak overseas demands contributed largely to this, as it weighed on output and
investment.
China’s recent economic growth performance is not surprising, as it is believed that
downwards pressure on its economy as a result of lower domestic consumption and
exports demand from particularly the euro-zone hampered its production and
expansion levels. However other figures reflected a seemly positive performance in
June, like industrial output rising slightly though less than forecast compared with a
year earlier, however retail sales increased more than had been expected.
Hence China’s statistics bureau said the economy’ performance in the first half of
the year was stable overall and that indicators were within a reasonable range. Also
the new Premier Li Keqlang who has been at the fore front of pushing for economic
reforms over fast-line growth has however suggested that the government is in no
rush to offer fresh stimulus to revive an economy in a protracted slowdown.
Africa’s economy bucking global economic turbulence!!
Africa’s economy continues to show a high degree of resilience against global
economic turbulences. Though, countries with strong links to global markets witness
slowdown in growth momentum, while growth has equally eased in those witnessing
increased social-economic tension.

However, Sub-Sahara Africa (SSA) has continue to be the shining star and
investments destination on the African continent as it experience strong growth, with
both the resource-rich and lower-income economies benefiting from robust domestic
demand. However, according to the (World Economic Outlook Report – April 2013),
the external environment is the main source of risks to growth in SSA, particularly for
middle-income and mineral-exporting economies, given the still uncertain global
environment.
SSA experienced robust growth in 2012 continuing a long trend of expansion driven
largely by increased domestic private consumption and investment, as well as
exports, , while growth is projected to reach 5.5% in 2013. The generally strong
performance is driven basically by on ongoing investment in infrastructure and
productive capacity, continuing robust consumption, and the activation of new
capacity in extractive sectors. In Nigeria however, the transformational agenda of the
government, particularly the implementation of power sector reform programmes will
boost growth in 2013.
However, among middle-income countries, South Africa is forecasted to grow at
2.75%, owing majorly to sluggish mining production and the weakness of demand in
the euro area, its main export market.
In Nigeria however, the
transformational agenda of the
government, particularly the power
sector reform programmes will
boost growth in 2013.
Sub-Sahara Africa Economies: Real GDP
SSA: Sub-Sahara Africa; MIC: Middle-Income Countries
LIC: Low-Income Countries
Source: WEO April’13, SA Capital Research
Source: World Bank, SA Capital Research
3
4
5
6
7
8
9
2012A 2013E 2014E
SSA
MIC
LIC
Nigeria
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2011 2012 2013e 2014f 2015f
GrowthRate(%)
Global Real & Forecasted GDP Growth Rate (%)
World Euro Area
U.S.A East Asia & Pacific
Europe & Central Asia Latin America
MENA South Asia
SSA Nigeria

Nigeria just like its peers in Sub-
Sahara Africa (SSA) enjoys strong
domestic demand which allows it to
continue its robust growth
trajectory,
Nigeria: Steady growth……amid uncertainties without fear!!
The Nigerian economy Gross Domestic Product (GDP) grew by 3.5 per cent to 6.56
per cent year-on-year in Q1-2013 compared to 6.34 per cent in the corresponding
quarter of 2012 and 6.99 per cent in Q4’12. However the Nigerian GDP growth rate
is expected to be 6.7 per cent at the end of the year (2013) and maintain this growth
level through 2014, but improve on it to 7.0 per cent according to the (World Bank
forecasts: Global Economic Prospects – June 2013).
Nigeria just like its peers in Sub-Sahara Africa (SSA) enjoys strong domestic
demand which allows it to continue its robust growth trajectory, despite subdued
global demand conditions on the back of weak economic conditions in major trading
partners’ economies particularly those in the euro area.
First quarter of 2013 saw the non-oil sector being the major contributor to Nigeria’s
GDP growth. Agriculture recorded a 4.28 per cent growth year-on-year; growing by
4.14 per cent in Q1’13 from 3.97 per cent in the corresponding quarter of 2012 this is
largely due to positive results from the Federal Government’s (FG) Agric reforms
programmes. Equally Manufacturing, Building and Construction also contributed to
the GDP growth as both sectors individually grew by 8.41% and 15.66% in Q1’13
from respective 7.55% and 12.58% in Q1’12. Owing largely to increase in industrial
capacity and investment, as well as increased capital expenditure in the national
budget.
Source: National Bureau of Statistics, SA Capital Research Analysis Source: NBS, SA Capital Research
5
6
7
8
9
2009 2010 2011 2012 2013 2014 2015
Nigeria's GDP Growth Rate & Forecast
GDP Growth Rate
1%
34%
15%
24%
4%
9%
3%
7%
2%0%
1%
Sectors (%) Contribution to GDP Q1'13
Business & Other Services
Agriculture
Crude Petroleum & Natural Gas
Wholesale & Retail Trade
Finance & Insurance
Telecommication & Post
Building & Construction
Other Economic Activities
Real Estate
Solid Mineral
Hotel & Restaurants

Nigeria’s oil sector GDP contribution declining …. Yet remains major “FOREX
“earner!!
Nigeria recorded an average crude oil daily production of 2.29 million barrels per day
in Q1’13 according to data from Nigerian National Petroleum Corporation (NNPC) as
against 2.35 million barrels per day in Q1’12 representing a drop of 2.55% in
production. Also the Nigerian oil sector contributed about 14.75 per cent to real
GDP in Q1’13 as against 15.80 per cent it recorded in Q1’12 and 12.59% in Q4’12,
as its contribution to the country’s GDP continues to decline. However, Nigeria
continues to be highly dependent on the oil sector, which is still the country’s main
source of foreign exchange earner and growth as it contributes more than 70 per
cent of the federal government’s revenue. Although the contributions of non-oil
sector particularly Agriculture, Wholesale and Retail Trade to GDP growth has been
growing in recent years.
Growth Rate of Real GDP & Sectoral Shares (%)
Source: CBN, SA Capital Research
Though the Nigerian Oil sector continue to witness some level of disruptions as a
result of pipeline vandalisation and bunkering activities which has led some oil
companies such as Eni (Agip), Exxon Mobil and Shell to declare “force majeure” in
recent past. The Nigerian Minister of Finance Dr. Ngozi Okonjo-Iweala recently
announced that Nigeria loses N150 billion monthly to crude oil theft, which is
impacting negatively on the revenue available to government for public expenditure.
Although the contributions of non-oil
sector particularly Agriculture,
Wholesale and Retail Trade to GDP
growth has been growing in recent
years.
-14.00
-9.00
-4.00
1.00
6.00
11.00
16.00
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Real GDP Oil & Natural Gas Non - Oil

In recent past Agriculture,
Manufacturing, Building and
Construction sectors stands out
growing their contribution to
Nigeria’s GDP in Q1’13 to 41.14%,
8.41% and 15.66% respectively
from 3.97%, 7.55% and 12.58% in
Q1’12 accordingly.
Though the relative stable price of oil in international market and stable exchange
rate of the naira against the dollar impacted positively on government’s revenue
base, which accounts for the country’s robust external reserves.
Nigeria's External Reserves Trend
Going forward the slowdown in growth in emerging economies particularly China,
India and Brazil, coupled with the discovery of “shale oil” in the U.S, as well as the
drop in crude oil production and increase in the level of oil theft pose a downside risk
to government’s revenue, and its ability to finance ongoing developmental projects.
Though the Nigerian Government has intensify effort towards diversifying the
economy, with various laudable transformational reform programmes in strategic
sectors such as Agriculture, Power/Energy and Manufacturing, so as to diversify its
export and revenue base.
In recent past Agriculture, Manufacturing, Building and Construction sectors stands
out growing their contribution to Nigeria’s GDP in Q1’13 to 4.14%, 8.41% and
15.66% respectively from 3.97%, 7.55% and 12.58% in Q1’12 accordingly.
Monetary Policy Rate (MPR): No Paradigm Shift…New mix in monetary tools!!
After its meeting on July 22 and 23, 2013 the Monetary Policy Committee (MPC) left
the MPR unchanged at 12 per cent for the 11th time in line with its tightening
monetary policy, but with a new mix in its monetary tools – 50 per cent Cash
Reserve Requirement (CRR) on public sector deposits. After reviewing the
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
External Reserves

economic conditions and challenges confronting the domestic economy in Q1’13
and re-evaluating the short-to-medium term risks to inflation, domestic output,
external balance and financial stability. The MPC decided:
To hold the MPR at 12 per cent with a symmetric corridor around the MPR
at ± 2 per cent.
To retain the CRR at 12 per cent
Introduced a 50 per cent CRR on public sector deposits, which will be
applied on Federal, State and Local Government deposits and all
Ministries, Departments and Agencies (MDAs).
Implication of the new mix in monetary tools…
Overall the outcome of the MPC meeting was expected as the MPC in recent past
have favoured monetary tightening policy over expansionary monetary policy.
However the committee said it maintained the status quo because it was satisfied
with prevailing macroeconomic dynamics achieved thus far, such as the single digit
inflation, stable banking system, exchange rate stability, favourable output growth,
capital market recovery and growth in external reserves.
Source: NBS, SA Capital Research
Overall the outcome of the MPC
meeting was expected as the MPC
in recent past have favoured
monetary tightening policy over
expansionary monetary policy.
0.00
5.00
10.00
15.00
Headline Inflation Trend
Inflation Trend
30,000.00
32,500.00
35,000.00
37,500.00
40,000.00
42,500.00
45,000.00
47,500.00
50,000.00
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Nigeria's External Reserves
External Reserves

Going forward we expect the new
50 per cent CRR on all public
sector deposits to impact negatively
on DMBs particularly those with
high exposure to public sector
deposits on their balance sheet,
The Committee however, said it is disturbed by the build-up in excess liquidity in the
banking system particularly those emanating from the public sector and expressed
its concern over the rising cost of managing liquidity. Equally the Committee
observed the sluggish growth in private sector credit, as Deposit Money Banks
(DMBs) prefers investing in government securities over extending credit to the
private sector.
Thus base on the above premise the MPC decided to introduce the 50 per cent CRR
on all public sector deposits, this they believe will help channel much required funds
to the more productive real sector of the economy, reduce the cost of liquidity
management, as well as stop DMBs from the act of perverse incentive structure
which they have adopted in sourcing huge amounts of public sector deposits and
lending same to the government through FGN Bonds and CBN via OMO bills at
higher rates of interest.
Going forward we expect the new 50 per cent CRR on all public sector deposits to
impact negatively on DMBs particularly those with high exposure to public sector
deposits on their balance sheet, as they will be forced to find other alternative source
of funds, while some may be forced to equally sell down their position in government
securities to meet up with the new policy. Also we expect this to cause hike in rates
in the Nigerian interbank money market as banks with insufficient funds will push up
demand in the market and consequently jack-up rates.
Money market: Interest rates in tandem with liquidity level…
Average interbank interest rates declined in first half of 2013 (H1/2013) to 11.6%p.a
and 12.2%p.a in Q1’13 and Q2’13 respectively compared to 14.32%p.a in 2012, this
was largely due to higher amount of maturing short term financial instruments and
increase in monthly disbursements by the Federal Accounts Allocation Committee
(FAAC) to the three tiers of government, FAAC’s total disbursements for the period
under review was about N3.3trillion.
Thus Nigerian Interbank Offered Rates (NIBOR) moderated as a result of the above
mentioned fiscal and monetary activities. On the whole interbank interest rates in H1
2013 eased compared to rates in H1 2012, as rates for call and three months at
NIBOR averaged 11.72% and 13.08% respectively in H1’13 as against 14.46% and

16.12% accordingly in H1 2012. Similarly, the weighted average rate at the Open
Buy Back (OBB) segment rose to 11.70%, while NIBOR rate for 7-day tenor and 30-
day tenor rose and declined to 12.40% and 13.00% respectively.
Selected DMBs Interest Rates (Average)
Nigeria’s Fixed Income Market: A safe haven for “Portfolio Investors” (PI’s)
The Nigerian Bond market has become a safe haven for most Portfolio
Investors’ both local and foreign, as a result of attractive yield offered by the
market relative to other global markets. The attractive yields and stable
exchange rate witnessed in H1 2013 has however triggered inflows of huge
Portfolio Funds into the market.
However, the Nigerian fixed income market just like other emerging and frontier
market experienced an outflow of FPIs on the back of the U.S. Fed
announcement of tampering with its Quantitative Easing (QE) programme.
Nevertheless calm has since returned back to the market as the U.S. Fed later
announced that it will delay its QE tampering till when the American economic
growth is strong and sustainable.
Hence, earlier exited FPIs are currently entering back into the market, as rates
still remains attractive, as well as inflation rate remaining in single digit, stable
exchange rate and MPR still at 12 per cent.
6
7
8
9
10
11
12
13
14
15
16
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Interbank
0
5
10
15
20
25
30
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Average Term Deposit Prime Lending
Interbank Maximum Lending

FOREX Market: Exchange rate stability threatened by declining revenue…
The naira was relatively stable in H1 2013 but came under pressure in Q2 2013 as it
weakened to N158.41/dollar at the interbank market and N161.9/dollar at the parallel
market respectively. But the naira however was unchanged at N157.30/dollar at the
official market largely due to the CBN’s support for it, and relatively stable
international oil price and robust external reserves.
However in Q2 2013 the naira came under pressure which saw it declining, as a
result of multiple dynamics in the economy such as, outflow of Foreign Portfolio
Investments (FPIs) triggered by the earlier mentioned U.S. Fed announcement,
declining oil price, production and by extension decline in external reserves
accretion, which made it difficult for the CBN to come to the aid of the naira.
Going forward we see the CBN in a quagmire situation as it will be cut between
support for the naira and depletion of Nigeria’s foreign reserves. This is hinged on
the fact that oil theft in Nigeria is not abating hence affecting production levels,
discovery of shale oil in the United States will further put pressure on international oil
price which by extension will impact negatively on external reserves and the
inevitable U.S. Fed cutting down on its assets purchase which will trigger outflow of
FPIs and consequently push up demand for the green back. Hence, we expect the
naira to further weaken in the near term.
Trends in Crude Oil Prices
Source: CBN, SA Capital Research Source: CBN, SA Capital Research Source: OPEC, SA Capital Research
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Bonny Light OPEC Basket
J'13 F'13 M'13 A'13 M'13 J'13 J'13
Nigeria's External
Reserves
45.824 47.296 47.884 47.903 47.703 48.33 46.882
44.5
45
45.5
46
46.5
47
47.5
48
48.5
49
Nigeria's External Reserves
1.75
1.8
1.85
1.9
1.95
2
2.05
Crude Oil Production mbpd

Stock Market: Safe sailing thus far…era of uncertainty beckons!!
The Nigerian equities market experienced an impressive bullish run in the first half
of the year to end the period with an All Share Index (ASI) and Market
capitalization of 36,164.30bps and N11.426 trillion respectively, as well as an
impressive YTD return of 28.80% in H1’13. Equally within H1 2013 the Nigerian
equities market witnessed a post – 2008 ASI market high of 40,012.66bps and
N12.858 trillion market capitalization, though this impressive performance was
anchored on the gross undervalued stock prices and attractive yields in the
Nigerian equities market space particularly the banking stocks, as well as inflows
of funds from foreign portfolio investors’ (FPIs) seeking higher yields. Also
increase in participation of local institutional investors (PFAs) contributed to the
trend as renewed confidences amongst them begin to muster.
Total deals, volume and value of transactions executed in H1 2013 increased
significantly by 73.12 per cent, 28.71 per cent and 87.66 percent respectively
compared to 39.30 per cent, 13.48 per cent and 16.25 per cent in H1 2012
accordingly. Thus the total volume and value of transactions in H1 2013 stood at a
daily average of 480 million shares worth N4.80 billion respectively.
NSE: All Share Index & Market Capitalization Trend
Source: NSE, SA Capital Research
However it was not a sweet “roller coaster ride” all the way, as the Nigerian
equities market just like other emerging and frontier markets witnessed a sharp
downward reversal of bullish run on the back of the United State Federal Reserve
Bank (U.S. Fed) announcement on the tampering on quantitative easing “QE”.
8
9
10
11
12
13
14
27,500.00
30,000.00
32,500.00
35,000.00
37,500.00
40,000.00
10-Jan-13 10-Feb-13 10-Mar-13 10-Apr-13 10-May-13 10-Jun-13
ASI Mkt Cap

This announcement sent headwind across global markets, causing markets to tumble
and this led to over $1 trillion dollars being wiped out of global equity markets in just
one week. Emerging equities and bond markets were the most hit, Nigeria inclusive
as its equities market witnessed the outflow of huge FPIs funds from the market in
just a week. However the U.S. Fed has later rescinded its decision, and announced
that its assets purchase will continue until the U.S. economy experience strong and
consistent economic growth, which has returned calm across global markets.
However, despite the massive selloff spiked by the U.S. Fed announcement, the
Nigerian equities market has since recouped some of its earlier gains, as the stock
market closed H1 2013 with 28.80% year-to-date (YTD) performance. Also tracking
the NSE sectoral performance in H1 2013, NSE Consumer Goods Index and NSE
Banking Index both enjoyed investors’ sentiment as they both returned 21.40% and
18.46% in H1’13 respectively while NSE Insurance and NSE Oil & Gas equally
returned 16.90% and 12.18% accordingly.
Date NSE - 30
NSE Consumers
Goods
NSE
Banking
NSE
Insurance
NSE Oil &
Gas NSE LII
31-Jan-12 1,336.07 838.97 339.63 118.49 152.92 1,769.07
28-Jun-13 1,701.93 1,018.47 402.34 138.52 171.54 2,517.57
Change 365.86 179.50 62.71 20.03 18.62 748.50
% Change 27.38% 21.40% 18.46% 16.90% 12.18% 42.31%
Source: NSE, SA Capital Research
Nonetheless the major downside risk and uncertainty surrounding the Nigerian
equities market are both external and internal. Internally the recent mix in monetary
tools (50% CRR) on all public sector deposit will increase the cost of funds hence
hamper on the amount of funds inflow into the equities market locally, also the 50%
CRR would equally impact negatively on the earnings growth of the Deposit Money
Banks, which constitute about 20 per cent of the total market capitalization of the
Nigerian equities markets.
While on the other hand, the decision by the U.S. Fed to postpone its QE tampering,
is actually the postponement of doomsday for most markets that has become an
abode for these asset purchase funds, as it is inevitable that in the near term the U.S.
fed will tamper with its QE programme, hence the outflow of these hot monies, which
will see capital markets particularly in the emerging and frontier economies
witnessing a reversal capital flight and decline in asset prices.

Outlook for H2’2103
Global Economic Outlook
The balance risk of global growth has improved but the road to recovery
remains bumpy and uneven for advanced economies according to the World
Economic Outlook (WEO), IMF 2013 Report. Also the Organization for
Economic Cooperation and Development (OECD) projected a growth rate of 3.1
per cent for the global economy in 2013. This is actually on the bank of policy
actions which have diminished risks of acute crisis in both Europe and the
United States. However the baseline outlook for these two regions deviates, the
euro area on the one hand is still challenged by balance sheet repair and tight
credit conditions which hampers on growth prospects. While the U.S. on the
other hand is faced with conditions more supportive of recovery, even with the
demand of induced unanticipated fiscal consolidation.
Also, in many emerging market and developing economies, economic activities
are expected to continue on the high. Latin America and the Caribbean (LAC),
and sub-Sahara Africa (SSA) are slated to strengthen further this year, while
growth in the Commonwealth of independent states (CIS) will be at par with last
year. The Middle East and North Africa (MENA) region is however a notable
exception, according to the (IMF WEO, 2013) “a pause in oil production growth
among oil-exporting countries is expected to lead to a temporary deceleration in
the region’s growth, while ongoing political transitions and a difficult external
environment are preventing a quicker recovery in some oil-importing countries”.
Nigerian Economic Outlook
Real GDP growth down from 6.99% in Q4’12 to 6.56% in Q1’13, and it’s been
forecasted by NBS to rebound to 6.72% in Q2,’13, based on improvement in
productivity gains in manufacturing, whole sale and retail trade, as well as
expected slight improvement in power supply. However widespread of
insecurity and discovery of “shale oil” in the U.S. coupled with possible
reduction in oil prices and continued leakages in oil production due to increase
oil theft, will impact negatively on continuous growth prospects. Nonetheless
increase in contribution by the non-oil sector to the real GDP and positive
results from government’s “transformational agenda” will cushion the adverse
impact this may have on Nigeria’s growth prospects, hence real GDP growth is
expected not to be below 6.7 percent.

This report is produced by the Research Unit of Standard Alliance Capital & Asset Management Limited (SA Capital) base on
publicly available information and it is for information purposes only. It does not constitute any offer, recommendation or
solicitation to any person to enter into any trading transaction. Whilst every care has been taken in preparing this document,
you are advice to make your independent judgment with respect to information contained herein.
Important Disclosure
For further enquires please contact
Standard Alliance Capital & Asset Management Limited
Plot 1, Block 94, Providence Street, Lekki Scheme 1,
Lekki, Lagos.
Nigeria.
Phone: +234-1- 7358635
+234-1-8429749
cserve@sacapitalng.com
research@sacapitalng.com
www.sacapitalng.com

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