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News Update (January 10, 2012 07:21 AM...)

Analysts want structural re-balance of Nigeria's productive base


WorldStage Newsonline-- With the latest OPEC's Monthly Oil Market Report that forecast increased uncertainty for the global economy, analysts at FSDH Security Limited, a leading investment banking firm in Nigeria have challenged the government to urgently carry out structural re-balance of the productive base of the economy.

The Organization of the Petroleum Exporting Countries had asserted that the global economy would enter a phase of increased uncertainty in 2011, while underlying that demand in the real economy had improved, but the global economic outlook had weakened.

The organization made a downward revision to global growth in 2011 from 3.9 per cent to 3.6 per cent, while its forecast for 2012 remains unchanged at 3.6 per cent.

FSDH analyst in its latest outlook of Nigeria's economy noted that oil price volatility remained one of the impediments to the sustainability of Nigerias revenue being an oil dependent economy.

We note the efforts of the government in diversifying the revenue base of the country, but the distortions created by the mono-product income nature of the Nigerian economy would persist if there is no urgent structural re-balance of the productive base of the economy, the report said.

Particular attention should be given to agribusiness as it has the potential to ameliorate poverty and generate substantial employment for the country.

On monetary policies, the analysts are expecting the Central bank of Nigeria to employ other monetary tools to manage liquidity in the system in 2012, other than raising the Monetary Policy Rate (MPR). We expect the CBN to lower the MPR to 11.5 per cent around second quarter (Q2), 2012 and this should cause yields on fixed income securities to drop while prices rise, the report said.

While the analysts projected that the Naira would depreciate against the US Dollars on account of demand pressures at the foreign exchange market, they said the equity market offer excellent growth opportunities in 2012.

We maintain that investors should take strategic positions, maintaining a long term view with the mind that the current situation in the market will not last for too long.

Among the stocks recommended by the analysts to investors are, NAHCO, First Bank, GT Bank, Skye Bank, Stanbic IBTC, Zenith Bank, Nigerian Breweries, WAPCO, UACN, Unilever, Flour Mills, Cadbury, GSK, UPDC and Oando.

Story by Segun Adeleye (segunadeleye@worldstagegroup.com)

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