Equities & June inflation

Nigeria's headline inflation rate declined to 11.22 percent in the month of June, providing relief for the economy amidst concerns about slow growth and potential recession. Usoro Essien, Head of Research at Vetiva, shared insights on the inflation trend and the outlook for the Nigerian economy in an exclusive interview with CNBC Africa. Essien's analysis was based on the high base of inflation experienced in the first three quarters of 2018. He accurately predicted a decline in June, with an expected rate of 11.26, followed by a slight rise in July to 11.24. Looking ahead, Essien foresees inflation picking up again in Q4 2020 due to delayed effects from fiscal reforms around power and the minimum wage implementation. Despite the anticipated increase, he remains optimistic about the economy's overall trajectory. When questioned about the current slow growth and the likelihood of a recession, Essien expressed confidence in a turnaround. He emphasized the need for increased capital expenditure, which he believes will be facilitated by the reconstitution of the Federal Executive Council and the implementation of the minimum wage. Essien also highlighted the potential impact of reviewing the Mito tariff to attract investments and stimulate bank lending in key sectors. In terms of market performance, Essien acknowledged a sluggish start to the second half of the year, particularly in the stock market. He noted that while investors are not disinterested in equities, they are waiting for significant fiscal reforms from the government to unlock sectoral potential. The recent listing of Airtel Africa failed to generate a substantial market impact, indicating the need for more decisive policy actions. Despite the current challenges, Essien identified the insurance sector as a standout performer due to regulatory reforms on recapitalization. This sector's success underscores the importance of targeted policy interventions in driving market growth and investor confidence. In conclusion, Essien's analysis provides a balanced perspective on Nigeria's economic outlook, inflation trends, and market dynamics. While challenges persist, strategic reforms and fiscal stimuli have the potential to revitalize the economy and steer it towards sustainable growth.