2023 Macroeconomic and Investment Outlook: A year of Uncertainties and Opportunities

2023 Macroeconomic and Investment Outlook: A year of Uncertainties and Opportunities

Dear Client/Reader, 

2023 is a year of massive uncertainties both locally and globally. However, within risk and uncertainties lies opportunities. Our Outlook for 2023 helps you identify where the opportunities lie in 2023.

Below is an excerpt of the executive summary:

The Russia-Ukraine war shaped the global scene in 2022, pushing on commodities prices, and impacting price levels. Especially the shortage of gas supply from Russia to Europe pushed inflation rates to decades-high levels in various countries. As a result, monetary policy authorities were not sparing in their move to fight rising prices, hiking rates aggressively. From various indications including gradually abating inflation and monetary policy tones, monetary pivoting is underway. Nonetheless, the effect of the accumulated rate hikes is expected to lead to a slowdown in some economies, including China which is still battling with Covid-19 cases and the property sector crisis. 

Global growth is projected to slow from 6.00% in 2021 to 3.20% in 2022 and 2.70% in 2023 according to IMF on the back of slower growth across both the Advanced Economies and the Emerging and Developing Economies. Global inflation is expected to rise from 4.70% in 2021 to 8.8% in 2022 but to decline to 6.5% in 2023 and to 4.1% by 2024.

The International Monetary Fund (IMF) recently revised its Nigerian real GDP growth forecast downwards to 3% (from 3.2% earlier expected) while the World Bank also slashed the same to 2.9% from an earlier projection of 3.20%. The reasons for the slower growth projections are similar: a slowdown in agricultural output due to the flooding, the impact of the CBN’s hawkish monetary policy on the real sector, as well as the lingering FX issues.

The equities market presents attractive opportunities for investors in form of capital appreciation and dividend return. Nigerian stocks are currently undervalued and present an opportunity for growth in the short to medium term. However, the election is just around the corner and it may trigger some short term downside risks. We believe stocks in the Financial Services (mostly Banks), ICT, Agriculture, Consumer Goods and the Industrial sectors present strong prospects for growth given their resilience to the economic recession.

In 2023, the outlook is for fixed income yields to increase, although at a gradual pace. The reason is due to the offsetting effects of the expected higher FGN borrowings as a result of higher budget deficit, and the expected high system liquidity from coupon payments and bond maturity, especially in the first half of the year.

See below our model portfolio for 2023 (Find the detailed analysis of the instruments in the full report).

S/NStocksSectorWeightCurrent Price Exit Price Up/DownsidePortfolio ReturnEPSP/E
1FIDSONHealth Care5.00%9.411.9226.81%1.34%1.54.67
2WAPCOIndustrial8.00%24.433.6637.95%3.04%2.796.82
3MTNNICT7.00%229.9298.0629.65%2.08%13.313.42
4NBBreweries6.00%46.4569.5449.71%2.98%1.8719.34
5GTCOFinancial Services8.00%24.13128.63%2.29%4.534.03
6ZENITHBanking8.00%24.632.130.49%2.44%5.553.36
7ACCESSFinancial Services8.00%8.9513.9355.64%4.45%3.881.89
8DANGSUGARConsumer goods8.00%17.521.321.71%1.74%2.046.32
9PRESCOAgriculture6.00%150.8170.513.06%0.78%16.155.97
10NESTLEConsumer goods7.00%10801521.8540.91%2.86%2.3318.37
1113.53% MAR 2025FGN BOND6.00%103.3910013.53%0.81%
12CSCSOTC4.00%12.5018.0333.55%1.20%6.8119.82
1314.55% APR 2029FGN BOND7.00%104.3110014.55%1.02%
1412.5% MAR 2035FGN BOND6.00%94.0410012.50%0.75%
1516.25% APR 2037FGN BOND6.00%107.6510016.25%0.98%
100.00%28.75%  

Find attached here the Full Report.

Thank you.  

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