A report by Sterling Asset Management and Trustees shows that despite growth expectations for Africa in 2025, negative impacts from global economies may trigger exchange rate fluctuations, supply chain disruptions among other. The report also highlights the growth drivers for African economies. Patrick Ejumedia, Head of Research at Sterling Asset Management and Trustees joins CNBC Africa to unpack the report.
A report by Sterling Asset Management and Trustees shows that despite growth expectations for Africa in 2025, negative impacts from global economies may trigger exchange rate fluctuations, supply chain disruptions among others. The report also highlights the growth drivers for African economies. Patrick Ejumedia, Head of Research at Sterling Asset Management and Trustees joins me now to unpack the report even further. Patrick, thanks a lot for joining us on the show today. Quite an interesting take you have in this report. But let's start from Nigeria before we go to the wider African scope. A bullish trend for the equities market here. Key drivers, we're seeing a recovery in industrial and consumer goods on the back of the Naira stability and expected inflation moderation. Your take on this and what if things don't go as we expect? Well, first, like you said, we have to be positive initially. Now you would have seen that inflation already, if you look at December inflation that came out yesterday, or two days ago, the 15th of this month, you would have seen that inflation just grew marginally. Ordinarily, a lot of analysts have forecasted that inflation is going to grow by about 0.6, 0.7%, about 35% to close the year in December. But we're waiting to see what happens. And now with the rebasing of the inflation data, we're going to see it come down. So yes, it's likely to come down, it's likely to moderate this year. But if it doesn't happen, then that's also going to negatively affect these sectors that we've talked about, the industrial sector and the consumer goods sector. But we see it happening, we see we are very positive that it will happen, because we might not necessarily see exchange rate depreciating the way it depreciated last year. Remember that at the end of 2023, people were thinking that exchange rate was going to stop in 2024 at around $700. But it came depreciated to as high as $1,500, at some point it got to $1,900. And that's the highest. But we know why it is so, it is because of the negative impact of the unification of the exchange rate policy. So we're likely not to see it depreciate further. Don't forget that there's also the window by the government that they've put on, the opening trading window by the government. We've also seen our reserve that is likely, even though it's coming down in some period, it's likely going up. So government has that strength to be able to interfere in the FX market. And we've also seen, in addition to all that, we've also seen that the stability in the Naira as a result of all of this. So we are likely not to see, if once exchange rate is stable and inflation moderates, then they are likely to play that revived role that we said they are going to play. And you know, we are right in the middle of the month of January. So that gives us a little bit of insight as to where things are likely going to pan out, especially for the first quarter of this year. We're seeing fresh investment, portfolio rebalancing happened this month. We're also expecting the full year numbers and then investors have a clear direction as to how things panned out for the year 2024 and how to position for 2025. And then we expect a more corporate action by March as well. Now, as we see the unification effects subsidise even further, and then we still have the prospect of the base effect kicking in in terms of inflation moderation. But going into how we see things panning out now, top price movement, top gainers, top losers, where should investors likely put their monies? Well, now the markets, surprisingly, in this week that I've entered, we've seen the market going down negative trend, even though we started the year on a positive note. And we've seen that most of the sectors are now coming down. If you look at the industrial goods sector, except for the banking sector and maybe the consumer goods sector that appears to be having this positive growth year-to-date at the moment. But if you look at the insurance sector that happens to do well last year, year-to-date, as we speak, they are having negative growth. And the reason may be because many investors have seen the capital markets, which ordinarily is supposed to be a long-term market, as a short-term market. So people are profit-taking activities. They've put money in December, January last year. They've seen that the share price has grown significantly and they're beginning to cash out their fund. So those activities are what's probably driving those sectors down. If you look at the oil and gas sector that did very well last year, the same thing is happening to them. Apart from ethanol oil, most of the oil firms that are in the index are having negative growth. So the banking sector at the moment is currently doing well, having about 3% growth year-to-date. And except for UBE, most of the banks that are listed in that index are doing well. Likewise, the same thing is happening to the consumer goods sector. Okay. Well, we'll still have more time later on to talk about whether or not we'll see the ESI also crossing that 100,000 basis point benchmark. But let's shift focus a little bit towards the African markets now. When you do an assessment of the Nigerian economy and juxtapose that to key markets across the continents, be it West, South, North Africa, how do you see each region performing even under the key markets there? If you look at the Ghanaian market and how they started the year last year, surprisingly they grew, even though the growth rate is low. But we need to carefully then see how each of them has grown. We saw how Nigeria ended the market at about 37% year-to-date as of last year. So we then need to then see how each of these markets have also grown so that we can then put a picture to see which of them is likely to do well. And we need to look at the macroeconomic indicators in all of these economies. Fortunately for us somehow we are seeing inflation coming down in most of this country, even though the rate of growth is still very low. So we can still see that inflation is coming down. Once inflation can come down to that level that can drive investment, that can bring about increased profits, and once there's increased profits there'll be increased returns to shareholders and that can also drive investors to begin to partake in those markets. But for now it's important for us to look at the index in terms of the ASIs of these economies, then we'll then be able to know which of them is likely to drive the market for African economies this year. No doubt. We're also seeing issues around the geopolitical space also definitely impact how the markets here would move. But we'll leave the conversation here for now, Patrick. Thanks a lot for your time on the show today. That was Patrick Kijimedia, Head of Research at Sterling Asset Management and Trustees.
Theme: Exploring the growth drivers and challenges for African economies in 2025
A recent report by Sterling Asset Management and Trustees has shed light on the growth expectations for African economies in 2025. Despite the positive outlook, the report also highlights potential challenges such as exchange rate fluctuations and supply chain disruptions that may be triggered by negative impacts from global economies. Patrick Ejumedia, Head of Research at Sterling Asset Management and Trustees, discussed these findings in an interview with CNBC Africa, providing valuable insights into the factors that will drive Africa's economic and market growth in the coming year. The report emphasizes the key drivers for African economies and offers a glimpse into the investment opportunities and risks that lie ahead. One of the focal points of the report is the bullish trend in Nigeria's equities market, driven by a recovery in industrial and consumer goods sectors. This positive momentum is supported by Naira stability and expected inflation moderation. Ejumedia expressed optimism about the outlook for inflation, noting that recent data suggests a marginal increase, but forecasts indicate a moderation in the coming months. He pointed out that stable exchange rates and government interventions in the FX market are contributing to Naira stability, which bodes well for the industrial and consumer goods sectors. The prospect of fresh investments, portfolio rebalancing, and upcoming corporate actions further signal a positive start to the year for Nigerian markets. However, Ejumedia also highlighted the need for caution, as market volatility and profit-taking activities have led to sector fluctuations, with the insurance and oil and gas sectors experiencing negative growth. Despite these challenges, the banking and consumer goods sectors are showing resilience, highlighting potential opportunities for investors. Looking beyond Nigeria, Ejumedia discussed the performance of key African markets, including Ghana, and emphasized the importance of assessing macroeconomic indicators to gauge investment potential. He noted a trend of inflation reduction across several African countries, which could attract investors seeking returns and shareholder profits. By evaluating the ASIs of different economies, investors can identify regions poised for growth and market-driving potential in 2025. Geopolitical factors were also cited as influential in shaping market movements, underscoring the interconnected nature of global economies. As African economies navigate the complexities of a changing landscape, strategic insights and an informed approach to investment will be crucial for stakeholders in 2025. The report serves as a roadmap for understanding the opportunities and risks that lie ahead, guiding decision-makers in unlocking the full potential of African markets in the coming year.
"Once inflation can come down to that level that can drive investment, that can bring about increased profits, and once there's increased profits there'll be increased returns to shareholders and that can also drive investors to begin to partake in those markets."
['Africa', 'economic growth', 'market trends', 'investment opportunities', 'Nigeria', 'Sterling Asset Management', 'macroeconomic indicators', 'FX market', 'inflation moderation', 'geopolitical factors', 'profit-taking activities']