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Breakfast Report - 01 February 2021

In its first meeting for the year, the Monetary Policy Committee (MPC) voted to maintain the status quo on its policy rates. The Committee noted that while the recovery in oil prices has been instrumental in bolstering Nigeria’s external reserves, the underwhelming performance of the Purchasing Managers’ Indices and the persistent uptick in inflation, is indicative of a sluggish recovery path. Faced with a dilemma of subdued growth and rising inflation, the most appropriate policy action was to stay pat on policy tools to simultaneously give a fillip to growth while also putting inflationary risks in check.

Equity: The equity market was largely dominated by the bulls last week, leading to a positive close across all sectors, except for the Oil & Gas sector which fell 7.25% (majorly affected by losses in SEPLAT: -9.26% w/w; MOBIL: -9.14% w/w and ARDOVA: -7.09% w/w). As major bellwether stocks are expected to announce their earnings results in the coming month, we expect the market to be largely directed by the outcome of these results as they are being released into the market.

Stock Watch: MTNN rose 343bps on Friday to close at ₦181.00. The counter which opened the week at ₦170.00 gained 6.47% w/w, while its YTD return also improved to +6.53%.

Fixed Income: Given where rates currently stand, we expect the market to open the week on a positive note, especially in the bonds space. As such we expect investors to show some interest in papers in the bonds space, especially at the mid-to-long ends of the space. Meanwhile in the OMO segment, we expect activity to remain sell-side skewed in the near-term, given where rates closed at Thursday’s auction, whilst we foresee a quiet session in the NTB space.