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Breakfast Report - 04 March, 2018

The Week Ahead

Following an explosion on Saturday within the vicinity of Nembe Creek Well 7, the Aiteo Group, major operators of the Nembe Creek Trunk Line (NCTL), announced an indefinite shutdown of the pipeline. The NCTL, which is 100km long and has a capacity of 150,000 bpd evacuates crude to the Bonny Crude Oil Terminal and notably services independent producers like Eroton, Newcross and Aiteo. Given the capacity of the NCTL, we expect the effects of this shutdown to be sizeable, given that the alternative evacuation routes (e.g. barges) are not as cost effective. However, we expect this to be somewhat offset by the ramp up in production from the Egina field, which recently began production in January.

Equity: After a broadly negative week, the Nigerian Bourse gained 34bps on Friday, leading to a cumulative loss of -212bps w/w. Given the reaction of investors to the election results last week, we highlight the possibility of negative sentiment trickling down into the market this week. That said, we expect bargain hunting to drive positive trading as investors take up undervalued stock leading to a mixed session at week start.

Stock Watch: CORNERST was the best performing stock on the exchange last week, gaining 19% in three sessions. The stock gained 8.70% on Friday to settle at ₦0.25, its highest price since September 2018.

Fixed Income: Given the change in frequency of OMO auctions over the past two weeks, we believe the CBN has changed its liquidity stance and expect this trend to continue. That said, we anticipate strong demand in the T-bills space this week. That said, we except demand to remain elevated in the Fixed Income market next week even as investor interest strengthens.