FREE

Breakfast Report - 04 November, 2019

President Muhammadu Buhari and U.S. Treasury Secretary Steve Mnuchin had discussions in Riyadh, Saudi Arabia on Wednesday. They spoke about the possibility of Nigeria receiving additional capital from the United States International Development Finance Corporation (USIDFC) to upgrade critical infrastructure in the country. The USIDFC has a $60 billion budget which is intended to supply foreign aid to developing countries through the financing of private development projects. This shift in policy direction by the Federal Government comes amidst the country’s rising foreign debt profile, which has expanded to $22.9 billion as of H1’19 from $10.3 billion in June 2015 and now accounts for 40% of our total debt. Although the cost of foreign debt is lower than domestic debt (the 30-year Eurobond sold at 9.25%, compared to the 14.80% FGN APR 2049 bond), the government has shifted focus towards multilateral funding as a cheaper alternative. The implication of this, however, is that the government might have to acquiesce to some fiscal and monetary policy reforms in order to secure these loans.

Equity: We expect more active trading at week open as investors position in some stocks that offer high dividend yields as well as impressive upside potential.

Stock Watch: UPL ended last week as one of the top gainers, recording a 20.00%+ gain w/w, to settle at ₦1.43.

Fixed Income: At the start of next week, we expect a positive session in the T-bills market barring any shocks to system liquidity. In the bond space, we expect the bears to drive trading in the market, as players in the market could look to book profits on gains made this week.