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Breakfast Report - 05 September, 2017

The Week Ahead                                                    

The National Bureau of Statistics (NBS) released Nigeria’s Gross Domestic Product (GDP) report for the second quarter of 2017, showing that the Nigerian economy grew 0.55% y/y in the period, compared to a downwardly revised growth of -0.91% y/y in Q1’17 (Previous: -0.52% y/y). Whilst it is positive that Nigeria has officially exited recession, we note that Q2’17 GDP growth is significantly weaker than both Vetiva (1.86% y/y) and Consensus (1.30% y/y) expectation. The weaker than expected Q2’17 numbers, as well as the downward revision to Q1’17 GDP growth, can be partly attributed to weaker NBS oil production estimates in the first half of the year. Specifically, the Bureau lowered its Q1’17 oil production estimate from 1.83 mbpd to 1.69 mbpd, and estimated Q2’17 oil production at 1.84 mbpd (Department of Petroleum Resources: 1.91 mbpd).                                            

Notwithstanding a surge in market turnover as well as the positive turnaround in market breadth, the NSE ASI wrapped up the largely bearish week with a 35bps loss on Thursday. Overall, the ASI closed 312bps lower over the shortened trading week.                                          

Despite the positive market breadth on Thursday and the buying interest seen on select blue-chip stocks, we note that market sentiment remained weak. As trading resumes today, we expect to see more mixed trading in the market but still with a slight bearish bias.                                                   

Stock Watch: Despite the release of an impressive H1’17 performance (PAT up 56% y/y and 10% ahead of Vetiva estimate), UBA’s shares have been on a consistent downtrend in recent times. The stock lost 6% in the last six sessions and currently trades at ₦9.10 (30-session low). Nonetheless, the tier I bank has outperformed the sector, returning 102% ytd vs. 60% for the NSE Banking Index.                                          

Supported by modest improvement in system liquidity, we expect yields to trend further southwards in the T-bills market today. However, we maintain that consistent mop-ups from the CBN would cap demand in the space. The bond market is however expected to remain mixed, with interest still skewed towards the shorter dated bonds.