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Breakfast Report - 08 March 2021

Recently, the Amalgamated Union of Foodstuff and Cattle Dealers declared a food blockade on the southern region of the country, which led to a disruption in the country's food supply chain. The disruption resulted in higher food prices in the South, while food prices tanked in the food-producing Northern region as the forces of demand and supply came into play. Following prompt intervention, the blockade has been called off - six days after it took effect. With food prices being under pressure for the past three years, the blockade could have aggravated food inflation to new peaks. While the retreat could reduce the demand-supply imbalance, further measures are needed to reduce the pre-existing disequilibrium in the market, including dousing ethnic tensions, improving food storage facilities, and irrigation mechanisms for year-round farming.

Equity: The domestic market maintained its weekly bearish run despite the significant boost in prices of global Crude Oil, coupled with the attractive dividend yields of a number of dividend-paying stocks. However, we expect the low prices of major bellwether stocks, coupled with attractive dividend yields to fuel some buying interest this week.

Stock Watch: WAPCO maintained Thursday’s impressive performance to end the Friday at its intra-day maximum price of ₦9.90. With the sell pressure recorded in recent times, savvy investors took advantage of its cheap valuation, thereby closing the Industrial goods stock up by 990bps d/d. Following today's gain, its YTD return improved to +5.45%.

Fixed Income: The apex regulator is scheduled to have its first PMA of the month on Wednesday and we expect rates offered at the auction to remain relatively flat. We expect the prevailing market sentiment at the time of the auction to help the guide the CBN on rates to be offered at the NTB auction. For the week, we expect market participants to cherry-pick tenors, notably at the long-end of the market due to yields offered in the space.