Breakfast Report - 10 December, 2018
The Week Ahead
On November 1, the Central Bank of Nigeria (CBN) issued draft guidelines for the licensing and regulation of Payment Service banks, an initiative the apex bank hopes will help promote financial inclusion in Nigeria. The draft rules allow Telecoms providers amongst others to set up and operate these banks mostly in rural areas. The telcos are expected to leverage on their existing networks and customer base to enhance financial inclusion by facilitating high-volume, low-value transactions in remittance services, micro-savings and withdrawal services. The concept appears to be gaining popularity, with two major telcos recently announcing their intent to apply for the license. Given the similarity of the concept to the Mobile money platforms dominant in Kenya and India as well as the success of these platforms in these countries, we see this move as positive and are optimistic that it would promote financial inclusion across the mostly unbanked rural areas.
Equity: Following a 15bps uptick on Friday, the All-Share Index closed nearly flat w/w (-2bps) amidst varied closes through the week. While bargain hunting has been more visible on the exchange, notable selling has also persisted across select stocks. Nevertheless, we anticipate a slightly positive start this week as investors continue to snap up downbeaten stocks.
Stock Watch: DIAMONDBNK was on an uptrend last week, gaining 57% w/w to settle at ₦1.02. We note the improvement in investor sentiment on the stock since the CBN officially converted the bank to a national bank.
Fixed Income: With the CBN keeping a lid on system liquidity, the interbank call rate advanced 776bps w/w to settle at 24.33% on Friday. Overall, the CBN sold ₦646 billion in OMO auctions last week, including ₦288 billion at a special OMO on Thursday. With the CBN showing no indications of slowing down on OMO auctions, we anticipate further slowdowns in demand at the secondary FI market to start the week.
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